[Senate Hearing 108-681]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 108-681

                            FISCAL YEAR 2005



                                before a

                          SUBCOMMITTEE OF THE


                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION


                            SPECIAL HEARING

                      JUNE 2, 2004--WASHINGTON, DC


         Printed for the use of the Committee on Appropriations

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                     TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi            ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico         ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri        PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky            TOM HARKIN, Iowa
CONRAD BURNS, Montana                BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama           HARRY REID, Nevada
JUDD GREGG, New Hampshire            HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah              PATTY MURRAY, Washington
LARRY CRAIG, Idaho                   DIANNE FEINSTEIN, California
MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
                    James W. Morhard, Staff Director
                 Lisa Sutherland, Deputy Staff Director
              Terrence E. Sauvain, Minority Staff Director

                        Subcommittee on Defense

                     TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi            DANIEL K. INOUYE, Hawaii
ARLEN SPECTER, Pennsylvania          ERNEST F. HOLLINGS, South Carolina
PETE V. DOMENICI, New Mexico         ROBERT C. BYRD, West Virginia
CHRISTOPHER S. BOND, Missouri        PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky            TOM HARKIN, Iowa
RICHARD C. SHELBY, Alabama           BYRON L. DORGAN, North Dakota
JUDD GREGG, New Hampshire            RICHARD J. DURBIN, Illinois
CONRAD BURNS, Montana                DIANNE FEINSTEIN, California

                           Professional Staff

                              Sid Ashworth
                           Jennifer Chartrand
                             Alycia Farrell
                              Tom Hawkins
                            Robert J. Henke
                              Lesley Kalan
                            Mazie R. Mattson
                              Brian Potts
                             Kraig Siracuse
                              Brian Wilson
                       Charles J. Houy (Minority)
                   Nicole Rutberg Di Resta (Minority)
                        Betsy Schmid (Minority)

                         Administrative Support

                             Janelle Treon

                            C O N T E N T S


Statement of Hon. Joel D. Kaplan, Deputy Director, Office of 
  Management and Budget..........................................     1
Opening Statement of Senator Ted Stevens.........................     1
Statement of Senator Daniel K. Inouye............................     2
Timing of Fiscal Year 2005 Supplemental..........................     3
Opening Statement of Joel D. Kaplan..............................     4
Prepared Statement of Joel D. Kaplan.............................     5
Statement of Lawrence J. Lanzillotta, Under Secretary of Defense 
  (Acting Comptroller), Department of Defense....................     6
Prepared Statement of Larry J. Lanzillotta.......................     6
The President's $25 Billion Reserve Fund.........................     7
Funding Flexibility..............................................     7
Statement of General Peter Pace, United States Marine Corps, Vice 
  Chairman, Joint Chiefs of Staff, Department of Defense.........     8
Guard and Reserve................................................     8
Justification Materials for Request..............................     9
Protection of Troops.............................................    10
Coalition Partners...............................................    12
Heavy Truck Recapitalization.....................................    12
Embassy Construction and Civil Operations........................    13
Funding for U.S. Mission in Iraq.................................    14
Release of Funds From $25 Billion Reserve........................    16
Flexibility for Use of the $25 Billion...........................    17
Role Played by the Military Services.............................    18
Mid-year Review..................................................    18
Recruiting and Retention.........................................    19
Monthly Costs of Operations......................................    20
Access to the Contingent Emergency Reserve Fund in Fiscal Year 
  2004...........................................................    21
Troops in Afghanistan............................................    23
DOD Need for Greater General Transfer Authority..................    23
Home Security Forces.............................................    24
Estimating Fiscal Year 2005 Incremental Costs....................    26
How Has Fiscal Year 2003 and 2004 Supplementals Been Spent?......    28
Likely Changes in Funding Requirement............................    29
Iraqi Government.................................................    30
Operations in Afghanistan........................................    32
Elections........................................................    34
Additional Committee Questions...................................    34
Questions Submitted to Hon. Joel D. Kaplan.......................    34
Questions Submitted by Senator Christopher S. Bond...............    34
Question Submitted to Lawrence J. Lanzillotta....................    35
Question Submitted by Senator Christopher S. Bond................    35
Question Submitted to General Peter Pace.........................    35
Question Submitted by Senator Christopher S. Bond................    35

                            FISCAL YEAR 2005


                        WEDNESDAY, JUNE 2, 2004

                               U.S. Senate,
                           Subcommittee on Defense,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Ted Stevens (chairman) presiding.
    Present: Senators Stevens, Cochran, Domenici, Bond, Gregg, 
Burns, Inouye, Byrd, and Dorgan.

                opening statement of senator ted stevens

    Senator Stevens. Good morning. Welcome to our witnesses. 
We're pleased to have you all back with us again. Our 
subcommittee is meeting this morning for a special hearing 
convened specially to review the President's request for $25 
billion as a reserve fund for military operations in Iraq and 
Afghanistan. Deputy Director Kaplan, we welcome you in your 
first appearance before the committee, and Mr. Lanzillotta, we 
welcome you back. You testified with Secretary Rumsfeld about 1 
month ago, and it's a challenging and important time to be the 
acting Department of Defense (DOD) Comptroller, I'm sure of 
that. So we thank you for your service. General Pace, it's 
always good to see you. We welcome you again. We look forward 
to hearing your perspective.
    As we meet today, our servicemen and women remain engaged 
in combat missions in Iraq and Afghanistan. They are the ones 
who are fighting and winning the global war on terrorism. To 
meet their commitment and ensure that they have the resources 
they need to get their job done, the President has proposed $25 
billion in a contingent emergency reserve fund. Our military 
commanders must make prudent operational plans. They must be 
prepared to respond to the dynamic events on the battlefield. 
We expect nothing less of our military leadership and our 
people in uniform.
    So the Congress also must plan for and provide the 
resources for our military forces needed to do their job. Our 
military commanders in the field and the troops that are doing 
the hard work must not find that fiscal issues or the 
availability of money constrain them in any way. The last thing 
we want an operational commander concerned about is whether or 
not there's enough money to do the job. I applaud the 
President's decision to ask for these resources now and the 
President requested resources for the Iraqi Freedom Fund (IFF), 
a flexible transfer account that Congress created in 2003 with 
the Iraqi supplemental.
    As requested, this version of the IFF is different in two 
important ways. First, funds are explicit only to support 
operations in Iraq or Afghanistan. Previous IFF language was 
somewhat broader and allowed the use of the funds for the 
global war on terrorism. Second, funds would become available 
after two actions by the President. The President must first 
transmit an official budget request and designate the amount as 
an emergency and as essential to support the activities or 
agencies in Iraq or Afghanistan. The request includes the 
requirement for a 5-day advanced congressional notification 
before making any transfer from the fund, the same requirement 
that Congress included in the original Iraq Freedom Fund.
    I want to remind the committee that this hearing is about 
the President's request for the $25 billion reserve fund. It's 
really not an appropriate place to have a policy debate on Iraq 
or a hearing on the allegations of Iraq prisoner abuse. It's 
our hope that this hearing will stay on track and focused on 
the appropriations matters before us. We expect other members 
to--ranking member, former chairman, is with us now. I do 
expect a full committee to attend this hearing.
    We will make your statements, gentlemen, a part of the 
committee record in full, and we'll ask you to present them to 
us as briefly as you may. I would like to turn now to the co-
chairman of the subcommittee for his remarks.


    Senator Inouye. I thank you very much. I'm pleased to join 
our chairman in welcoming all of you to discuss the 
administration's request for fiscal year 2005 emergency funding 
for the wars in Iraq and Afghanistan. We did not anticipate a 
supplemental request to come before Congress this year. When 
the Congress passed the $87 billion supplemental last October, 
we were told by the administration that those funds would cover 
the costs of war for the next 18 months.
    However, due to unforeseen circumstances in theater that 
called for more forces than planned, resulted in more damage 
and loss of equipment than predicted and longer duration than 
anticipated, the services' accounts are running short. I think 
we should make it very clear that this committee and this 
Congress support our forces deployed overseas and we'll make 
certain that we provide adequate funds to provide for their 
safe return.
    Nevertheless, Mr. Chairman, I have several concerns and 
questions about the request before us this morning. It is my 
understanding that when the administration fashioned this 
request that the services were not consulted. Without their 
input, how did the administration arrive at this $25 billion 
figure and determine what accounts to apply it to? The request 
includes $5 billion to reimburse other appropriations and 
classified programs. There's no information regarding how that 
$5 billion would be spent and I hope that you will address how 
the Department plans to use the unclassified portion of these 
    We have learned in recent weeks that the Army has 
procurement shortfalls for activities such as resetting the 
force and modularity. In addition, both the Army and Marine 
Corps have shortfalls for replacing lost and damaged equipment 
and for critical items such as aircraft survivability 
equipment, ammunition, vehicle armor, and rapid fuel equipment.
    I understand there's no funding in the supplemental request 
earmarked for these items. I'm interested in hearing from you 
on how the Department intends to address these concerns.
    Furthermore, with rising costs associated with increase in 
troop strength on ground, what is the status of the remaining 
fiscal year 2004 funds? We've been told that this is part one 
of a two-part supplemental request for fiscal year 2005. We 
anticipate receiving another request for funding the wars when 
the administration sends over next year's budget request.
    I hope you will discuss this morning how the administration 
determined what is funded in this supplemental versus the one 
we expect to receive next year. I raise these points, Mr. 
Chairman, because the Congress has been provided very limited 
information on how these funds will be used, and because I 
noted in a recent Wall Street Journal article that an 
unidentified senior administration official said that Congress 
is not provided detailed information if they don't ask the 
right questions.
    Finally, I remain concerned about recruiting and retention. 
I think all of us do. The Active Forces are stretched thin. We 
are relying heavily on our Guard and Reserve forces to serve 
extended tours overseas. The forces are performing 
magnificently, but how long can we sustain this pace of 
operations? How can we expect the operational tempo to slow 
    So, Mr. Chairman, these are some of the questions that have 
been of concern to me, and I hope that you'll be able to 
respond to these issues. I thank you, Mr. Chairman.
    Senator Stevens. Thank you. It will be my intention to ask 
that members accept a 5-minute limitation. You and I have used 
about 3 minutes apiece. I'll just ask one question and then 
yield to Senator Inouye and then we'll follow the early-bird 
rule and first early bird was Senator Byrd, so we will try to 
move along so everyone that comes in will have a chance to 
ask--make some comments or ask questions.


    My question really pertains to the change. I was the one 
that went to the Office of Management and Budget (OMB) and 
asked that we not have a supplemental presented to us this 
summer because of the shortness of this session due to the long 
recess for the two conventions. And we were told that OMB and 
DOD agreed and they would not seek a 2005 supplemental this 
year, a supplemental until next year, until after the first of 
the year of 2005. That has obviously changed and the President 
requested $25 billion. We expect this to be used as indicated 
for--only for Afghanistan and Iraq plus the $5 billion that 
Senator Inouye mentioned. And we've had another change, and 
that has been the decision to not reduce the forces in Iraq, 
but to maintain the level of 135,000 through calendar year 
    Now, my question really goes to Director Kaplan and Mr. 
Lanzillotta. We understand that it's difficult to present a 
supplemental for what might occur over the next 18 months, and 
this reserve fund really seems to be directed to the first 4 
months of the next fiscal year. Is there a plan to add to this 
supplemental after the beginning of the year? Could you tell 
us, one of you, what timeframe does this reserve fund really 
purport to cover?
    Mr. Kaplan. Yes, Mr. Chairman. As you know, due to many 
conversations you've had with the administration, it was not 
the administration's plan to come forward with a fiscal year 
2005 supplemental until calendar year 2005 when we will have 
more precise and reliable estimates of what the needs on the 
ground in Iraq and Afghanistan will be.
    You mentioned some of the challenges in terms of 
operational requirements that have developed in the last couple 
of months. The President has been very clear with us at OMB and 
throughout the administration in his commitment to provide the 
commanders on the ground the resources they need and the 
confidence that the resources will be there when they need 
    With that in mind, Secretary Rumsfeld came to the President 
several weeks ago and reported that because of changing 
conditions in Iraq and Afghanistan, we needed to request from 
the Congress basically an insurance policy. It had been our 
intention to cash flow until we could submit a full and 
reliable supplemental request in calendar year 2005. Given 
uncertainties, the developments in Iraq, the political 
situation, the security situation, we thought it was advisable 
to get an insurance policy in place to help the services get to 
the fiscal year 2005 supplemental. It remains our intention, 
Mr. Chairman, to come before the Congress in early calendar 
year 2005 and ask for that full supplemental to carry us 
through the rest of fiscal year 2005.
    Senator Stevens. I apologize to the committee and to our 
witnesses. I failed to let you make your statements in my 
eagerness to answer my question. Would you care to make your 
statement, Mr. Kaplan?


    Mr. Kaplan. As you wish, Mr. Chairman. I'll be very brief. 
Thank you, Mr. Chairman, and members of the committee for 
inviting me to appear to discuss the President's request for 
the $25 billion contingent emergency reserve fund. The 
administration as always, Mr. Chairman, appreciates your 
support and this committee's unwavering support for our men and 
women engaged in the war on terror, and we look forward to 
working with you on this important request.
    I do have a full text I'll submit for the record, but I'll 
just be very brief in highlighting the key factors, and we just 
talked about a couple of them, that shaped our thinking in 
putting together this request. First, we were guided by the 
President's clear and consistent direction, make sure the 
commanders and troops in the field have the resources they need 
to accomplish the mission.
    Second, the request would appropriate the reserve into 
service accounts within the Iraq Freedom Fund, which was 
established by the Congress, as you mentioned, Mr. Chairman, in 
the fiscal year 2003 supplemental. We wanted to work with an 
existing structure for which the Congress has shown support in 
the past.
    Third, the funding is requested as a contingent emergency 
reserve with the funds activated only after the President 
submits a request designating all or part of the funding as an 
emergency and essential to operations in Iraq or Afghanistan.
    Fourth, again, as you mentioned, Mr. Chairman, the reserve 
is intended for operations in Iraq and Afghanistan only.
    Fifth, we're seeking this reserve in addition to funds 
requested for DOD's base in the President's 2005 budget. The 
President believes strongly that the transformation agenda and 
rebuilding of our core defense capabilities must be funded on a 
predictable and reliable path, and we urge the Congress to 
fully fund the Department's base request.

                           PREPARED STATEMENT

    Finally, as I just mentioned in my answer to your question, 
Mr. Chairman, I'd like to note that we do continue to plan to 
come to the Congress with a full supplemental request for 
fiscal year 2005 early in the calendar year when we can have 
more precise and reliable estimates of what the operational 
needs are likely to be during 2005. Thank you, Mr. Chairman. I 
look forward to answering the rest of the committee's 
    [The statement follows:]

                  Prepared Statement of Joel D. Kaplan

    Thank you, Mr. Chairman and Members of the Committee, for inviting 
me to appear before you today to discuss the President's request for a 
$25 billion contingent emergency reserve fund for operations in Iraq 
and Afghanistan. In recent remarks, the President reiterated this 
Nation's commitment to our Armed Forces engaged in Iraq, Afghanistan, 
and elsewhere around the world in the War on Terror. The President has 
never wavered in this commitment. Consequently, his direction to us has 
been clear and consistent: make sure the commanders have the resources 
they need to accomplish the mission and protect our men and women in 
    It is with those men and women in mind that the President decided 
to propose this contingent emergency reserve fund, to provide the 
commanders and the troops in the field the confidence that the 
resources they need will be there when they need them. This reserve 
fund, if enacted by Congress, will guarantee we have the ability to 
respond to rapidly changing conditions in the region, while affording 
the necessary time and experience after the transition in Iraq and the 
elections in Afghanistan to ensure that a Supplemental request made of 
the Congress in early 2005 more accurately and completely reflects real 
    There are several core principles that guided the Administration's 
request for this reserve fund. First, it should be made available as a 
contingent reserve activated only after the President submits a request 
designating the funds as an emergency and essential to operations in 
Iraq or Afghanistan. Based on our work with the Department of Defense 
and the Services, it is clear that they will need to--and can without 
disruption--pull forward funds planned for the second half of the year 
to use in the first and second quarter for operational needs if the 
tempo continues at the current high pace. However, in the current 
environment, a need to ``cashflow'' from the last two quarters in 2005 
has the potential to raise concern about the availability and 
reliability of resources later in the year. We wanted to provide 
commanders, as well as the troops serving in the field, with the 
confidence that nothing will stand in the way of the President's pledge 
to provide them with the resources they need to accomplish their 
mission. A reserve fund guarantees they will have what they need when 
they need it.
    Second, we wanted to propose a structure based on authorities and 
accounts familiar to and supported by the Congress. Therefore, we have 
requested funds appropriated into the Iraq Freedom Fund, established by 
the Congress in the fiscal year 2003 Supplemental. We have also 
requested allocation of funds into specific service accounts, again as 
enacted by the Congress.
    Third, the reserve fund should provide adequate flexibility to 
allow us to respond to a fluid operational environment and emerging 
requirements. The Department of Defense and we believe that at the 
current pace the pressure points in planning and executing are likely 
to develop in the Operation and Maintenance accounts, and particularly 
Army and Marine Corps O&M. This understanding is reflected in the 
allocations in the request we sent to the Congress. However, we also 
are seeking to assure that these resources are matched with transfer 
authority to promptly address changing requirements, including emerging 
procurement requirements related to force protection.
    Fourth, the reserve should address requirements in Afghanistan and 
Iraq only. We believe the base 2005 request provides ample resources to 
meet requirements unrelated to the critical operational missions in 
Iraq and Afghanistan.
    Fifth, we want to assure that enactment of the contingency 
emergency reserve does not come at the expense of the President's 2005 
base request for the Defense Department of $401.7 billion. Early in his 
Administration, the President determined that predictability in funding 
was critical to fulfilling the Department's transformation agenda. That 
predictability is even more important now as the services are asked to 
fully engage in the war against terror abroad, even as they 
fundamentally transform their organization, infrastructure, force, and 
doctrine. While some may argue to shift requirements identified in the 
2005 base request into the proposed reserve, such a shift risks 
creating uncertainty and disruption in the Department's planning and 
execution of key national security policies and missions.
    Finally, I'd just like to note that this Administration has 
tremendous respect for Congress' Constitutional role, and its 
responsibility, in authorizing and appropriating resources for our 
Armed Services. It is in deference to this role that we want to make 
sure that the next supplemental request you consider is accurate and 
precise as to the military's needs. Some have recommended that we 
simply extrapolate from today's costs, multiplying those costs over 
some fixed period as the basis for a request. We have found that such 
estimates often mean funds are mismatched with accounts and the 
requirements that actually develop. The combination of a reserve fund 
that can be activated as needed with a future supplemental built on 
actual 2005 conditions assures we will spend what is necessary to 
support our troops and their vital mission.
    Thank you again for the privilege of appearing before this 
Committee with my distinguished colleagues. I will be happy to take 
your questions.

    Senator Stevens. Yes, Mr. Lanzillotta.

            OF DEFENSE
    Mr. Lanzillotta. Thank you, Mr. Chairman. I will leave my 
statement to be submitted into the record. But to just 
emphasize the point that Director Kaplan made, and to answer a 
question that Senator Inouye raised, it was this consultation 
with the services during the mid-year review to understand 
corporately the financial situation that we were in and the 
Department that led the Secretary to seek and report to the 
President on this condition and why we needed certain things 
for the end of the year.
    I just wanted to emphasize it was the consultation with the 
services at every step of the way that led us to get a full 
understanding of our 2004 requirements, our plan, and also the 
need for this reserve fund to get us to the supplemental in the 
spring next year.
    Senator Stevens. Thank you.
    [The statement follows:]

               Prepared Statement of Larry J. Lanzillotta

    Mr. Chairman and Members of the Committee, I am happy to be here 
today to testify in support of President Bush's request for a $25 
billion reserve fund.


    The reserve fund we are requesting will provide an insurance plan 
so the Department of Defense (DOD) has adequate resources for both its 
core defense activities and its operations in Iraq and Afghanistan. It 
is critical to avoid any disruption in funding for our military forces.
    The Department's plan had been to cash flow fiscal year 2005 
operations in Iraq and Afghanistan until a Supplemental budget request 
could be prepared by early 2005. Now, however, our higher projected 
troop levels increase the risk that certain accounts--especially 
Operation and Maintenance, Army--would have difficulty cash flowing 
operations beyond the February-March timeframe in 2005. This reserve 
fund will eliminate that risk and provide a margin of safety.
    The reserve fund would be used primarily for operation and 
maintenance (O&M) requirements, but a portion is expected to be used 
for force protection needs. Requirements are likely to include:
  --Fuel for helicopters, tanks, and other vehicles.
  --Transportation costs for movement of personnel and equipment in and 
        out of the theater of operations.
  --Equipment maintenance (such as lubricants, repair parts) and 
        logistics supplies.
  --Force protection needs such as individual body armor and up-armored 
        HMMWVs and for possible support for Army modularity.
    The Administration still anticipates submitting a supplemental 
appropriation request to Congress in early 2005 to fund incremental 
costs for contingency operations. It continues to be impossible to know 
what our total supplemental funding needs will be for fiscal year 
2005--particularly after the election in Afghanistan and after 
sovereignty is transferred in Iraq. Depending on the circumstances, we 
could face the need for either more or fewer troops--and more or less 
intensive operations.

                          FUNDING FLEXIBILITY

    I want to make a special plea for giving the Department of Defense 
the needed flexibility that this reserve fund would provide. The 
request was structured to reflect the reality that certain O&M accounts 
will have the greatest difficulty in meeting requirements without this 
reserve, until a full supplemental request can be provided.
    I especially urge you to avoid designating a portion of this fund 
for specific investment programs, because that would undermine the 
central purpose of the fund. It would make it much more likely that the 
Department could not finance its incremental war-related requirements--
especially O&M requirements--all the way until fiscal year 2005 
supplemental appropriations are approved. As the President requested, 
funding should be in accounts likely to be under the greatest strain 
during the first half of fiscal year 2005.
    Besides supporting the flexibility requested for the $25 billion 
reserve fund in fiscal year 2005, the Department of Defense needs the 
Committee's help in making it through the rest of fiscal year 2004. The 
Office of Management and Budget and DOD leaders continue to expect that 
fiscal year 2004 requirements can be financed with the resources 
available in the fiscal year 2004 DOD budget and fiscal year 2004 
Emergency Supplemental Appropriations. However, to accomplish that the 
Department needs to be able to shift funds to finance and sustain its 
current operations. We soon will have exhausted our existing transfer 
authority, and so we will have no authority to move resources to meet 
all our must-pay fiscal year 2004 bills. I urge you to approve an 
additional $2 billion in general transfer authority (GTA) to enable the 
Department to get through the remainder of fiscal year 2004 with its 
existing resources.
    Finally, looking ahead to fiscal year 2005, I urge you to support 
the $4 billion in general transfer authority requested in the 
President's budget. The Department's need for higher GTA, especially 
during this time of war, has been evident in this current fiscal year.


    In closing, I want to thank this committee for your continuing 
strong support to U.S. security and to our military people. We look 
forward to continuing to work closely with you on behalf of America's 
armed forces and their vital missions around the globe. Thank you.

    Senator Stevens. General, do you have an opening statement?

    General Pace. Sir, I'll keep my remarks very brief, but I'd 
be remiss if I didn't say a few thank you, first to this 
committee and through you all to the entire Congress. We do 
have the world's best military and we have it because of the 
sustained bipartisan support of this Congress and we thank you 
for that.
    Second to the magnificent young men and women who are 
serving right now overseas and defending our freedoms. They and 
their families deserve our respect and our appreciation and 
they certainly have it from everyone in this room. And to the 
guardsmen and reservists who have put their lives on hold to be 
able to serve their country and to their employers. The 
guardsmen and reserves are truly performing magnificently well, 
and they performed so well that it's obvious that the employers 
who have let them go have gaps in their workforce and we 
appreciate their support.
    Last, if I may have the temerity to do so, sir, we just 
completed a wonderful Memorial Day weekend where we, among 
other things, witnessed the unveiling of the World War II 
memorial, to you, Senator Inouye, your medal of honor, to you, 
Mr. Chairman, your distinguished flying cross. To everyone on 
this committee and in this room who served, thank you very 
    Senator Stevens. Thank you very much, General. Senator 
Inouye, you have 2 minutes left.
    Senator Inouye. General Pace, when Senator Stevens and I 
were in World War II, we knew that we would be there on the 
front until combat ceased. But today you're trying your best to 
limit our force deployments to 6 months or 1 year. But now we 
find that we've gone to the limit, all the available forces are 
being used, reservists are being used, National Guard units all 
being used. In fact, we are pulling out forces from Korea.
    In light of the current situation in Iraq, do you think 
that this is a good strategy?

                           GUARD AND RESERVE

    General Pace. Sir, we've gone back and reviewed the time in 
combat where a soldier or marine is effective, and all of the 
studies from World War II and Korea and Vietnam indicate that 
at about the 1-year mark a person's, an individual's personal 
capacity to endure combat drops off significantly. So I believe 
that we have the correct strategy as far as the time that we 
ask an individual to spend continuously in combat.
    Second, with regard to the use of the Guard and Reserve, 
clearly because we have now been using the Guard and the 
Reserve for more than 2 years in certain military occupational 
specialities, we need to rebalance the force.
    And General Schoomaker and the Army have identified about 
100,000 billets that are either in the Guard and Reserve right 
now or in the Active Force that should be flip-flopped with 
each other so that we have more of the requisite skills in the 
Active Force so we do not have to rely quite as heavily in the 
future on the Reserve and the Guard, sir.
    Senator Inouye. Speaking of General Schoomaker, the General 
requested additional 30,000 troops, but in this funding we have 
nothing there for 30,000, I think about 1,200. What do we 
expect from you? What can we expect from you?
    General Pace. Sir, General Schoomaker has requested from 
the Secretary and has received from the Secretary temporary 
authority to go over the standing end strength of the Army by 
about 30,000 soldiers. That will allow him to take his 10 
divisions, which are currently configured in 33 brigades, and 
swap out, as I've mentioned, some of the skills, retrain, 
reorganize, and have 43 to 48 brigades at the end of this 
reorganization process.
    Right now, the proposal to fund that is as part of the 
transformation, as part of the resetting of the force, as part 
of the supplemental request, yet to be submitted for next year 
to be funded, sir.
    Senator Inouye. So it's not in this $25 billion?
    General Pace. It is not in this $25 billion, no, sir.
    Senator Inouye. My time is up.
    Senator Stevens. Thank you. Senator Byrd, you're recognized 
for 5 minutes.


    Senator Byrd. Thank you, Mr. Chairman. We've done a great 
job in sending a man to the Moon and returning him to Earth 
safely, but it's amazing that we haven't yet been able to 
prepare an adequate and good system, public address system.
    Senator Stevens, since I'm limited to 5 minutes, I'll save 
it, but a little at this point. The amendment that you and 
Senator Warner are proposing on this $25 billion request is a 
vast improvement, and I thank you, a vast improvement over the 
outrageous power and money grab that the President sought in 
his original request to Congress. He wants it all, no strings 
attached. But our chairman and our ranking member and Mr. 
Warner have proposed to do things differently.
    I commend you, Mr. Chairman, for the steps you've taken to 
impose accountability on the Defense Department and to provide 
the means for Congress to exercise some oversight of how this 
money is spent, and we ought to insist on that always. That's 
not only the right, but it's the duty of the appropriators in 
their fairness to the request, of course, and also in their 
fairness to the expectation of the taxpayers.
    I think we can do more, however, without infringing on the 
flexibility that the Defense Department so badly wants. For 
example, I believe that the transfer authority should be 
limited to $2.5 billion, which amounts to 10 percent of the 
entire $25 billion. That seems to me to be giving the Defense 
Department an adequate bit of flexibility. It seems to me that 
giving the Defense Department a 10 percent margin of error in 
calculating where it will need these funds provides more than 
adequate flexibility.
    I also believe, Mr. Chairman, that the chairman and ranking 
members of the House and Senate Appropriations Committees 
should be included in the consultation and notification process 
in addition to the congressional defense committees. This 
request, after all, amounts to supplemental funding regardless 
of what the administration chooses to call it.
    Furthermore, I believe that this committee needs to see 
detailed justification material on this request before we sign 
off on it. For my part, I have seen no coherent explanation of 
how the administration arrived at the figure of $25 billion, 
and I believe we need to have that explanation before we okay 
the request. Mr. Chairman, I thank you again for what you have 
already done in seeking adequate accountability.
    I have a question now for Director Kaplan. Director, does 
the administration intend to submit a detailed justification 
for this $25 billion request?
    Mr. Kaplan. Yes, Senator, we will submit a justification 
for the request. Should the Congress appropriate the contingent 
emergency reserve fund, as the President, in consultation with 
the Secretary of Defense, designates needs as an emergency and 
essential to operations, we fully intend and expect to consult 
with the Congress in advance of submitting that request.
    Senator Byrd. Let me ask the question again so I can be 
sure I understand what you're saying. Do you intend to submit a 
detailed justification insofar as you possibly can for this $25 
billion request?
    Mr. Kaplan. Yes, Senator, insofar as we possibly can, 
keeping in mind the evolving situation on the ground and our 
expectation that it will continue to evolve in ways that we 
don't necessarily know at this time.
    Senator Byrd. All right. I guess my time is up. My time is 
up, thank you.
    Senator Stevens. Thank you very much. Senator Cochran is 
    Senator Cochran. Mr. Chairman, thank you very much for 
convening this hearing. We appreciate the cooperation of the 
Defense Department, OMB, and the Deputy Chairman of the Joint 
Chiefs for being here and helping us understand this request.
    It seems to me that the request is, as submitted, is 
something that is justified if the ongoing costs above what you 
have available to you is expected to be $5 billion a month. We 
do need to respond in a way that provides you the resources you 
need to be sure that our troops are protected who are in the 
field. I understand that some of these funds will be used to 
upgrade the capacity of our vehicles to withstand attacks from 
these improvised explosive devices. Is that correct, General 
Pace? Is that one of the reasons for this supplemental being 
requested at this time?

                          PROTECTION OF TROOPS

    General Pace. Senator, some of the funds from the 
supplemental could be used for that purpose. As you know, 
Congress this year allowed us to use almost $1 billion, over 
$750 million specifically for force protection of our troops to 
include body armor, up-armored Humvees and the like. So as we 
spent the fiscal year 2004 money, we were able to come to you, 
explain to you what we wanted to use it for, and you allowed us 
to do that.
    The $25 billion that is the emergency fund could be used 
for those purposes or for others, depending upon what we face 
once we get to October 1, sir.
    Senator Cochran. Well, I just want to make sure that the 
record is clear that the request is being submitted for 
additional funding that can be used to enhance force protection 
of our troops who are in the field. We've all come to realize 
through news reports and the briefings that we've received here 
on Capitol Hill that this is a very real threat, and that more 
and more of these rocket-propelled grenades and other devices 
like that that are designed to kill our troops who are 
operating vehicles and trying to protect the Iraqi people as 
they establish their capacity for self-government and for 
ruling their own country through a democratic process. To me 
it's a very timely request and I'm hopeful that our committee 
will act quickly and with unanimity in approving and supporting 
the administration's request.
    General Pace. Sir, it can be and it will be.
    Senator Cochran. Thank you, Mr. Chairman.
    Senator Stevens. Senator Bond.
    Senator Bond. Thank you very much, Mr. Chairman, and 
welcome, Mr. Kaplan and Mr. Lanzillotta and General Pace. I 
particularly appreciate and associate myself with the remarks 
of General Pace and we thank you for those, sir. We look 
forward to working with the chairman and the ranking member and 
I certainly agree with Senator Cochran on the need to ensure 
that our troops have everything they need to fulfill the 
    I was very interested in some things that came up recently. 
Apparently in Iraq no news is good news. Two months ago 
everybody was talking about Fallujah, the brutal murder and 
desecration of four Americans, every mosque in the city calling 
for jihad, local police and fire departments ceasing to exist. 
But thanks to the great work of the marines and the cooperation 
of the Iraqis, everything's quiet and it's off the news pages 
    Just this past weekend I watched the movie, ``Ike: 
Preparation for D-Day'', and the thought struck me that if we 
had had 24-hour news coverage of D-Day with all the problems 
that were encountered there and all of the changes in plans 
that occurred, all of the things that went wrong, the New York 
Times and the Columbia Broadcasting System (CBS) would be 
calling for the firing of General Eisenhower and probably the 
defeat of the President as a result.
    I am concerned we are not getting some reports on the 
successes that are coming out of Iraq, and I think the American 
people deserve to know about the so-called rest of the story. 
And I hope we can do a better job of that. With the new Iraqi 
interim government we may have an opportunity to get a better 
    But General Pace, I'd like to ask you a question. There are 
some people who are saying we have far too few troops in Iraq. 
Obviously the protection of the troops themselves is key to the 
accomplishment of their mission and requires a certain level of 
troop strength. However, I think there are other considerations 
about the presence, the total presence of United States (U.S.) 
forces that may be a factor. Could you comment on whether you 
think we have adequate troops, and will the additional troops 
being sought enable us to fulfill our mission within the 
constraints that exist?

                           COALITION PARTNERS

    General Pace. Senator, thank you. We review that 
constantly, both here in Washington, and more importantly, the 
commanders in the field. And General Franks and General Abizaid 
have come in with their troops request. Those of us on the 
Joint Chiefs have reviewed their request and done our own 
independent analysis. We thought we would be at about 115,000 
troops today. As a result of the increased attacks, because the 
enemy is concerned about the fact that we are in fact going to 
return sovereignty on June 30, the increased attacks have 
resulted in us analyzing that we need more troops on the 
ground, an extra 20,000 were asked for and have been provided, 
and that 135,000 now will be the level to stay at for the 
foreseeable future.
    We're also reviewing literally as I speak in the Pentagon 
right now, and we'll be presenting in the tank this afternoon, 
a lookout for the next 5, 6, 8 months, how the U.S. forces are 
deployed, how we are intermixed with our coalition partners and 
whether or not that's right, and then how we intend to begin 
looking at the turnover of individual responsibilities to the 
new Iraqi army, the new Iraqi police force, and the like. So 
this is a constant process, sir. I am personally comfortable 
with the size force we have there right now. When you combine 
135,000 United States and about 24,000 coalition and another 
250,000 Iraqis, granted in various stages, but all coming 
online, that's a very significant coalition force.
    Senator Bond. I hope my colleagues would agree with me that 
the decisions made by the commanders in the field and the 
leadership in Washington should be the definitive word on the 
number of troops.


    Let me ask either Mr. Lanzillotta or Mr. Kaplan, I recently 
supported an effort calling for $200 million to increase the 
heavy truck recapitalization fund account. We hear reports that 
trucks in Afghanistan and Iraq are getting years' worth of use 
in 2 months. Does this supplemental adequately factor in the 
costs associated with the Army's reset requirements for its 
transportation fleet?
    Mr. Lanzillotta. Senator, let me take a stab at that one. 
This reserve fund is not meant to address all the resetting of 
the force requirements that we're going to incur. This fund is 
only to allow us to support the cash flow or reduce or mitigate 
the problems and the risks associated with cash flowing our 
operation and maintenance (O&M) accounts, specifically in the 
Army, through this time period. The resetting of the force or 
the wear and tear on the equipment is a problem. It's one that 
the Department is addressing and it's one that the Secretary 
has charged the Director of Program Analysis and Evaluation 
(PA&E) to do a study as to what that requirement actually is, 
because we are finding as we study more and more that this 
equipment ages differently on wear and tear. The Director of 
PA&E is going to do that study and we hope to address this 
issue, and when we do the full supplemental later this year, or 
I should say earlier next year.
    Senator Bond. Thank you, Mr. Chairman.
    Senator Stevens. Senator Gregg.


    Senator Gregg. Yes, Mr. Kaplan, in this $25 billion, is 
there any money allocated toward the construction of the new 
Embassy, which is estimated to be $1 billion, and the 
maintenance of the civil operations, which the authority is 
going to hand off to the State Department post-June 30?
    Mr. Kaplan. Senator, as to the first part of your question, 
there is no money in this contingent emergency reserve fund for 
construction of a new Embassy. It is the view of the State 
Department that we're not quite there yet on construction of a 
new Embassy. As you mentioned, Senator, the State Department 
will be taking responsibility for the mission in Iraq post-June 
30, and there will be funding requirements for the State 
Department at that time. For the remainder of 2004, we have 
identified available funding in the administrative accounts for 
the reconstruction fund in monies that the State Department 
received for an Embassy in the previous supplemental that the 
Congress appropriated.
    When we get to fiscal year 2005, the State Department has 
estimated the cost of running the Embassy operations will be 
about $1 billion exclusive of any construction, which again 
there are no plans for at this time. Of that $1 billion, only 
about $170 million of that have to do with traditional Embassy 
personnel-type operations. The State Department, as I said, has 
some money in 2005 for that. Our expectation is that the State 
Department would cash flow from their accounts until the 
supplemental in 2005 to make up the difference of that $170 
million. The rest of that $1 billion is for security and 
logistics, which are currently being covered by the Department 
of Defense, and our expectation is that the Department of 
Defense will continue these activities until the fiscal year 
2005 supplemental is available to carry those costs.
    So we do think that the State Department will be covered 
until we can get to that fiscal year 2005 supplemental. We have 
discussed this at some length with both the Department of 
Defense and the State Department and there's an agreement that 
everybody's comfortable will provide the State Department the 
resources they need.
    Senator Gregg. Well, that comes as news to me and I'm 
chairman of the committee that has responsibility for funding 
the State Department, so I suggest you get that information up 
in writing to us, because we're not going to fund an area that 
you people think you've got the money for in that--in the 
framework you just laid it out, and we certainly don't want to 
be pointed to as underfunding the State Department----
    Senator Byrd. Mr. Chairman, would the distinguished Senator 
speak a little louder?
    Senator Gregg. It's just a long way from--I'll move over a 
little closer to it, Senator.
    Senator Byrd. It's better now.
    Senator Gregg. So I would like to get that explanation of 
how you plan to fund the State Department, the building of the 
Embassy, the maintenance of the Embassy, and the operational 
requirements that they will have post-June 30, all of which in 
your explanation, as I understand it, will require no 
additional funds being put into the State Department accounts 
in the 2005 budget as it was sent up.
    Mr. Kaplan. That's right, Senator, in the 2005 regular 
appropriations. We would expect to address your concerns, 
Senator, in the full fiscal year 2005 supplemental.
    Senator Gregg. I just want that in writing.
    Mr. Kaplan. Absolutely, Senator.
    Senator Gregg. Thank you.
    Senator Stevens. An interesting point. I thought there was 
still some money left in Mr. Bremer's account from the $87 
billion to initiate the construction of that Embassy.
    Mr. Kaplan. Senator, you're correct. I think I omitted 
reference to--there is a fourth quarter apportionment in the 
Coalition Provisional Authority (CPA) account that's about $180 
million that will go toward the 2004 costs. I don't believe 
it's for construction, Mr. Chairman, but it is for the ongoing 
operations, and that will defray some of the 2004 costs of 
maintaining and operating the mission once it opens its doors 
for business on July 1.
    Senator Stevens. That's not before us now, but Senator 
Gregg is right, we need to have some explanation of what will 
be the transitional situation for funding for the non-defense 
portion of our activities in Iraq post-June 30.
    Mr. Kaplan. We'll provide that for you in writing, Mr. 
    [The information follows:]

                    Funding for U.S. Mission in Iraq

    As Deputy Secretary of State Armitage and Under Secretary Grossman 
have testified before the Senate Foreign Relations Committee and House 
International Relations Committee, the total cost of the U.S. Mission 
in Iraq for fiscal year 2004 and fiscal year 2005 is currently 
estimated to be approximately $1.5 billion, excluding costs of 
construction of a new embassy. (Please see ``Funding Availability for 
State Department Fiscal Year 2004/05 Operations in Iraq.'')
    For the fourth quarter of fiscal year 2004, the costs to stand up 
and operate the U.S. Mission and continue necessary functions of the 
Coalition Provisional Authority (CPA) will be in the range of $480 
million, including funds to support readying temporary facilities, 
providing additional Information Technology infrastructure, 
administrative and personnel support costs, establishing regional State 
Department teams, and funding a temporary Iraq Relief and 
Reconstruction Management Organization (IRMO). These costs will be 
covered through existing funds in CPA's fourth quarter operating budget 
($196 million) available to State as the successor to CPA, the one 
percent transfer of Iraq Relief and Reconstruction Funds ($184 million) 
available under law for operating expenses, and from funds directly 
appropriated to the Department of State in fiscal year 2003 
supplemental appropriations ($97.3 million).
    For fiscal year 2005, the estimated operating cost is approximately 
$1 billion, which is exclusive of capital facility costs for a new 
embassy compound and the Program Contracting Office (PCO). The largest 
cost components of running the U.S. Mission in fiscal year 2005 are 
logistics and security. Deputy Secretary of State Armitage together 
with Deputy Secretary of Defense Wolfowitz testified before the Senate 
Foreign Relations Committee on May 18 that their expectation is that 
DOD will continue to supply Logistics Civilian Augmentation Program 
(LOGCAP) and security support for the new Mission until Ambassador 
Negroponte and his team have time to assess the actual needs and 
provide an estimate that can be included as part of a 2005 supplemental 
request. The annual cost of this support is currently estimated at 
about $800 million. The remaining fiscal year 2005 traditional embassy 
operating costs will be covered through funds requested by the State 
Department in the fiscal year 2005 budget and any remaining funds 
carried over from the fourth quarter of fiscal year 2004. State may 
have to rely on portions of its base Diplomatic and Consular Programs 
(D&CP) regular operating account to cash flow any interim requirements 
until a supplemental is requested in 2005. These estimates continue to 
be in flux and will be refined as we work through the transition 
    With respect to the new permanent embassy, the State Department has 
begun the planning process for a new compound in Baghdad and has 
selected a site for construction. The Department continues to work to 
develop requirements, such as determining the appropriate number of 
staff for the facility, so that when we do come forward with a cost 
estimate, it is based on the right size and build for the Department's 
long term plans. In the interim, the Department is in the process of 
renovating three facilities (a chancery building, an embassy annex, and 
the ambassador's residence) in the Green Zone, using funds appropriated 
for this purpose in the Iraq Reconstruction supplemental.

                                 IN IRAQ
                        [In millions of dollars]
       Identified State Resources/Support for Iraq

Fiscal Year 2005 State Budget Request...................            46.2
Fiscal Year 2003 War Supplemental.......................            97.3
Fiscal Year 2004 4th Quarter CPA operating expenses.....           195.8
IRRF up to 1 percent transfer for ``Operating Expenses''           184.4
 of the CPA.............................................
      Total State Resources Fiscal Year 2004/2005.......           523.7
Estimate of State Fiscal Year 2004/05 U.S. Mission Costs
                        for Iraq

Fiscal Year 2004 Embassy Operations (including regional            482.5
 teams, security, and logistics)........................
Fiscal Year 2005:
    Embassy Operations (excluding security and                     191.4
    Security and Logistics..............................       \1\ 817.2
      Total.............................................         1,008.6
      Fiscal Year 2004/2005 Total estimated U.S. Mission         1,491.1
\1\ DOD will provide security and logistics support.

State Operations
    The fiscal year 2005 State budget includes $46.2 million in 
Diplomatic and Consular Programs (D&CP) for operations, security, and 
personnel funding to support activities in Iraq. This includes: $29 
million to cover 120 staff positions being moved to the Iraq mission; 
$10 million for basic Baghdad mission operations; and $7.2 for security 
    $97.3 million from the fiscal year 2003 War Supplemental is 
available in fiscal year 2004 and 2005 for embassy facilities and set-
up costs--including $35.8 million for initial operating and security 
costs and $61.5 million for temporary embassy facilities.
    Of CPA's operating expenses, $195.8 million has been apportioned to 
the 4th quarter fiscal year 2004 and should be available to the State 
Department after the June 30th transition, based on current 
apportionment schedules.
    Pursuant to the fiscal year 2004 Supplemental, up to 1 percent of 
the Iraq Relief and Reconstruction Fund (IRRF) ($184.4 million) may be 
transferred to CPA or its successor organization for operating 
expenses. In addition, the fiscal year 2004 Supplemental language 
provides that up to 10 percent of IRRF funds that are obligated, 
managed, or administered by agencies (other than CPA) can be made 
available to pay for administrative expenses.
DOD support for Security and Logistics
    The largest cost components for the fiscal year 2005 Iraq mission 
are logistics and security. It is the expectation that DOD will 
continue to cover logistics and security contracts for its uniformed 
and civilian personnel and the Iraq mission until the State Department 
has time to assess the actual needs and provide an estimate that can be 
included in a 2005 supplemental request.
    If necessary, State may rely on portions of its fiscal year 2005 
base Diplomatic and Consular Programs (D&CP) regular operating account 
of $3.626 billion (excludes D&CP worldwide security funding) to cash 
flow any interim requirements in fiscal year 2005 until other funding 
becomes available. Approximately 45 percent of State's D&CP regular 
operating funds are apportioned to the 3rd and 4th quarters.

    Senator Gregg. My point was that they're not expecting any 
of this $25 billion to be used for that, so they're looking for 
some--there's unaccounted-for funds which are going to be used 
to accomplish that, which I'm still trying to figure out where 
those funds are and how we're going to get them.
    Mr. Kaplan. If I may, Senator, in the period beginning in 
fiscal year 2005 on October 1, we expect that the Department of 
Defense, until the fiscal year 2005 supplemental is enacted, 
will continue to cover the costs that it's currently incurring 
with respect to security and to the logistics contract, which 
the Department of Defense currently owns.
    Senator Gregg. I'm not sure the State Department 
understands it in those terms and I'd want to make sure 
everybody's on the same page here. That's why I would like to 
get a written statement from OMB as to what your understanding 
is and I intend to vet it with the State Department to see if 
that's their understanding.
    And don't forget we've got $1 billion sitting somewhere to 
build an Embassy, which I haven't seen the money for yet. It's 
not in the budget.
    Mr. Kaplan. That's correct, Senator.
    Senator Stevens. That's an additional aspect to this 
transition, and I hope that you'll ask OMB to cover the full 
scope of that transition, not just Defense activities, but 
under possible--under this reserve account, but where we're 
going to get the money to continue the activities that 
previously have been done by Mr. Bremer's accounts.


    I would like to ask this question, and that is how would 
this contingency emergency reserve fund really operate in terms 
of the drawdown? Do you anticipate making requests for bulk 
transfers or is this going to be a line-by-line operational 
account that we are asked to release?
    Mr. Lanzillotta. Senator, we would plan to handle this much 
similar to how we do the IFF. Right now it requires a 5-day 
notification of a move out of the transfer out of the account. 
We do quarterly reports and then we do spot reporting as 
requested as to how these transfers occur.
    Senator Stevens. Well, there are two differences from the 
IFF account under this request. These funds are specifically 
only for Iraq and Afghanistan. The IFF language allows that 
money to be used for the global war on terrorism. Second, this 
request two actions by the President. One is the transmission 
of the official budget request, and second, a designation that 
the amount is emergency essential to support the activities in 
Iraq and Afghanistan.
    Now, again though, are we looking for bulk money to be 
transferred going in from the fund to another activity or are 
we going to look at this on a line-by-line basis?
    Mr. Lanzillotta. We would look at this fund, you're 
correct, Mr. Chairman, as far as the restrictions and the 
framework that this fund would be used for.
    Senator Stevens. Totally military requirements now?
    Mr. Lanzillotta. Totally military requirements for Iraq, 
Afghanistan, to support the operational costs that are 
associated with those operations and some force protection 
needs. We outlined as to which accounts that we believe that 
money should go to up to, I think $14 billion up to Army O&M 
account. The procedure I was outlining is what the current 
procedure is that we have in place as far as notification to 
Congress as to when these transfers occur.


    Senator Stevens. Let's make sure--the request is written so 
that the funds may be available to transfer to service 
operations and maintenance accounts, and $14 billion for O&M 
Army, $1 billion for O&M Navy, $2 billion for O&M Marine Corps, 
$1 billion for O&M Air Force, $2 billion for O&M Defense-wide, 
and up to $5 billion for other DOD appropriations that might be 
supplemented. The language is permissive, not binding.
    Now, what I want to know is, what is binding about this? 
Can you send us a request you want the whole $25 billion 
transferred without any strings attached?
    Mr. Lanzillotta. Senator, when we--the fund is set up, 
those accounts specifically for the O&M accounts because we 
know those are the accounts that are under the most stress. 
Where we were looking for some flexibility was in the 
centralized piece of it or down at the bottom was what we 
normally refer to as the IFF portion. And what we wanted the 
flexibility for was to address force protection needs, 
specifically like Humvees, we were recently made aware of the 
Army requirement for a possible other 3,000 up-armored Humvees.
    Senator Stevens. I'm over on my time, but some of my 
colleagues have said that you're asking us to give you a blank 
check because that word ``may'' in this provision. Now, I would 
intend to change that to say it shall be used only for these 
accounts except for the $5 billion. Are you going to object to 
    Mr. Lanzillotta. As long as--no, Senator. What we would 
like to have though is the general transfer authority necessary 
that if the situation would change on the ground, we would have 
the sufficient flexibility with notification to Congress to 
make those changes.
    Senator Stevens. The food and forage concept applies to the 
funds we give you for the Department of Defense. If you run 
into trouble you can use any funds you've got. What we're 
talking about is this reserve fund now. Can you take it and put 
it wherever you want, just notify us we want $25 billion and 
we're going to put it wherever you want? That's a blank check 
theory and it's something we're going to run into in the floor 
and I don't like to run into it. So I intend to change that 
word to ``shall'' so that there's no blank check involved. You 
shall use this money for those accounts. You have broad 
discretion, $5 billion for other appropriations. Now, I think 
that's sufficient under this. I hope you agree.
    Mr. Lanzillotta. Yes, Mr. Chairman.
    Senator Stevens. Thank you. Senator Inouye.
    Senator Byrd. Mr. Chairman, might I ask a question along 
the line that you----
    Senator Stevens. Yes, sir. If Senator Inouye agrees.
    Senator Byrd. He said yes in answer to your question. We 
don't know what that means.
    Senator Stevens. It means that we will change the word 
``may'' to ``shall'' and they shall use these funds only as 
designated in the request for those specific funds and there is 
no possibility of asking for a blank check, take all the 
amounts and do what they want. They must use it either for O&M 
account up to $14 billion, $1 billion for the Navy, $2 billion 
for Marine Corps, $1 billion for Air Force, $2 billion for the 
Defense-wide, and there's $5 billion for other DOD 
appropriations that they can use that within the Department as 
they see fit, but it still is limited to Iran--pardon me, to 
Iraq and Afghanistan.
    Senator Byrd. I fully agree and I compliment you and our 
ranking member. I just wasn't sure what the witness meant when 
he just said yes.
    Senator Stevens. Well, I hope he agreed with me, Senator.
    Mr. Lanzillotta. Correct, Mr. Chairman.
    Senator Byrd. Now, what does that mean?
    Mr. Lanzillotta. There were specific accounts laid out with 
specific dollar amounts that Mr. Chairman has said that this--
we change from discretionary authority to ``shall.'' He would 
leave a small IFF-type account at the bottom that we would be 
able to use to address our force protection needs or a changing 
situation on the ground.
    Senator Byrd. Thank you, Mr. Chairman.
    Senator Stevens. Senator Inouye.


    Senator Inouye. Yes, sir. I'm still concerned about the 
process being used to develop this request. I've been told that 
the services had very little to do with the final determination 
of the size and purpose of this supplemental fund. What role do 
you permit the services? Do they play any role?
    Mr. Lanzillotta. Senator, when we developed the mid-year 
review process, the services played an active role in every 
step of the situation to develop the requirements for 2004. 
When we developed the reserve account as it was presented by 
the administration to Congress, this was simply meant to 
address the Army's need and the Department's need to relieve or 
mitigate the risk associated with cash flowing these accounts.
    The services have been briefed every step of the way to 
include service secretaries, service chiefs, on the actions 
taken, and they have been able to play and provide their input.

                            MID-YEAR REVIEW

    General Pace. Senator, if I might add, I was in the room 
during the mid-year review. The way Mr. Lanzillotta just 
described it is exactly accurate. There was a general 
discussion in the room based on what we learned in the mid-year 
review that it looked like it would be prudent to have a 
contingency fund as we got to the beginning of fiscal year 2005 
so that we could stabilize the way we were spending on the 
force, stabilize training, and be able to continue operations. 
So that discussion did take place.
    With regard to the specific numbers of dollars that would 
be asked for, sir, I was not privy to that particular 
    Senator Inouye. So you're telling the committee that the 
service chiefs were well aware as to size and the purpose of 
these funds?
    General Pace. No, I did not say that, sir. What I said was 
the service chiefs were very much aware and part of the 
discussion with the Secretary of Defense that said we should 
come forward if we could earlier than February, March 2005 and 
get some kind of insurance policy for our operations. The exact 
size of that was not discussed in the meetings that I was.
    Mr. Lanzillotta. Can I clarify that point, Senator?
    Senator Inouye. Yes, sir.
    Mr. Lanzillotta. The services fully participated in 
developing what the requirements were for 2004 and 2005. When 
we developed what the size of this number should be, we have--
it was kind of done at a technical level with what we call a 
cost team, and on the cost team there's representatives from 
the services, there's representatives from the joint staff that 
they use and they together and they try to cost out what the 
impact of the operations would be next year. And we looked at 
that to see, based on what this cost team had put together from 
the services and the joint staff that participate, as to what 
that number ought to be to get us to the point where we thought 
that we could get a supplemental submitted and approved by the 
Congress. The exact number of the $25 billion was never taken 
to the service chiefs.
    General Pace. But the service chiefs were aware of that 
once the number was developed and the chairman was told by the 
Secretary it looked like it would be about $25 billion. The 
chairman shared that with the rest of the Joint Chiefs in the 
tank and that was very, very satisfactory to all of us.

                        RECRUITING AND RETENTION

    Senator Inouye. I have just one more question. Can you 
provide this committee at this time on the numbers involved in 
recruiting and retention?
    General Pace. Sir, I can take for the record the exact 
numbers. I can tell you, sir, that on the active side of the 
house for recruiting we are meeting our goals, for retention we 
are meeting our goals. On the Reserve side, the last numbers I 
saw, recruiting were off by 1 or 2 percent, retention was off 
by 1 or 2 percent. National Guard right now, the Air National 
Guard, the last number I saw recruiting was off about 23 
percent, but I can get you the exact numbers, sir.
    [The information follows:]

                                                            Percent of
                         Service                               goal
    Army................................................             100
    Navy................................................             100
    Marine Corps........................................             101
    Air Force...........................................             103
    Army National Guard.................................              93
    Army Reserve........................................              95
    Naval Reserve.......................................             109
    Marine Corps Reserve................................             109
    Air National Guard..................................              77
    Air Force Reserve...................................              92

    Senator Inouye. So you're satisfied with those numbers?
    General Pace. No. I'm satisfied that those are accurate 
numbers, sir, not satisfied with what the numbers portend. We 
need to be very attentive to the way that we're using 
especially our Guard and Reserve. We need to ensure that when 
we ask these great Americans to put their lives on hold and 
serve their country that the mission we are giving them is a 
valid mission, that we are up-front with them as far as when we 
are going to call them back to duty, how long we are going to 
keep them on active duty, when they will be returned to their 
employers, and that we do as quickly as we can the rebalance of 
the force so that we do not rely on the Reserves for things 
that Active Forces should be doing.
    Senator Inouye. I thank you.
    Senator Byrd. May I ask the Senator to yield?
    Senator Stevens. Senator, you're recognized for 5 minutes.
    Senator Byrd. I would ask the Senator from Hawaii, what 
were the Army and Guard statistics? I don't believe I heard 
    General Pace. Sir, I don't have in my head the exact 
number. I believe the Army Guard is about 2 or 3 percent. I'm 
not positive of that. I do know that the Air Guard is off about 
23 percent. And what I said to Senator Inouye, sir, is that I 
would get for the record the exact number so you have it 
    Senator Byrd. How long does it take to get that for the 
    General Pace. Sir, we should be able to get that today.
    Senator Byrd. Mr. Chairman, I think it would be good if we 
knew those figures today.
    Senator Stevens. Yes, Senator, we'd be happy to have them 
today as requested, Senator Byrd. The numbers for the Air Guard 
remind me of the numbers at the time of the Persian Gulf war. 
You remember, Senator Inouye, we were over and met with them. 
Those fell off at that time too. The Air Guard was particularly 
disturbed at that time as I recall. But we would like to have 
the numbers if you'll provide them.
    General Pace. Yes, sir. Can do.
    Senator Stevens. Senator, you're recognized for 5 minutes.

                      MONTHLY COSTS OF OPERATIONS

    Senator Byrd. General Pace, what is the current monthly 
cost of operations in Iraq and do you expect the anticipated 
spike in violence over the coming weeks to affect that cost?
    General Pace. Sir, I'd like to turn to Mr. Lanzillotta for 
the answer to the exact cost. I have a number in my head, but I 
know he knows exactly.
    To answer your second question, we do expect violence to 
increase between now and June 30 as it already has in April and 
May, because our enemies fully understand that transfer of 
sovereignty back to the Iraqi people and their ability as an 
Iraqi people then to hold elections later on this year, to 
write their own constitution, to have a representative form of 
government, goes at the very heart of what the terrorists are 
trying to do, which is to stifle freedom.
    Senator Byrd. You're going a little beyond my question, but 
thank you. Do you have any concern if the transfer----
    Senator Stevens. Senator, Mr. Lanzillotta had answers to 
your question, the first part of your question, if you'd like 
to hear them.
    Senator Byrd. Yes, thank you for calling that omission on 
my part.
    Mr. Lanzillotta. Senator, our current operational tempo in 
Iraq is about $4 billion a month. We expect with the increase 
of troops that were recently announced that that will jump each 
month between $120 million to $160 million, depending on the 
rotation of the troops that are coming out there each month.
    Senator Stevens. $160 million now you're talking about?
    Mr. Lanzillotta. Correct, Mr. Chairman. Now, for 
Afghanistan, our current operational tempo rate is about $700 
million. It changes on a monthly basis.


    Senator Byrd. Do you have any concern if the transition is 
bloodier than anticipated that some of this $25 billion will be 
needed before the end of this fiscal year?
    Mr. Kaplan. Senator, the Department of Defense has 
conducted their mid-year execution review for fiscal year 2004 
and as I understand it, the conclusion of that review is that 
based on the needs as we know them today, with sufficient 
transfer authority, general transfer authority in 2004, the 
Department will be able to cover those needs as we know them 
    To your question, Senator, if the situation on the ground 
in the next few months were to be more violent than even 
General Pace described, then having some portion of the reserve 
available as an insurance policy in 2004, I expect would 
provide the services additional comfort.
    Senator Stevens. Would the Senator yield there?
    Senator Byrd. Yes.
    Senator Stevens. It would be my intention to ask the 
committee to provide that whatever funds are available for this 
IFF would be available upon enactment just to make sure we 
don't face another request for the balance of this year. So we 
would make these funds available upon enactment in the event 
such emergency would occur.
    Senator Byrd. Well, Mr. Chairman, I thank you for that. I 
am concerned about this IFF, what that means, what additional 
flexibilities that may give.
    Senator Stevens. My proposal would only affect--only impact 
the effective date of the availability of these funds. As 
requested, they would be available on October 1. Under my 
amendment, they would be available from the date of the 
enactment of this bill, just the fund itself, not the whole 
2005 defense funds, but just for this reserve fund, the reserve 
would be there as soon as Congress enacts the bill, or passes 
the bill and the President signs it.
    Senator Byrd. When the term IFF is used, does that mean 
that there may be some needs beyond those pertaining to Iraq 
and Afghanistan?
    Senator Stevens. This bill--this fund applies only to Iraq 
and Afghanistan, Senator.
    Senator Byrd. I thank you, Mr. Chairman.
    Senator Stevens. I correct that. There's $5 billion that 
could be allocated to any one of the services at the request of 
the President with the approval of Congress.
    Senator Byrd. But would that--would the committee have the 
understanding that anything that goes beyond Afghanistan and 
Iraq comes back to this committee?
    Senator Stevens. That's correct. That's my understanding. 
The request for the reserve is limited to Iraq and Afghanistan, 
but $5 billion could be used throughout the services again 
without regard to their limitations of the request for a 
specific service.
    Senator Byrd. But--I'm sorry if I'm taking too much time--I 
want to be sure that none of that money can be used for making 
wars elsewhere. I want that understood that the funds would be 
used only for Afghanistan and Iraq.
    Senator Stevens. It specifically states in the bill that 
it's for an emergency essential to support activities and 
agencies in Iraq or Afghanistan, period. Even the $5 billion 
for the Defense-wide and classified programs are limited to 
Iraq and Afghanistan.
    Senator Byrd. Mr. Chairman, that answers my question. Thank 
    Senator Stevens. Senator, I used some of your time, so if 
you wish to have a few more minutes, please proceed.
    Senator Byrd. Thank you. General Pace, I'm growing 
increasingly concerned about the continuing and possibly 
growing insurgency in Afghanistan. That's where the first war 
began. That's the war I fully support. Four American military 
personnel were reported killed in Afghanistan in recent days as 
were four Afghan soldiers. The news report I read described the 
toll on the U.S.-led coalition forces in Afghanistan as among 
the worst for a single attack since the United States invaded 
Afghanistan in 2001. This is a troubling development. 
Afghanistan seems to have become the forgotten war. And yet 
reports like this remind us that it is still a war and that 
American military personnel are continuing to fight and die 
    Would you give us an assessment of the current situation in 
Afghanistan? Let me just finish this question. At the end of 
April, General Abizaid reported that there were approximately 
20,000 U.S. military personnel in Afghanistan as a result of 
increased offensive operations and troop rotations. That level 
is about twice what the U.S. military presence in Afghanistan 
had been. Approximately--here's my question--how many U.S. 
troops are currently in Afghanistan and how many coalition 
forces? And then I asked an earlier question which you won't 
have time for right now, Mr. Chairman, I want General Pace to 
give us an assessment of the current situation in Afghanistan 
whenever you see that we have time without imposing on the 
other members. I don't want to impose on their time. But 
specifically, approximately how many U.S. troops are currently 
in Afghanistan, how many coalition forces?

                         TROOPS IN AFGHANISTAN

    General Pace. Sir, we have approximately 19,000 U.S. troops 
in Afghanistan right now. We have approximately 8,000 coalition 
troops in Afghanistan. The four soldiers you mentioned who were 
killed in action in the past week were in a vehicle that hit a 
mine. Most of the U.S. forces are in the south, southeast part 
of Afghanistan operating in the provinces along the Pakistan 
border and are working in cooperation with the forces from 
Pakistan as they work--as the Pakistan forces work in Pakistan.
    Senator Byrd. Thank you, Mr. Chairman.
    Senator Stevens. Thank you. Senator Cochran.
    Senator Cochran. Mr. Chairman, the Memorial Day break gave 
us all an opportunity to go back to our States and I had the 
good fortune of being able to visit a new defense manufacturing 
facility in Stone County, Mississippi, which is assembling and 
installing on Bradley fighting vehicles a reactive armor plate 
that permits the safeguarding of these vehicles and the 
occupants of these vehicles against rocket-propelled grenade 
attacks. It was a very interesting experience for me and it 
shows that we have technologies evolving and are using 
technologies that are evolving now to make it safer for our 
troops and safer for our equipment, less costly for equipment 
that would have otherwise been destroyed by these rocket-
propelled grenade devices.
    My question is, I assume from the answers to your questions 
from Senator Stevens and others that the funds in the $5 
billion account may very well be used for helping to ensure 
that we're taking advantage of emerging technologies and new 
developments in defensive mechanisms to protect our forces in 
the field in Afghanistan and in Iraq. Is that correct?
    General Pace. Sir, that is correct.
    Senator Cochran. I have no other questions, Mr. Chairman.
    Senator Stevens. Thank you very much. Senator Domenici.
    Senator Domenici. Thank you, Mr. Chairman. I have one 
technical question and then I'd like the General to talk about 
another issue. Mr.--how do you say it--Lanzillotta. I should 
know that, I should know how to say that. They've said mine 
wrong so many times I tried to say yours right, but I couldn't.


    Let me ask you, it seems to me that even with what we have 
been talking about that you may need some general transfer 
authority in order to make this work. Can you discuss with me 
that issue and tell us what you think about the necessity for 
    Mr. Lanzillotta. Thank you, Senator. We have completed--are 
in the process of completing our mid-year review, and hopefully 
in the next couple of weeks we'll have our annual omnibus 
reprogramming that we'd normally do up to the Hill. We feel 
that we're going to be short in general transfer authority 
somewhere in the neighborhood of $1 to $2 billion.
    The problem is we were provided general transfer authority 
in the supplemental and then we were provided general transfer 
authority, but the combination of the two doesn't make up to 
allow us to transfer the money where we have assets available 
from under execution to where the bills are. To complete this 
year though, we will need between $1 to $2 billion of general 
transfer authority.
    Senator Domenici. Thank you very much. General, the most 
startling thing to me that's happened with reference to America 
is what happened in Saudi Arabia with terrorists taking over a 
building within the compound for civilian workers in the oil 
patch. I think it indicates, I regret to say so, but I think it 
indicates that the Saudi oil is vulnerable, that the Saudi 
kingdom is vulnerable. I'm very, very worried about it. As a 
matter of fact, I believe that this generation serving right 
now is going to go down in history as the worst generation 
instead of the best in terms of the energy situation.
    If in fact we do not do anything about the situation of an 
energy policy, I clearly believe that some of us won't be here, 
but some will, when America will be brought to her knees 
without a terrorist firing a shot in America if we get a 
substantial oil disruption. How many remember the Iranian 
disruption? We were in gas lines. In Brooklyn, they shot each 
other, remember, Senator Byrd, because somebody went around the 
line and somebody had a pistol and got mad and early in the 
morning, 5 o'clock, they were waiting in gas lines. That was a 
little tiny disruption. This one could be a monster disruption 
from what I see.
    Now, General, you can't fix the world and you can't fix 
Saudi Arabian anti-terrorist forces, but I guarantee you that 
Iraq won't work unless the police and military of the Iraqis 
are ready. Can you tell us, how is the training of these men 
and women from Iraq? How is it going? What's your assessment? 
Are they really getting better? We're talking about turning the 
government over. Will they be ready to take a significant 
portion of the load, or will we still be almost exclusively in 
charge? Now, I think they've been doing better. I read even, in 
the biased press, that some of the trained Iraqis are involved 
in a number of these security situations--putting out the 
fires, et cetera. Could you just address this for us? I think 
it's terrifically important.
    General Pace. Sir, they have been doing better, but we can 
be doing better in helping them to get better. In the Iraqi 
Civil Defense Corps (ICDC), for example, the forces that are--
    Senator Domenici. What is ICDC?

                          HOME SECURITY FORCES

    General Pace. The home security forces, battalion-size 
organizations that we're going to have about 36 of, to a tune 
of about 40,000 across the entire country. Their equipment 
right now is on order but not yet in theater. Their training is 
being done by local U.S. forces, but we need to be working 
first, as we are, and with Congress' support, to get the 
equipment to them more quickly, to train alongside them, and 
then to work alongside them in the field.
    One major lesson from the last month is that understandably 
Iraqis do not want to fight for a foreign power no matter who 
that is. They want to fight for their own government. And with 
the stand up, the announcement and the stand up of Prime 
Minister Alawi and the rest of the interim Iraqi Government, 
these Iraqi soldiers will now have an Iraqi Government to 
respond to, an Iraqi flag to fight under, and have a purpose 
for which they can lend their energies.
    But we do need to do better with the five forces, the civil 
defense corps, the new Iraqi army, the police force, those that 
are providing protection on the fixed facilities like oil 
fields and the like, and the border guard. We need to increase 
that, and in fact, there is a general officer who was just 
confirmed last week by the Senate to go over and take charge of 
that entire Iraqi security force operation for us. He is going 
over this week.
    Senator Domenici. What's his name?
    General Pace. That is Lieutenant General Petraeus, Dave 
Petraeus. General Petraeus was a Major General obviously until 
about 2 weeks ago. He was the 101st Airborne Division commander 
up in Mosul, did a fantastic job there for 1 year, has been 
home about 2 or 3 months and has been selected to go back 
because of his demonstrated capabilities in the battlefield to 
help us reorganize all parts of the Iraqi security force.
    Senator Domenici. Mr. Chairman, I would like to say to you 
and Senator Inouye that I believe this is the most important 
issue, training the forces of Iraq. None of this is going to 
work if they are not properly trained and equipped. I believe 
we ought to push the military to get that going as fast as 
possible and spend as much money as necessary to see that it 
works. In fact, it is not so good if they can't get their 
equipment. Why will they believe us if in fact we train them 
and tell them they are in charge and then we don't have their 
    So, General, I know you're not in charge, but I hope that I 
speak for these Senators. There is no way to win this without 
the Iraqis becoming trained and taking over, or having a plan 
for them to take over. Thank you, Mr. Chairman.
    Senator Stevens. Well, Senator, as I understand this 
proposal, if the money was used in Iraq by the Department of 
Defense to train people of Iraqi descent, that would be 
consistent with the request. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much. I regret 
I was late, delayed by another committee, but I have read your 
testimony. First, let me say I don't think there's anyone on 
this subcommittee that will ever withhold the resources that 
are needed to carry out your missions, and I think the evidence 
is the chairman and the ranking member and every member of this 
subcommittee wants to support that which is necessary for our 
troops who are doing what this country has asked them to do.
    I do want to, however, say that this--that the $25 billion 
reserve fund is an unusual request I think in the scheme of 
things over many years, and it is, according to your testimony, 
to provide flexibility, and you urge us to avoid designating a 
portion of the fund for specific investment programs because 
that would undermine the purpose of the fund, which I guess is 
    It seems to me that we would have some basic knowledge of 
knowing what our needs are going to be for the next 3 months, 6 
months, or 12 months. And let me come to the--in the last 
year's Defense appropriations bill, we said this, section 8139, 
it is the sense of the Senate that, one, any requests for funds 
for a fiscal year for an ongoing overseas military operation, 
including operations in Afghanistan and Iraq, should be 
included in the annual budget of the President for such fiscal 
year as submitted to Congress under section 1105 of the U.S. 


    I still do not understand why we do not have some better 
notion of what the expenditure needs are going to be for the 
coming fiscal year, and perhaps we can talk just a bit about 
that. Can you respond to that question? Obviously you have 
not--you have ignored the sense of the Senate provision that 
was in last year's appropriations bill, but explain to me why 
there's not some basic attempt to try to tell us and the 
American people what this cost will be in the coming fiscal 
    Mr. Lanzillotta. Senator, let me try. What the attempt was, 
and what I meant on that statement was, we are using this 
reserve fund to pay for our operational costs associated with 
operations in Iraq and Afghanistan. If that money is diverted 
toward other things outside of those operational costs, then 
that undermines the purpose of trying to mitigate the risk 
associated with cash flow and the services and the commanders' 
need to cash flow these accounts.
    We fully intend to address these other issues as far as 
wear and tear and equipment, other requirements associated, in 
a full supplemental, in which case we would submit that to the 
administration and up to the Hill for consideration. As far as 
being able to, last February, include the cost of the 
operations in this year's budget, we're in this situation that 
we had an early supplemental this year in 2004 and the service 
budgets for fiscal year 2006 would be due to us in August. To 
project the costs for 2006 would be difficult because the 
situation on the ground changes and the reality changes on the 
ground. And so what we are here for with this reserve fund is 
to be able to address that changing situation.
    Some of the changes over the last couple of months have 
been forced deployment. We've added--or the combatant 
commanders have needed for additional troops. We have had to 
put those additional troops on the ground to meet those needs. 
That was an assumption that wasn't in the supplemental and 
that's why we're basically here today.
    Senator Dorgan. You make a fair point with respect to 2006, 
but what do you expect our costs to be in 2005? I mean, do you 
just anticipate that we'll just keep going along and every time 
money is needed we'll just do an emergency supplemental? I'm 
just asking if we have some basis for understanding what our 
costs will be in the coming fiscal year for these operations?
    Mr. Lanzillotta. I think that we've been forthcoming as to 
what the current operation costs, as far as what our burn rates 
have been. The problem that we have right now is the 
unforecasted things that happen on the ground to be able to 
adjust to meet those. Even when we finished 2004, we found 
significant problems in trying to get our arms around what the 
requirements on the ground versus the assets that were made 
available in 2004 on an early supplemental. What we----
    Senator Dorgan. I'm sorry, I don't mean to interrupt you. 
Go ahead.
    Mr. Lanzillotta. We don't have the data or the accuracy to 
be able to project that far ahead as to what possibly could 
happen. And then we get into a situation where we need to come 
back and ask for additional general transfer authority, we need 
to ask for reserve funds.
    Senator Dorgan. But it seems to me it's a function of 
planning. If our so-called burn rate is now roughly $5 billion 
a month, that's $60 billion a year and you're asking for $25 
billion as a contingency fund. Does that mean that next spring 
we'll be asked for $35 billion in emergency supplemental monies 
or more?
    Senator Stevens. This is the Senator's last question.
    Senator Dorgan. I wonder if the witness could answer.
    Mr. Kaplan. Senator, if I may, our expectation is we would 
like not to have to ask for a contingent supplemental in 2005--
that's why we've planned to come to the Congress at the 
beginning of calendar year 2005 when we actually do have more 
reliable and precise estimates and the best sense of how things 
have developed in the intervening months. Calendar year 2005 
obviously is many months away, and as we've seen just in the 
last couple months, circumstances on the ground in Iraq do 
continue to evolve. Obviously they've evolved in a more violent 
fashion in the last couple months. The hope is, as our military 
engages with Iraqi forces and continues the acceleration of the 
training, equipping, and enlisting the Iraqis in providing 
their own security, the hope is that the needs as we get into 
2005 will diminish. Obviously the contingent emergency reserve 
fund is there until we get to calendar year 2005 and the 
supplemental to provide the insurance if operations don't 
diminish or if they continue at the increased operational rate 
that we've experienced in the last couple months and that 
General Pace has spoken about.
    Senator Stevens. Thank you, Senator. For the Senator's 
information, I would oppose the Senator's amendment. We have 
operated during this period in Afghanistan and Iraq under the 
concept that we do receive supplementals. To my knowledge, the 
administration has not used the food and forage fund concept 
yet in these two actions. We have used supplementals as they've 
been presented.
    The Iraqi Freedom Fund, which was created in 2003 as a 
supplemental and was again used in the 2004 supplemental, it 
really has financial flexibility and congressional oversight. I 
asked for some rundown of what has happened. Seventeen billion 
dollars has been provided in the IFF in the past, and about 
$944 million remains available to the Department of Defense, 
and we expect that to be spent during the balance of 2004. The 
IFF has a 5-day advance notification requirement before DOD can 
transfer funds. To date, DOD has sent us 33 IFF notifications 
accounting for every dollar that's been spent. In a couple of 
cases, the DOD sought prior approval where required for a 
procurement new start. As allowed by law and to prudently 
manage funds, DOD also transferred money back into the IFF in 
order to keep the excess funds from lapsing at the end of the 
last fiscal year.
    Now, I have some general questions to ask Mr. Lanzillotta 
about this. How has the----
    Senator Dorgan. Mr. Chairman, might I clarify, I was not 
suggesting an amendment, and all I did was read current law 
that was in the 2004 Defense Appropriations Act, so I'm not 
proposing an amendment. I was just reading the sense of the 
Senate that was in the appropriations act last year.
    Senator Stevens. That's the sense of the Senate, but I 
misunderstood. I thought the Senator was going to present that 
as an amendment.


    I asked Mr. Lanzillotta, how has the fiscal year 2003/2004 
Iraqi Freedom Fund been spent in your opinion?
    Mr. Lanzillotta. Mr. Chairman, out of the $65 billion that 
was made available in 2004, we've obligated $32.1 billion, $25 
billion in Iraq, $4.5 billion in Afghanistan, and $2.1 billion 
in Noble Eagle, which is stateside mobilization of Guard and 
Reserve. In 2003, we had two pieces of the supplemental. We had 
the $9.97 billion that was provided in an omnibus 
appropriations in January and the $62.5 billion that was 
provided in the supplemental for a total of $72 billion. Of 
that, we've spent $45.6 billion in Iraq, $12.7 billion in 
Afghanistan, and $6.5 billion in Operation Noble Eagle. That's 
for $64.8 billion. It doesn't include the intel numbers.
    Senator Stevens. Do you believe that the flexibility 
provided by the IFF has been important to the operations of 
your Department from a financial point of view?
    Mr. Lanzillotta. Yes, Mr. Chairman, I do. What it has 
allowed us to do, and it has been mentioned already, is it 
allowed us to react to some force protection requirements. When 
we submitted the supplemental, we had force protection 
requirements in there for up-armored Humvees. Since then, that 
requirement has changed about three times, in which case the 
flexibility in the IFF has allowed us to meet that requirement 
to transfer money into Other Procurement, Army for the Army to 
continue to build up-armored Humvees at a rate sufficient to 
meet their requirements.
    Senator Stevens. General Pace, in response to a request for 
information how this fund was, for examples of how it was spent 
for force protection equipment like the body armor, I was also 
informed that it was used to up-armor Humvees and it was used 
to augment the monies that we provided to destroy captured 
Iraqi ammunition, to deal with the ammunition dumps. Can you 
tell us how important it is to have this fund available for 
commanders in the field so they can respond quickly to changes 
and not have to go back through the process of budget approval 
right through the Department over to OMB and to Congress?
    General Pace. Sir, it is very important for all the reasons 
you mentioned. We have about 178,000 new sets of body armor out 
there, one for each person in theater. You have building 
toward--almost 4,000 up-armored Humvees have been paid for out 
of this fund. You have about another 8,000 sets of armor that's 
hung on the sides of other vehicles and these were made 
possible because of the flexibilities inherent in the Iraqi 
Freedom Fund. Further, flexibilities like contingency emergency 
responds program (CERP) where you have the ability for 
commanders to use that money in the field, they do not have to 
come back to the Army, for example, asking Army to reprogram 
some money, which means that Army then can continue to train 
the soldiers back here and repair the equipment back here that 
needs to go back on the next rotation. So all these things help 
provide stability across the force.
    Senator Stevens. The committee knows I publicly apologized 
to Senator Feinstein for the actions that I recommended in 
limiting the monies available to deal with the ammunition 
dumps. When we discovered how serious they were, I was very 
pleased to see that you had used the reserve fund to deal with 
those ammunition dumps. If we approve this reserve fund, is 
that the type of action that you would use the money for in the 
event we discover some more of those dumps? By the way, I don't 
know if you know, we've discovered some 8,500 dumps so far. 
There's more ammunition, I think, in Iraq than the rest of the 
world stacked up in the ground openly. I really support any 
activity that will deal with those, although I understand it's 
almost an impossible task right now with the terrorism that's 
going on. Could you comment on that, General?
    General Pace. Sir, it is the exact kind of thing that we 
would do with this money. The numbers today are, we have 
discovered over 300,000 short tons of ammunition in today over 
9,500 locations. They have been compressed now down to 63 
locations. We've destroyed about 150,000 short tons, but 
there's another 150,000 short tons to go. But that 300,000 tons 
that we found is estimated to be about one-half of the 600,000 
tons that was believed to be in the country when we began the 
    Senator Stevens. It could be out there buried, hidden. 
There's still stuff that may be found that you would need money 
immediately to deal with, right?
    General Pace. Absolutely, yes, sir.
    Senator Stevens. So I commend you for that and I commend 
this committee. The concept of a reserve fund to deal with 
issues, emergencies issues, Mr. Lanzillotta, these are 
emergency funds, right? You don't use them for routine 
activities of any one of the services in Iraq?
    Mr. Lanzillotta. Correct, Mr. Chairman.
    Senator Stevens. Senator Inouye.


    Senator Inouye. With the recent United Nations' involvement 
in the establishment of this interim government, and with the 
selection of a president, prime minister, et cetera, are you 
sufficiently optimistic that the funding requirement may come 
down in the next 18 months?
    Mr. Lanzillotta. Senator, to tell you the truth, I don't 
know in the next 18 months what will happen.
    Senator Stevens. When you sat here, I'm assuming you're 
telling the truth all the time.
    Mr. Lanzillotta. I stand corrected. In the next 18 months, 
my personal opinion is I have no idea what this requirement 
will do. I've watched this requirement change on a dime, and 
that is what makes a prediction of a supplemental in 2005 so 
hard, because just finishing 2004 the requirements have changed 
so dramatically. So I am not optimistic that I know what that 
number is in 2005 and that the requirement will come down.
    Senator Inouye. But do you look upon the new developments 
with optimism?
    Mr. Lanzillotta. Senator, I certainly do. I certainly think 
that the transition to the Iraqi people eventually will 
stabilize and is the only way to stabilize that country.
    Senator Inouye. Thank you.
    Senator Stevens. Senator Byrd.
    Senator Byrd. Thank you. What about those who have said, 
hell no, we won't go? How much confidence can we have in the 
Iraqis to fight Iraqis in order to bring security and stability 
to the country? Hell no, we won't go. Does the witness 
understand my question? General Pace.

                            IRAQI GOVERNMENT

    General Pace. I understand it. I don't know how it's said 
in Arabic, but I understand what you just said in English. I 
believe that Iraqi young men led by Iraqi leaders serving an 
Iraqi Government that is selected, elected by the Iraqi people, 
that those young men will serve that government, will rally 
around their flag, will do the right thing for their 
government. So I am optimistic about the announcements that 
have been made over the last couple of days about the progress 
in standing up a new government.
    Senator Byrd. General Pace, my office has recently begun to 
hear reports from my constituents that our troops in Iraq will 
soon have their rest and relaxation (R&R) leaves substantially 
reduced. This R&R leave, which allows troops to return home for 
up to 2 weeks, has been critical to military families who have 
been forced to deal with the deployment of a family member to 
Iraq for 1 year or more. Are these reports accurate? Is there 
now or will there soon be a cutback in the R&R leave for our 
troops in Iraq?
    General Pace. Those reports are not accurate. There will 
not be a cutback, sir.
    Senator Byrd. So there's--there will not be a cutback in 
the R&R leave for our troops in Iraq?
    General Pace. That is correct, sir. A soldier who gets 
assigned to Iraq for 1 year is given the opportunity to take a 
R&R about midway through his or her tour.
    Senator Byrd. When can our troops expect their leave to be 
    General Pace. Yesterday, sir, because it wasn't taken away.
    Senator Byrd. I beg the witness to pardon.
    General Pace. I'm sorry, sir. You said when could it be 
restored. Because I believe that it never was taken away, sir, 
the answer is yesterday or the day before, because it never was 
taken away.
    Senator Byrd. In other words then, my office has been 
incorrectly informed with respect to the report that I earlier 
alluded to, namely that our troops in Iraq will soon have their 
rest and relaxation leaves substantially reduced?
    General Pace. They will not have their rest and leave 
reduced, sir.
    Senator Byrd. Are our troops also able to visit recreation 
centers in Iraq and neighboring countries for shorter periods. 
What's going to happen, if anything, with respect to this?
    General Pace. Sir, to my knowledge, those programs are on 
solid ground. Each of the neighboring countries, of course, 
reviews their own programs over time. I will double check on 
the neighboring countries, but I'm not aware of any reduction 
in any of the programs in the neighboring countries.
    Senator Byrd. I thank you, General Pace. Now, if I may have 
a question for Mr. Kaplan. Is there not a need--let me back 
this up just a little bit--last week, DOD asked the Coast Guard 
to increase the number of personnel in Iraq from 300 to 400 and 
to increase the number of ships. Prior to that request, the 
Coast Guard had estimated their fiscal year 2005 costs for the 
mission in Iraq at $95 to $105 million. Is there not a need to 
include specific language in the supplemental authorization and 
appropriation that transfers funds from DOD to the Coast Guard? 
The current version, as I understand it, of the Warner-Stevens 
language makes no reference to the Coast Guard. Perhaps, Mr. 
Chairman, I could ask you if I may do so timidly to answer that 
    Senator Stevens. Yes, $400 million has been transferred 
from this fund to the Coast Guard so far. Because of our great 
interest in Alaska, having half the coastline of the United 
States, we maintained a little contact with the Coast Guard to 
see how much of their funds are being spent. But since they are 
technically an arm of the Department of Defense, when mobilized 
by the President, they will be able to have portions of this 
fund to carry out their activities as I understand it, and they 
have had parts of the fund that has previously been made 
available to the Department of Defense, as I said, $400 million 
has already been transferred to them in the past.
    Senator Byrd. Then, Mr. Chairman, is it not--where there is 
no vision, the people perish. Would it not be well to exercise 
our vision to include specific language in the supplemental 
authorization and appropriations that transfers funds from DOD 
to the Coast Guard?
    Senator Stevens. I would see no problem with that because I 
think it's implied already, and they have used the fund in the 
past. It's the same fund we're putting this money into. But I'd 
see no problem. As a matter of fact, I'd welcome the 
opportunity to sponsor with you a provision that says that to 
the extent necessary these funds may be used for the activities 
of the Coast Guard carrying out the activities in Iraq. I don't 
think they're necessary for Afghanistan. I don't think they'll 
be necessary there.
    Senator Byrd. No West Virginia for the same reason. We have 
no coastline.
    Senator Stevens. We'd welcome them back in Alaska whenever 
they can come back, Senator.
    Senator Byrd. Senator, I'm one Senator who voted to bring 
Alaska and Hawaii into the union.
    Senator Stevens. We honor you for that continually, sir.
    Senator Byrd. And may I thank you, Mr. Chairman, I thank 
you for your suggestion that we might work together on such 
    Senator Stevens. Thank you. Senator Inouye, do you have any 
further questions? We expect to have this be the last hearing 
for this subcommittee. We do appreciate your coming today. I 
think it's a very important and productive hearing. I want to 
assure you that we stand ready, as Senators here have stated 
from both sides of the aisle, to respond at any time when 
resources subject to our control are necessary to ensure the 
troops in the field or preparing to go to the field being 
trained for that, have the resources needed to get the job done 
and get it done with as full protection as possible.
    I'm constrained to say that the Senator from West 
Virginia's questions about leave I think were of interest to 
Senator Inouye and I. We got 4-day leave before we left to go 
overseas and we got 1 week leave when we came back from 
overseas. We didn't get R&R and we didn't get leave to go to 
any rest center or any recreation center during the period of 
World War II. So I'm pleased to see that these people have it, 
don't misunderstand me, but it is something new in terms of the 
cost of operations of the Department of Defense. That's an 
enormous, enormous burden to ensure that those forces have at 
least one trip home after, what, 6 months, General?
    General Pace. Sir, sometime during the year, usually 
between 4 to 8 months.
    Senator Stevens. They've got a trip back to the place of 
their choice as I understand it, to come home to the place of 
their choice, or is it to home?
    General Pace. Sir, it's a very generous--place of their 
    Senator Stevens. But it's needed and I hope we can talk 
later sometime about the necessity to restore the confidence in 
our system to increase the enlistment rates in the Air National 
Guard and to restore the total enlistment rates for the whole 
Department of Defense. We thank you for----
    Senator Byrd. Mr. Chairman?
    Senator Stevens. Yes, sir.

                       OPERATIONS IN AFGHANISTAN

    Senator Byrd. Could I impose on the chairman and the 
ranking member just briefly? What is the current monthly cost 
of operations in Afghanistan, and how much of the $25 billion 
in this budget request is for operations in Afghanistan?
    Mr. Lanzillotta. Senator, we're currently spending about 
$700 million a month in incremental costs for Afghanistan. This 
fund is envisioned to be able to relieve stress on the service, 
particularly the Army, for both operations in Afghanistan and 
Iraq. I don't really have a breakout as to exactly how in the 
future that it will come out.
    Senator Byrd. Mr. Chairman, may we have some estimate of 
this--of the needs? Do we have some estimate as to the monthly 
costs of operations in Afghanistan and how much?
    Senator Stevens. Senator, could you allow me to interrupt?
    Senator Byrd. Yes.
    Senator Stevens. This fund is for emergencies.
    Senator Byrd. Yes.
    Senator Stevens. The funds that are available for routine 
activities are in the regular bill, but the emergencies, I 
don't see how we could predict them.
    Senator Byrd. I don't think this is an unimportant question 
or an impossible one for the people who are in charge and who 
use the pencil and so on by the minute. I don't think it's 
something out of the order to have this question answered at 
least as well as can be, how much of the $25 billion in this 
budget request would Mr. Kaplan estimate to be for operations 
in Afghanistan?
    Mr. Kaplan. Senator, the best we can do as we sit here 
today is to tell you what we're spending in Afghanistan today, 
and that's as Mr. Lanzillotta reported, on the order of $700 
million a month. As with Iraq and as is the purpose of this 
contingent emergency reserve fund, we don't know what we'll be 
spending in the future, for instance, in Iraq, as we move 
toward democratic elections for that country.
    Senator Byrd. But this fund is not for democratic 
elections, is it?
    Mr. Kaplan. No, Senator. This fund is for the military 
operations in Iraq and Afghanistan. I only refer to the 
elections to make the point that we don't know what precisely 
the situation on the ground will be as we move into fiscal year 
2005. The fund is there, as the chairman has indicated, to make 
sure that the commanders on the ground in both Iraq and 
Afghanistan have what they need and to relieve pressure on the 
Department of Defense so that they don't have to go too far 
into their accounts.
    Senator Stevens. Senator, it would not be used for the 
elections, but it would be used to assure that our troops in 
Iraq have the funds in Iraq to react on a security basis to 
assure that the elections were carried out openly and freely, 
and we cannot estimate what that will be. I don't know what it 
will be.
    On Afghanistan, we spent a substantial amount of time with 
General Jones as he went through the proposed transition in 
Afghanistan to a more peaceful circumstance, and that too has 
some contingencies in it that means that there could be 
emergencies develop in Afghanistan. But he could give us no 
estimate of what would be required because he doesn't know what 
the emergencies might be.
    But we did have the amount that had been used in 
Afghanistan for the funds that exist today, and that has been--
I don't have the total--but some of these funds that have been 
used from the IFF in the past have been for Afghanistan. We 
could get the Senator that figure, how much of the funds have 
been used there in the past as compared to how much was used in 
    Senator Byrd. I think that would be good information for 
the subcommittee and the committee. Perhaps General Pace might 
have some view of how much of the $25 billion is expected to be 
for operations in Afghanistan. I'm very interested in 
Afghanistan. I was there 49 years ago and I have a great 
admiration for those people, but I just don't believe that 
we're giving enough attention to the war in Afghanistan. That's 
the war I really have supported from the beginning. Does the 
General have any idea as to how much of the $25 billion is for 
operations in Afghanistan?
    General Pace. Sir, I am no more prescient than the others 
who have already spoken. We are spending about $700,000 a month 
    Senator Stevens. $700 million.


    General Pace. You could multiply that by month if you'd 
like to to come up with an estimate. We have elections coming 
up in September in Afghanistan. There will be additional 
security needs there. There could be enemy activity because of 
that, those elections, that would require us to do more than 
we're doing day to day right now security-wise, so the number 
could change, sir. But it would be a guess, and the math that 
you would do based on $700,000 a month is the same that I would 
do, sir.
    Senator Stevens. Would the Senator yield just a moment?
    Senator Byrd. Yes.
    Senator Stevens. I'm told that the North Atlantic Treaty 
Organization (NATO) participation now is increasing. When we 
were there just a few weeks ago, there had been sort of a delay 
in NATO fulfilling its commitments, but NATO is now coming into 
Afghanistan in a way that it's not into Iraq, so as it comes 
in, its participation will augment the funds that we are 
spending there. The rate of expenditure now is decreasing as I 
understand it, so the problem is, is there any kind of formal 
resumption of real true hostilities from the remaining Taliban 
enclaves and that's, I don't think anyone can predict it.
    But the good news is that NATO forces are coming in and 
that four districts of Afghanistan are becoming linked by a 
road we are building, which is sort of like a beltway through 
the whole country. I share the Senator's concern for 
Afghanistan because I too went there years ago to Pakistan and 
what we saw immediately after we reentered Afghanistan on the 
trip there was a shocking, shocking situation. I told people 
when I came back, having seen China destroyed by the Japanese, 
the destruction in Afghanistan was far beyond the destruction 
that was in China.


    Senator Byrd. Mr. Chairman, as the ranking member of the 
Appropriations Committee, I wish to thank you and I want to 
thank my friend from Hawaii, the ranking member of the 
subcommittee, for the work you're doing. I want to thank you 
for the hearing you're holding today. And I want to thank 
General Pace and the other two witnesses for their 
contributions to this effort. Thank you very much.
    Senator Stevens. Thank you, sir.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 

               Questions Submitted to Hon. Joel D. Kaplan
           Questions Submitted by Senator Christopher S. Bond

    Question. Recently I supported an effort calling for a $200 million 
increase in the heavy truck recapitalization fund account. It is 
reported that our heavy trucks in Iraq and Afghanistan are getting a 
year's worth of use in two months. Does this supplemental adequately 
factor in the costs associated with the Army's reset requirements for 
its transportation fleet?
    Answer. The Department of Defense (DOD) and the Army are closely 
monitoring the wear on vehicles in Iraq. Based on current estimates of 
vehicle use, the combination of the fiscal year 2005 President's 
Budget, a planned fiscal year 2005 supplemental, and potential use of 
the $25 billion fund will provide a flexible means to adequately cover 
costs associated with the Army's transportation fleet requirements, 
including recapitalization.
    Question. Once the CPA transfers authority to the Iraqi Interim 
Government who will make the decision for the acquisition of military 
related equipment for Iraqi forces? Has the DOD considered equipping 
Iraqi forces with U.S. manufactured equipment (and replacing this 
equipment with newly manufactured and upgraded American made 
    As U.S. Forces place a greater reliance on Iraqi forces throughout 
Iraq it is important that the equipment Iraqi forces rely upon be 
dependable and can be reliably repaired and kept up. Transferring U.S. 
manufactured equipment to the Iraqi's will ensure that parts and 
service is available to Iraqi's in keeping their military equipment in 
good repair.
    Answer. Decisions on the types and numbers of arms secured for the 
Iraqi forces will be made, in consultation with appropriate officials 
of the Iraqi Interim Government, by the Department of Defense and 
General Petraeus, who is leading the effort to train, equip and 
mobilize the Iraqi security forces.

             Question Submitted to Lawrence J. Lanzillotta
           Question Submitted by Senator Christopher S. Bond

    Question. Recently I supported an effort calling for a $200 million 
increase in the heavy truck recapitalization fund account. It is 
reported that our heavy trucks in Iraq and Afghaniatan are getting a 
year's worth of use in two months. Does this supplemental adequately 
factor in the costs associated with the Army's reset requirements for 
its transportation fleet?
    Answer. No. This reserve fund is not meant to address all the 
resetting of the force requirements that we are going to incur. This 
fund is only to allow us to mitigate the problems and risks associated 
with cash flowing our O&M accounts, specifically in the Army, until 
fiscal year 2005 supplemental appropriations can be approved. The 
resetting of the force or the wear and tear on the equipment is a 
problem that the Department is addressing. Secretary Rumsfeld has 
charged the director of PA&E to do a study as to what that requirement 
actually is, because we are finding that this equipment ages 
differently on wear and tear. We hope to address this truck 
recapitalization issue when we prepare the fiscal year 2005 
supplemental appropriations request.

                Question Submitted to General Peter Pace
           Question Submitted by Senator Christopher S. Bond

    Question. Once the CPA transfers authority to the Iraqi Interim 
Government who will make the decision for the acquisition of military 
related equipment for Iraqi forces? Has the DOD considered equipping 
Iraqi forces with U.S. manufactured equipment (and replacing this 
equipment with newly manufactured and upgraded American made 
equipment)? As U.S. Forces place a greater reliance on Iraqi forces 
throughout Iraq it is important that the equipment Iraqi forces rely 
upon be dependable and can be reliably repaired and kept up. 
Transferring U.S. manufactured equipment to the Iraqi's will ensure 
that parts and service is available to Iraqi's in keeping their 
equipment in good repair.
    Answer. Decisions regarding the types and quantity of equipment for 
the Iraqi Armed Forces will be made by the Iraqi Ministry of Defence, 
under the advice of Lieutenant General Petraeus's Multi-National 
Security Transition Command--Iraq (MNSTC-I), formerly the Office of 
Security Transition. Many factors will go into the recommendations 
MNSTC-I provides, including equipment availability, production lead 
times, interoperability with existing systems, procurement and 
maintenance costs and training requirements. While the MNSTC-I analysis 
may recommend a number of U.S.-produced items for the armed forces, the 
Iraqis have the final say regarding what they believe best meets their 
needs, what they can afford to buy and from whom it should be 
    The Department of Defense has and will continue to consider U.S. 
equipment for the Iraqi Security Forces. We are already providing 
significant quantities of radios, field gear, vehicles and night vision 
devices to the Iraqis, and as new requirements emerge we will continue 
to assess if U.S. equipment will meet Iraq's needs.

                         CONCLUSION OF HEARING

    Senator Stevens. If there's nothing further to come before 
the subcommittee, this is the last meeting of this subcommittee 
on the fiscal year 2005 budget. Thank you all very much.
    [Whereupon, at 11:45 a.m., Wednesday, June 2, the hearing 
was concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]