[Senate Hearing 109-320]
[From the U.S. Government Publishing Office]




                                                 S. Hrg. 109-320, Pt. 7

                                                        Senate Hearings

                                 Before the Committee on Appropriations

_______________________________________________________________________


                            Military Construction and Veterans Affairs,

                                                   and Related Agencies

                                                         Appropriations

                                                       Fiscal Year 2007

                                         109th CONGRESS, SECOND SESSION

                                                              H.R. 5385

PART 7

  DEPARTMENT OF DEFENSE
  DEPARTMENT OF VETERANS AFFAIRS

Military Construction and Veterans Affairs, and Related Agencies, 2007 
                          (H.R. 5385)--Part 7

                                                  S. Hrg. 109-320, Pt 7
 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2007

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

                                HEARINGS

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   on

                               H.R. 5385

  MAKING APPROPRIATIONS FOR MILITARY QUALITY OF LIFE FUNCTIONS OF THE 
    DEPARTMENT OF DEFENSE, MILITARY CONSTRUCTION, THE DEPARTMENT OF 
   VETERANS AFFAIRS, AND RELATED AGENCIES FOR THE FISCAL YEAR ENDING 
               SEPTEMBER 30, 2007, AND FOR OTHER PURPOSES

                               __________

                                 PART 7

                         Department of Defense
                     Department of Veterans Affairs

                               __________

         Printed for the use of the Committee on Appropriations


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html


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                               __________

                      COMMITTEE ON APPROPRIATIONS

                  THAD COCHRAN, Mississippi, Chairman
TED STEVENS, Alaska                  ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico         PATRICK J. LEAHY, Vermont
CHRISTOPHER S. BOND, Missouri        TOM HARKIN, Iowa
MITCH McCONNELL, Kentucky            BARBARA A. MIKULSKI, Maryland
CONRAD BURNS, Montana                HARRY REID, Nevada
RICHARD C. SHELBY, Alabama           HERB KOHL, Wisconsin
JUDD GREGG, New Hampshire            PATTY MURRAY, Washington
ROBERT F. BENNETT, Utah              BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho                   DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas          RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
WAYNE ALLARD, Colorado
                    J. Keith Kennedy, Staff Director
              Terrence E. Sauvain, Minority Staff Director
                                 ------                                

Subcommittee on Military Construction and Veterans Affairs, and Related 
                                Agencies

                 KAY BAILEY HUTCHISON, Texas, Chairman
CONRAD BURNS, Montana                DIANNE FEINSTEIN, California
LARRY CRAIG, Idaho                   DANIEL K. INOUYE, Hawaii
MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
WAYNE ALLARD, Colorado               ROBERT C. BYRD, West Virginia
MITCH McCONNELL, Kentucky            PATTY MURRAY, Washington
THAD COCHRAN, Mississippi
  (ex officio)

                           Professional Staff
                             Dennis Balkham
                              Sean Knowles
                       Christina Evans (Minority)
                         B.G. Wright (Minority)
                        Chad Schulken (Minority)


                            C O N T E N T S

                              ----------                              

                       Wednesday, March 29, 2006

                                                                   Page

Department of Veterans Affairs...................................     1

                          Tuesday, May 9, 2006

Department of Defense............................................    57


   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2007

                              ----------                              


                       WEDNESDAY, MARCH 29, 2006

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:35 p.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Craig, Allard, Feinstein, 
Johnson, Landrieu and Murray.

                     DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY
ACCOMPANIED BY:
        JONATHAN B. PERLIN, UNDER SECRETARY FOR HEALTH
        DANIEL L. COOPER, UNDER SECRETARY FOR BENEFITS
        WILLIAM F. TUERK, UNDER SECRETARY FOR MEMORIAL AFFAIRS
        TIM S. McCLAIN, GENERAL COUNSEL
        ROBERT J. HENKE, ASSISTANT SECRETARY FOR MANAGEMENT


               statement of senator kay bailey hutchison


    Senator Hutchison. The subcommittee will come to order. Our 
hearing today, of course, is to review the fiscal year 2007 
budget request for the Department of Veterans Affairs.
    I'm very pleased to welcome the Secretary of Veterans 
Affairs, Jim Nicholson; Under Secretary for Health, Jonathan 
Perlin; Under Secretary for Benefits, Daniel Cooper; Under 
Secretary for Memorial Affairs, William Tuerk; General Counsel, 
Tim McClain; and Assistant Secretary for Management, Robert 
Henke.
    We are facing a time when our servicemen and women are 
returning from the Global War on Terror in Iraq and 
Afghanistan, and many of them are coming home wounded. 
Sometimes it would be a loss of limb, sometimes a brain injury 
or post-traumatic stress syndrome. The VA will have its hands 
full for years to care for those who have defended our country.
    Mr. Secretary, I want to say that you have demonstrated 
leadership not only in the war on terror and coming forward 
last year and saying, ``We need more money,'' working with us 
to make that happen in the very best possible way. We 
appreciate that forthrightness that you gave, and also what you 
did during Hurricanes Katrina and Rita. When we look back on 
the emergency planning for the Veterans Affairs, you really did 
everything right. Under your watch, the VA did not lose a 
patient, and I saw many of those evacuees, myself, in Houston. 
And I want to say, especially, thank you to Dr. Perlin for your 
real creativity not only for the planning for the hurricanes 
but also the electronic health records, which really made a 
huge difference for those veterans who were displaced so 
quickly. They never lost a record. Everybody was ready to treat 
them, it was seamless. And HealtheVet is a terrific system that 
you are credited with, and we thank you for that.
    Mr. Secretary, I think it's a wonderful news story that the 
veterans healthcare system is now getting so much good 
publicity, and the care is renowned to be among the best in the 
country. And I know that also has caused problems, because now 
more veterans, who wouldn't have come to the veterans system 
before, now are coming. So, that is creating a bigger workload.
    Certainly, the VA's budget request for this year is $80.6 
billion in budget authority for fiscal year 2007, $42 billion 
is mandatory programs, and discretionary is $38.5 billion. I 
think this is a good budget. Most of the increases, however, 
are based on increased collections and savings that rely on 
enacting legislative proposals that are in your budget request, 
including an annual enrollment fee of $250, a pharmacy 
copayment increase to $15 for priority 7 and 8 veterans. And 
without the proposed legislation, the increase in the medical 
services budget would be $2.7 billion, or 8.7 percent. So, we 
want to work with you, but I think you know that the committee 
is not supportive of the revenue requirements in the budget. 
So, we want to talk with you, work with you to try to see how 
we can address these issues, and perhaps look for some other 
options for revenue.
    I also want to mention the Gulf War Illness research, which 
is certainly a great area of interest to the committee. And I 
note that your research budget is 3.16 percent below last 
year's level, so I will want to hear how you plan to do Gulf 
War Illness research and the other prosthetic research that I 
know you're also looking at doing with that lower budget.
    Last year, the subcommittee directed the VA to consolidate 
its IT project with procurement, hardware, software, under one 
organization overseen by the Office of Information Technology. 
And we would like to have an update on how that reorganization 
is going. There is also a reduced request for the major 
construction account, which I hope that you will also be able 
to address.
    So, overall, I think, Mr. Secretary, we have a budget with 
which we'll be able to work on and we look forward to working 
with you. And we do appreciate the leadership that you have 
shown at the Department of Veterans Affairs.
    With that, I would like to ask my very wonderful colleague 
and friend--I started to say my ranking member, but I feel like 
she's one of our most productive and equal members of our 
committee. And so, I'll call on my colleague Senator Feinstein.


                 statement of senator dianne feinstein


    Senator Feinstein. Thank you very much, Madam Chairman.
    And welcome, Mr. Secretary and gentlemen. I wish I could 
say ``ladies and gentlemen.'' But at least I can say 
``gentlemen.'' Welcome.
    I sincerely hope this will be a smoother year than last 
year, and that we do not have the repeat of the shortfalls that 
we saw last year. As you all well know, California's home to 
the largest number of veterans in America. And I think Texas is 
either second or third. Certainly,--second?--and then, I guess, 
Florida is third. So, this is a major concern to both the 
chairman and to myself.
    While I believe the fiscal year 2007 budget is a good 
starting point from which to formulate the appropriations bill, 
I have some concerns in some areas.
    The first, and most glaring, are the fee proposals 
contained in the budget request. This budget assumes savings 
and fee collections of over $795 million by doubling 
prescription drug copayments and imposing a $250 enrollment fee 
on middle-income veterans, many of whom are struggling to make 
ends meet on incomes as low as $26,903 a year. More than 
200,000 veterans would be adversely affected by these 
proposals. I believe they are unrealistic assumptions. Congress 
has rejected them in the past. And I, for one, hope we will 
continue to reject them.
    Additionally, I remain concerned by the savings the budget 
has assumed regarding efficiencies. This year, the President's 
budget request contains over a billion in anticipated resource 
savings associated with so-called efficiencies. As you know, 
last year this subcommittee directed the VA to provide detailed 
justification for management efficiencies. It remains clear, to 
this day, what those efficiencies actually are. I understand 
that this year the VA has termed these savings ``clinical 
efficiencies'' rather than ``management efficiencies.'' Mr. 
Secretary, I hope in your testimony you will shed some light on 
the difference between these two and exactly how you're going 
to achieve these efficiencies, or savings, without cutting 
services.
    I'm also very concerned about the special needs of those 
veterans returning from combat in Iraq and Afghanistan. Roughly 
505,000 Iraq and Afghanistan veterans have separated from 
military service following their tour of combat. The latest 
figures show the VA having treated over 144,000 of these for a 
variety of healthcare problems. The VA has estimated that it 
would treat 110,556 of these veterans in 2006. However, 
according to VA statistics, through January the VA had already 
treated almost 75,000. And, at that time, there were still 8 
months left to go in the fiscal year. In 2007, the VA is 
estimated it will treat 109,191 Iraq and Afghanistan veterans. 
This seems somewhat low, considering the trend that's upward.
    Now, I know, Mr. Secretary, these are tough issues, but I 
hope you'll address them. And, if you don't, we certainly will 
in our questions. But I want to welcome you, and I want to 
thank all of you for the service to our country.
    Thanks, Madam Chairman.
    Senator Hutchison. Thank you. In order of arrival--Senator 
Johnson.
     Senator Mitch McConnell has submitted a statement to be 
entered into the record.
    [The statement follows:]

             Prepared Statement of Senator Mitch McConnell

    Senator McConnell will continue to work with the Kentucky 
Congressional delegation to advocate vigorously on behalf of the 
Commonwealth's veterans.
    American bravery and courage have been demonstrated in the heroic 
efforts of our Nation's veterans since the founding of our country. 
That rich tradition continues in the stalwart efforts of today's 
generation of American soldiers. In the continued struggle to rid the 
world of terrorism, our fighting men and women have time and again 
demonstrated their willingness to stand guard against the enemy and 
defend our way of life. This protection has come at a great cost, 
however, with over 2,600 soldiers having paid the ultimate price for 
our freedom. Furthermore, many more soldiers have also sacrificed of 
themselves, and as a result, bear the lasting scars--both physical and 
mental.
    As the nearly 18,000 wounded soldiers who have bravely served our 
country in Iraq and Afghanistan return home, it is important that they 
receive the first-rate medical care they need. These soldiers--many 
from Kentucky--will be dependent on the Department of Veterans Affairs 
(VA) to provide them with the proper care.
    The VA's CARES Stage I Summary Report for Louisville points out 
that there are over 117,000 enrolled veterans living within the 
Northern Market of VISN 9--an area that encompasses most of Central and 
Eastern Kentucky. Unfortunately, the report also details that only 61.6 
percent of those enrolled veterans, many living in Kentucky, have a VA 
primary care facility that is readily accessible to them. This is a 
full eight percentage points lower than the threshold the VA has deemed 
acceptable. Given this fact, and that there are nearly 400,000 veterans 
living in Kentucky, it is troubling that the VA has not requested 
funding for construction of new veterans' healthcare facilities for any 
community within the Commonwealth for the next fiscal year.
    As we begin to examine the issues facing our Nation's veterans in 
the upcoming year, I will continue to work with my colleagues from 
Kentucky here in Congress to advocate vigorously on behalf of the 
Commonwealth's noble veterans. All of us are interested in ensuring 
that the VA follows through with its proposals to create several new 
facilities throughout the State.

                    STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Well, thank you, Madam Chairman. Welcome, 
Secretary Nicholson.
    I have just come from South Dakota, where we had an 
interesting roundtable discussion with returning Afghan and 
Iraq veterans, with a particular focus on PTSD and other 
emotional mental health issues, and I look forward to your 
testimony in that regard.
    In order to expedite things this morning, Madam Chairman, I 
will submit an opening statement for the committee record, and 
I look forward to the testimony of the Secretary.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    I would like to thank Chairwoman Hutchison and Ranking Member 
Feinstein for calling today's hearing on the fiscal year 2007 budget 
for the Veterans Administration (VA). Your continued efforts on behalf 
of our Nation's veterans are greatly appreciated, and I look forward to 
working with you both as we move forward with this year's VA budget.
    I would also like to thank Secretary Nicholson for appearing before 
the Subcommittee, and for your willingness to serve. As Secretary of 
the VA, you have a very difficult job and an incredibly important 
responsibility to our veterans.
    Ensuring that our Nation's veterans receive the benefits they have 
earned and deserve is one of my most important duties as a Senator, and 
one I do not take lightly. While the President's fiscal year 2007 
budget request is a step in the right direction, I am concerned we will 
fail to meet our obligations unless additional money is appropriated 
above the level requested by the President.
    Recently, I had the privilege of meeting with a number of veterans 
in South Dakota who have returned from serving in Iraq and Afghanistan. 
One young man shared with me the difficulties he has had readjusting to 
civilian life following his tour of duty. He was currently attending 
college in South Dakota after serving in Iraq with the 82nd Airborne, 
and had been waiting months for an appointment with the VA. He required 
treatment because he was experiencing stress-related problems following 
his deployment.
    Even though he wasn't able to schedule an appointment in a timely 
fashion, he wasn't resentful. Rather, I was struck by his positive 
attitude. Like many soldiers, he was proud of his service in Iraq and 
thankful for the opportunity to serve his country. In fact, he said it 
made him a better person.
    We are all proud of our men and women in uniform, and we must do 
all we can to ensure that those returning from combat zones are getting 
the help they need. In addition to making certain that the VA has 
adequate funding for mental health services and readjustment 
counseling, we must also guarantee that the budget is properly funded 
each fiscal year and not subjected to emergency supplemental 
appropriations.
    As you are well aware, the primary reason for the budget shortfall 
last year was because the VA underestimated the projected costs of 
caring for soldiers returning from Iraq and Afghanistan. In my opinion, 
the funding crisis last summer underscored the necessity of mandatory 
funding. That is why I introduced S. 331, the Assured Funding for 
Veterans Health Care Act of 2005. I firmly believe the VA budget cannot 
be subjected to the whims of discretionary spending, and the only 
solution to this problem is to support my bipartisan mandatory funding 
legislation.
    In addition to new veterans enrolling in the VA, we must also 
remember those who have served our country in past conflicts. Often 
times, these veterans rely upon the VA as their only source of health 
care. That is why I am deeply concerned by the Bush Administration's 
continued insistence on implementing annual enrollment fees and 
increased prescription drug co-payments for our Priority 7 and 8 
veterans.
    These fees are designed to generate revenue in order to help offset 
VA expenditures. However, some veterans may be forced to seek health 
care elsewhere because they cannot afford either the annual enrollment 
fees or the increased co-payment costs. Rather than relying on budget 
proposals aimed at driving veterans out of the VA in order to save 
money, we should focus our efforts on providing adequate funding to 
ensure all those who have defended our country receive the health care 
they have earned and deserve.
    Without question, we are facing tough budget choices this year. 
However, if we are serious about our national security, and recruiting 
the best and brightest to defend our country, we must make honor our 
commitment to our Nation's veterans.
    Once again, thank you Madam Chairwoman for calling today's hearing. 
I look forward to working with my colleagues on the Subcommittee as we 
begin consideration of the fiscal year 2007 Military Construction and 
Veterans' Affairs Appropriations bill.

    Senator Hutchison. Thank you very much.
    Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Madam Chairman, thank you. Thank you 
specifically for holding this hearing. It's a necessary 
hearing, because we are in the appropriation process, and I'm 
looking forward to hearing from the witnesses today before the 
committee.
    And I would like to especially welcome a good friend of 
mine, and a fellow Coloradoan, the Secretary of the Veterans 
Administration, Secretary Nicholson. Jim, it's good to see you 
here, and thank you.
    Clearly, this committee has many new challenges before us 
this year. In addition to the roles of veterans from World War 
II, Korea, Vietnam, and Desert Storm that the VA already cares 
for, the number of men and women injured while performing their 
duties in Iraq and Afghanistan grows daily and will only add 
continued stress to the Veterans Health Administration. Now, 
while these needs increase, the United States also faces a 
challenge in reining in Federal spending and reducing our 
Federal debt over the next few years. This is a precarious 
balancing act that must always focus on answering the call for 
those men and women who have served their country courageously.
    And, Mr. Secretary, I just look forward to discussing these 
issues with you further today.
    And, with that, I'd like to, again, reiterate my thanks for 
appearing in front of us today, and look forward to your 
testimony.
    And thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Allard.
    Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Thank you very much, Chairman Hutchison and 
Ranking Member Feinstein, for holding today's hearing. 
Secretary Nicholson, it's good to see you again before one of 
our committees.
    And I just want to say, before I do my opening statement, 
that I want to just thank Congressman Lane Evans, who announced 
his retirement yesterday, for his tremendous service to all 
veterans. He owes--we all owe him a debt of gratitude for the 
tremendous job he's done, and we will miss him as a Member of 
Congress. And I know many people here share that sentiment with 
me.
    Madam Chairman, I do want to start with the good news in 
this budget proposal. After years of seeing inadequate budgets 
in a massive shortfall, last year we finally, I think, have a 
decent budget proposal for VA healthcare from this 
administration, and I want to commend you, Secretary Nicholson, 
for the focus you give to the wellness initiatives in your 
budget.
    But, overall, I have to say, I am still very concerned that 
the President's fiscal year 2007 budget doesn't fix the funding 
problems and is built around denying care instead of meeting 
the real needs. It seems to me this budget takes one step 
forward by providing a good number overall for VA healthcare, 
but takes two steps backwards in limiting access and not being 
based on real needs.
    This budget plan actually locks the hospital doors to 1.1 
million deserving veterans, and will keep another 200,000 
veterans from accessing the VA, and that is on top of the 
260,000 veterans that were denied access last fiscal year. So, 
while the bottom-line number looks good, how you get there is 
troubling.
    The Bush administration, as Senator Feinstein mentioned, is 
imposing new fees and copayments and blocking access for 
veterans to reach that funding number, and I just think that's 
wrong.
    I know that many times in a budget we rob Peter to pay 
Paul, but in this case what we're actually doing is denying 
care to 1.1 million veterans to provide care for others. And, 
to me, that's just morally wrong. And that is on top of the 
VA's efforts to cut back on outreach to 25 million veterans, of 
which only 5 million currently access care.
    I'm very concerned about the lack of outreach, that it is 
keeping many of our veterans who have service-related injuries 
out of the VA, and it's especially troubling when many of those 
veterans have illnesses specific to their service, like 
veterans who suffer from the impacts of Agent Orange or Gulf 
War syndrome.
    We all know that when veterans signed up to serve, they 
were promised healthcare. There wasn't any asterisk. There was 
no fine print saying ``exclusions apply.'' We made a promise to 
every veteran, and we need to keep that for every veteran.
    And I'm also very concerned about the other step backward I 
see, and that this budget is still not based on actual demands 
so that we can know what we need to see, in terms of numbers, 
for fiscal 2007. Everyone in this committee remembers what 
happened last year with the tremendous shortfall, and we could 
be setting ourselves up again for the same kind of shortfall if 
we don't have a budget that's based on real numbers. Now, I 
will recognize that the VA is making progress. And I want to 
commend Secretary Nicholson for that. He has told us that he's 
been asking for discharge numbers from the Department of 
Defense, and, under the law that we passed last year, he is 
meeting with us quarterly to review those numbers. And I really 
appreciate that.
    But I am concerned that the VA's model still leaves out 
some very critical factors that will impact a number of 
veterans. We continue to underestimate the number of veterans 
from Iraq and Afghanistan. This--the model does not account for 
the many seniors who are today being steered into the VA when 
they seek access to the new Medicare drug program. This budget 
doesn't take into consideration the influx of Vietnam veterans, 
who are now, as they age, increasing their need to have 
healthcare and are accessing the VA system for the first time. 
It doesn't account for all the veterans who are today in this 
country losing their employer-based healthcare and are, for the 
first time, turning to the VA for care. And, probably most 
importantly, the VA may give the VISNs adequate funds to 
provide care, but then it doesn't budget for various programs 
that they're mandated to enact, like increased mental health 
care. VA should take these programmatic efforts into account 
when they do their budgeting to ensure that we do not face any 
shortfalls.
    So, Madam Chairman, for these reasons, I think we still 
don't have an accurate model, and that is really disconcerting 
to me. Like many of my colleagues, I spent the March recess 
going out, talking to a number of veterans, and I talked to a 
representative from the Washington State Department of Veterans 
Affairs who told me that they had just completed a voluntary 
survey of Guard members in Washington State who recently 
separated after serving in Iraq and Afghanistan. And of the 
5,300 surveys they sent out, 1,700 responded, 370 of them were 
still unemployed since separation. That is 22 percent of them. 
And 416 said they were underemployed. That's 46 percent of our 
Guard members who are unemployed or underemployed. Veterans 
Service officers have told me about veterans coming back from 
Iraq and Afghanistan who were able to get an initial 
appointment with the VA within 1 to 3 months upon their return, 
but then they had to wait 6 months for a consultation, and 
another 7 months for surgery. So, it is taking our veterans 
still today over a year before they're getting the care that 
they are seeking from the VA.
    So, Madam Chairman, I will be looking closely at these 
numbers and to the Secretary's response today, but our veterans 
and our VA staff, as I have said many times, deserve to have a 
budget that is based on real numbers and on real demand, and 
not on gimmicks and fees that are designed to limit care.
    Thank you very much.
    Senator Hutchison. Thank you, Senator Murray.
    Senator Landrieu, did you have an opening statement?
    Senator Landrieu. Madam Chair, I will submit the statement 
for the record. I'd like to save my time for some questions on 
some specific matters. So, thank you very much.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Madame Chairman, Senator Feinstein, thank you for calling the 
hearing today to discuss the Veterans Affairs fiscal year 2007 budget 
submission. I would also like to thank Secretary Nicholson for joining 
us today and for answering any questions this Subcommittee may have 
regarding the VA's fiscal year 2007 budget submission.
    When Americans put on military uniforms and go to the front line, 
our Nation makes a long term promise to care for them during their term 
of service and long after the battle is over. Unfortunately, over the 
years our government has not kept its promise to our Nation's veterans. 
Over the past years the Veterans Administration has seen an 
overwhelming increase in enrollees, while support for medical services 
and benefits has barely increased--not nearly enough to keep pace with 
increased need and demand. And, as we all know, some veterans are not 
allowed to enroll in the VA health care system at all.
    Each of us has a responsibility to ensure that the VA health care 
and benefits system receives full authorized funding, and do so without 
increasing the out-of-pocket fees paid by veterans. We all have an 
obligation to the men and women who serve our Nation, and we must 
ensure that the Veterans Administration receives the support it so 
desperately needs to meet these goals.
    While the VA's fiscal year 2007 request, shows an increase, but 
there are a number of red flags raised. In particular, a few areas for 
concern are: the proposed increase in prescription co-payment, 
establishment of a $250 enrollment fee, mental health, State War 
Veterans Homes, burial benefits, and blinded veterans care.
    As of this month we have more than 17,000 wounded military men and 
women who have earned Purple Hearts in Operation Iraqi Freedom. Coupled 
with those who have been wounded in Afghanistan we could see over 
21,000 combat wounded by the end of the year. The physical wounds 
sustained by our soldiers heal, however, there is mounting evidence 
that demonstrates for many of our veterans, the injuries of war never 
end.
    I would like to commend the VA on setting aside $3.2 billion in the 
fiscal year 2007 discretionary funding request for mental health care. 
While today's soldier sees an increased chance of survival due to 
advances in things such as Kevlar body armor, mental health is not 
given the proper attention it requires.
    Mental health issues largely manifest themselves in the form of 
Post Traumatic Stress Disorder (PTSD) which touches both the active 
duty as well as the citizen-soldiers of the National Guard and 
Reserves. These brave patriots who fought for this country's ideals 
were raised in communities to which they will return to seek comfort 
and healing. Because of the silently devastating effects of PTSD, 
family members, friends, and members of the community may never know 
the extent of the damage caused by a soldier's experience in the war.
    If we are not vigilant and continue to seek solutions at the VA 
level regarding mental health issues, veterans returning from war will 
potentially be under siege for the rest of their lives.
    My home State of Louisiana is proud to operate and maintain three 
war veteran's homes in Jackson, Monroe, and Jennings. These homes have 
been innovative and important to the long term care of many veterans 
that live in these three distinct parts of the State. In order to 
preserve the fiscal healthcare of these tenants it is critical that we 
increase VA per diem payments to State Veterans Homes. VA per diem 
payments are authorized to cover up to 50 percent of the average daily 
cost of care, the current rate ($63.40 for skilled nursing care) covers 
less than 30 percent of that cost. As the number of veterans health 
care needs increase the Federal Government must meet its responsibility 
to provide the best resources to our veterans.
    The per diem program needs protection from attempts to compromise 
its future. Congress thwarted an attempt last year by the 
Administration to severely restrict per diem payments which, if 
enacted, would have cut per diem payments for up to 70 percent of 
veterans in State Homes.
    There are a range of concerns regarding blinded veterans that 
include issues like lengthy delays in admissions at Blind 
Rehabilitation Centers (BRC's) to the expansion of Blind Rehabilitative 
Outpatient Services (BRO's). Veterans who have lost their vision 
deserve first class treatment and a commitment by the VA to address the 
issues which will lighten the heavy burden they will endure for a 
lifetime.
    As with other areas that need improvement, the goal for the VA 
should be to deliver the highest quality of care in a timely manner. 
Unfortunately, goals often fall short from 400,000 people in a logjam 
with claims pending at the Board of Veterans Appeals to blinded 
veterans waiting an average of close to 19 weeks to enter one of ten 
BRC's. This rehabilitation is essential to assisting blinded veterans 
in adjusting to their blindness. We must do better.
    Madame Chairman, thank you for you and the ranking member's 
leadership and I look forward to the remarks from our guest.

                    STATEMENT OF R. JAMES NICHOLSON

    Senator Hutchison. Secretary Nicholson, welcome.
    Secretary Nicholson. Thank you, Madam Chairman, members of 
the committee. I have a written statement that I would also 
like to submit to the committee to be entered into the record.
    Senator Hutchison. Without objection.
    Secretary Nicholson. You know, as Secretary, it's a great 
privilege, and responsibility, of course, to lead the 
Department of Veterans Affairs.
    Earlier this year, President Bush announced a landmark 
budget for the Department of Veterans Affairs, a budget of 
$80.6 billion. That's truly historic in its scope of service to 
veterans.
    Behind the figures is a great story, one of America's truly 
good-news stories. And I'd be remiss, I think, if I didn't 
recount one of the best news stories, and one of the least 
known, of 2005, although, gratefully, you did mention it, Madam 
Chairman, and that is the heroic efforts of the VA employees 
during Hurricanes Katrina and Rita. Not only did our staffs 
evacuate several hundred patients to other hospitals out of the 
Gulf Coast area quickly and efficiently, they did so at great 
personal risk and considerable personal loss. One woman, who is 
a nurse, caught up with, in a hospital in Houston, where we had 
relocated many of her patients off of her ward at the New 
Orleans Hospital, said she could see her house during the 4 
days they were in there, before we finally got them evacuated, 
and all she could see was the roof and the chimney. And she 
didn't know the disposition of her own family, but she stayed 
right with her patients, and then relocated with her patients, 
got on an airplane, actually, and didn't know where she was 
going to end up. And that was--that's quite typical of scores 
of VA health caregivers in that great catastrophe.
    And, Madam Chairman, the citizens of the great State of 
Texas opened their hearts, as well, to our veterans that we 
relocated there, and their health caregivers, welcomed them to 
cities like Houston and San Antonio in their time of need, and 
Dallas.
    The DeBakey VA Medical Center provided much-needed care and 
comfort to all of the displaced citizen soldiers moved there, 
that were affected by the hurricane, and they did so in true 
Texas style. They were made to feel at home. And we are very 
grateful to all of those who made that possible.
    It's also a fact that the VA knows how to protect our 
veterans' vital health information against this kind of 
catastrophic event that swept over the Gulf Coast region. 
Because veterans healthcare records are electronic, no matter 
where our New Orleans veterans were eventually relocated, their 
complete health records were available for them, and for their 
givers, in an uninterrupted manner.
    Following a decade-long healthcare transformation, the VA 
is now at the forefront of America's healthcare industry. And 
that's not just a proud Secretary saying that, but, more 
importantly, it's being said by a host of organizations within 
and outside of the healthcare community.
    Let me mention just a few examples. The Journal of American 
Medical Association has applauded VA's dedication to patient 
safety. Since you're sitting down, I will say even the New York 
Times recently characterized the VA as a model for our Nation. 
And just recently--I think it was the week before last--the 
``NBC Nightly News'' aired a story on the VA that described our 
healthcare system as, quote, ``the envy of healthcare 
administrators and a model for healthcare nationwide,'' end of 
quote.
    Our veterans--these are the people that really count to us, 
the people that we take care of--they rank our care a full 10 
percentage points above their counterparts in the private 
sector. For the sixth consecutive year, the American Customer 
Satisfaction Index reports that veterans are more satisfied 
with their healthcare than any other patients in America.
    Because our first-rate, high-quality healthcare--because of 
that, veterans are coming to us in ever-greater numbers. Fully 
7.6 million veterans are now enrolled for our care. And this 
year we expect to see approximately 5.4 million of them. Last 
year, we had 55 million patient encounters in our system.
    Madam Chairman, President Bush, in his 2007 budget proposal 
for the Department of Veterans Affairs, is fulfilling his 
promise to our veterans with a strong budget that respects 
their service to our country and takes a significant step 
toward redeeming America's debt for our heroes. The President's 
total request is for $80.6 billion. This is an increase of 12.2 
percent over last year's record amount. It is $8.8 billion 
above the level of last year. This budget contains the largest 
dollar increase in discretionary funding for the VA ever 
requested by a President.
    Madam Chairman, our written statement presents a detailed 
description of the President's proposal for 2007. But I would 
like to take a few moments to highlight several of the key 
components of this historic budget.
    Let's start with veterans healthcare. During 2007, as I 
said, we expect to treat approximately 5.4 million patients, 
including more than 109,000 combat veterans who served in 
Operation Enduring Freedom and Operation Iraqi Freedom. The 3.8 
million veteran patients in priorities 1 through 6 will 
comprise 72 percent of our total patient population in fiscal 
year 2007. This will be an increase of 2.1 percent in the 
number of patients in this core group, and will represent the 
fourth consecutive year during which those veterans who count 
on us the most will increase as a percentage of all patients 
treated.
    The President's 2007 budget request includes our funding 
request for the three medical-care appropriations: $27.5 
billion for medical services, including $2.8 billion in 
collections; $3.2 billion for medical administration; and $3.6 
billion for medical facilities. The total proposed budgetary 
resources of $34.3 billion for the medical-care program 
represent an increase of 11.3 percent, or $3.5 billion over the 
level for last year, and it is 69.1 percent higher than the 
funding available at the beginning of the Bush administration.
    Madam Chairman, I want to emphasize VA's commitment to 
pursue the Gulf War Illness research through our new $15 
million a year research partnership over the next 4 years with 
the University of Texas Southwestern Medical School. Our Under 
Secretary for Health, Dr. Jonathan Perlin, will be joining you 
in Dallas soon, with other members of our staff, to discuss 
this newest avenue of investigation into what is certainly a 
pressing healthcare issue, a consistent, persistent, pressing 
issue for our Gulf War veterans, and for their families.
    Madam Chairman, the VA is focused on delivering timely, 
accurate, and consistent benefits to veterans, and their 
families, as well. The volume of claims receipts has grown 
substantially during the last few years, and is now the highest 
that it's been in 15 years as we received over 788,000 claims 
during fiscal year--or during calendar year 2005, last year. 
This trend is expected, most assuredly, to continue. We are 
projecting the receipt of over 910,000 compensation and pension 
claims in 2006, and nearly as many in 2007.
    One of the key drivers of new claims activity is the 
increase in size of the Active Duty military force, now 
including reservists and National Guard members who have been 
called to Active Duty to support Operation Enduring Freedom and 
Operation Iraqi Freedom. Another is the aging of our veteran 
population. This has led to a sizable growth in the number of 
new claims, and we expect this pattern to continue.
    A natural outcome of this increasing claims workload is 
growth in our mandatory spending accounts, which are growing 
even faster than VA's discretionary budget. We estimate that 
mandatory spending will increase by 14.5 percent, to over $42 
billion, from an estimated fiscal year 2006 spending level of 
$36.7 billion.
    Regarding burials, our veterans are leaving this life at an 
ever-increasing pace. In fact, 1,800 a day now pass away. 
Buglers will play Taps for more than 107,000 veterans in our 
national cemeteries in 2007. That is a 5.4 percent increase 
over the 2006 estimate, and 15 percent more than the number of 
interments in 2005.
    The President's 2007 budget request for the VA includes 
$160.7 million in operations and maintenance funding for the 
National Cemetery Administration. This represents an increase 
of $11.1 million, or 7.4 percent, over the estimate for last 
year.
    We will expand access to our burial program by increasing 
the percent of veterans served by a burial option in a national 
or State veterans cemetery within 75 miles of their residence, 
to 83.4 percent in 2007. This is an increase of 6.7 percent 
over last year. Our plan is for the biggest expansion of the 
national cemetery system since the Civil war. And we are on 
track.

                           PREPARED STATEMENT

    Madam Chairman, I started out my testimony by saying that 
this budget is historic, that this is a landmark proposal of 
funding unmatched by any previous VA budget ever. And I also 
said that VA's 235,000 employees are doing a terrific job 
throughout our country in taking care of our veterans. Veterans 
don't seek the spotlight of approval, so, as Secretary of 
Veterans Affairs, it's my privilege to lead our national 
applause in grateful thanks for every gift our veterans have 
given us. This proposed budget for VA is President Bush's 
appreciation for them, our heroes.
    Thank you, Madam Chairman.
    [The statement follows:]

                Prepared Statement of R. James Nicholson

    Madam Chairman and members of the Committee, good afternoon. I am 
pleased to be here today to present the President's 2007 budget 
proposal for the Department of Veterans Affairs (VA). The request 
totals $80.6 billion--$42.1 billion for entitlement programs and $38.5 
billion for discretionary programs. The total request is $8.8 billion, 
or 12.2 percent, above the level for 2006. This budget contains the 
largest increase in discretionary funding for VA ever requested by a 
President.
    With the resources requested for VA in the 2007 budget, we will be 
able to strengthen even further our position as the Nation's leader in 
delivering accessible, high-quality health care that sets the national 
benchmark for excellence. Whether compared to other Federal health 
programs or private health plans, the quality of VA health care is 
unsurpassed. In addition, this budget will allow the Department to 
maintain its focus on the timeliness and accuracy of claims processing, 
and to expand access to national and State veterans' cemeteries.
    As an integral component of our 2007 goals, we will continue to 
work closely with the Department of Defense (DOD) to fulfill our 
priority that service members' transition from active duty to civilian 
life is as seamless as possible.
Ensuring a Seamless Transition from Active Military Service to Civilian 
        Life
    The President's 2007 budget request provides the resources 
necessary to help ensure that service members' transition from active 
duty military status to civilian life is as smooth and seamless as 
possible. Last year through our aggressive outreach programs, VA 
conducted nearly 8,200 briefings attended by over 326,000 separating 
service members and returning Reserve and National Guard members. We 
will continue to stress the importance of an informed and hassle-free 
transition for all of our forces coming off of active duty, and their 
families, and especially for those who have been injured.
    If active duty service members, Reservists, and members of the 
National Guard served in a theater of combat operations, they are 
eligible for cost-free VA health care and nursing home care for a 
period of 2 years after their release from active military service 
provided that the care is for an illness potentially related to their 
combat service. VA has already facilitated transfers from military 
medical facilities to VA medical centers several thousand injured 
service members returning from Operation Enduring Freedom and Operation 
Iraqi Freedom.
    There are many other initiatives underway that are aimed at easing 
service members' transition from active duty military status to 
civilian life. Within the last year, VA hired an additional 50 veterans 
of Operation Enduring Freedom and Operation Iraqi Freedom to enhance 
outreach services to veterans returning from Afghanistan and Iraq 
through our Vet Centers. They joined our corps of Vet Center outreach 
counselors hired earlier by the Department to brief servicemen and 
women about VA benefits and services available to them and their family 
members. They also encourage new veterans to use their local Vet Center 
as a point of entry to VA and its services. Our outreach counselors 
visit military installations, coordinate with military family 
assistance centers, and conduct one-on-one interviews with returning 
veterans and their families.
    Last year VA signed a memorandum of agreement with Walter Reed Army 
Medical Center to give severely injured service members practical help 
in finding civilian jobs. Under this agreement, VA offers vocational 
training and temporary jobs at our headquarters in Washington, DC to 
service members recovering at the Army facility from traumatic 
injuries.
    VA and DOD are working together to establish a cooperative 
separation exam process so that separating service members only need to 
have one medical exam that meets both military service separation 
requirements and VA's disability compensation requirements.
    Separating military personnel receive enhanced services through the 
Benefits Delivery at Discharge (BDD) program. This program enables 
separating service members to file disability compensation claims with 
VA staff at military bases, complete physical exams, and have their 
claims evaluated before, or closely following, their military 
separation. With the assistance of VA staff stationed at 140 military 
installations around the Nation as well as in Korea and Germany, 
service members can begin the VA disability compensation application 
process 180 days prior to separation. These applications are now 
processed at two locations to improve efficiency and the consistency of 
our claims decisions. In addition, our employees conduct transition 
assistance briefings in Germany, Italy, Korea, England, Japan, and 
Spain.

                              MEDICAL CARE

    The President's 2007 request includes total budgetary resources of 
$34.3 billion for the medical care program, an increase of 11.3 percent 
(or $3.5 billion) over the level for 2006 and 69.1 percent higher than 
the funding available at the beginning of the Bush Administration. The 
2007 budget reflects the largest dollar increase for VA medical care 
ever requested by a President and includes our funding request for the 
three medical care appropriations--medical services ($27.5 billion, 
including $2.8 billion in collections); medical administration ($3.2 
billion); and medical facilities ($3.6 billion).
    The cornerstone of our medical care budget is providing care for 
veterans who need us the most--veterans with service-connected 
disabilities; those with lower incomes; and veterans with special 
health care needs. A key element of this effort is to make sure every 
seriously injured or ill serviceman or woman returning from combat in 
Operation Enduring Freedom and Operation Iraqi Freedom receives 
priority consideration and treatment.
Initiatives
    The 2007 budget includes two provisions that, if enacted, will be 
instrumental in helping VA meet our primary goal of providing health 
care to those who need our medical services the most. The first 
provision is to implement an annual enrollment fee of $250 and the 
second is to increase the pharmacy co-payment from $8 to $15 for a 30-
day supply of drugs. Both of these provisions apply only to Priority 7 
and 8 veterans who have no compensable service-connected disabilities 
and do have the financial means to contribute modestly to the cost of 
their care. Priority 7 and 8 veterans typically have other alternatives 
for addressing their medical care costs, including third-party health 
insurance coverage and Medicare, and were not eligible to receive VA 
medical care at all or only on a case-by-case space available basis 
until 1999 when new authority allowed VA to enroll them in any year 
that resource levels permitted.
    As you know, these two initiatives are not new, and I recognize 
that Congress has not enacted them in the past. However, we are 
reintroducing them because I believe they are justifiable, fair, and 
reasonable policies. They are entirely consistent with the priority 
health care structure enacted by Congress several years ago, and would 
more closely align VA's fees and co-payments with other public and 
private health care plans. The President's budget includes similar, 
small incremental fee increases for DOD retirees under age 65 in the 
TRICARE system. The VA fees would allow us to focus our resources on 
patients who typically do not have other health care options. 
Furthermore, these two provisions reduce our need for appropriated 
funds by $765 million as a result of the additional collections they 
would generate, and a modest reduction in demand.
    The 2007 budget also includes a provision to eliminate the practice 
of offsetting or reducing VA first-party co-payment debts with 
collection recoveries from third-party health plans. Veterans receiving 
medical care services for treatment of nonservice-connected 
disabilities would receive a bill for their entire co-payment. If 
enacted, this provision would yield about $30 million in additional 
collections that could be used to provide further resources for the 
Department's health care system.
    The combined effect of all three provisions reduces our need for 
appropriated funds by $795 million in 2007. I want to work with your 
committee and the rest of Congress to gain your support for these 
proposals.
Workload
    During 2007, we expect to treat nearly 5.3 million patients, of 
which 4.8 million are veterans, including over 100,000 combat veterans 
who served in Operation Enduring Freedom and Operation Iraqi Freedom. 
Among the remaining patients we will treat are qualified dependents and 
survivors eligible for care through the Civilian Health and Medical 
Program of the Department of Veterans Affairs (CHAMPVA), VA employees 
receiving preventive occupational immunizations, and patients receiving 
humanitarian care.
    The 3.8 million veteran patients in Priorities 1-6 will comprise 79 
percent of our total veteran patient population and 72 percent of our 
overall total patient population in 2007. This will be an increase of 
2.1 percent in the number of patients in Priorities 1-6 and will 
represent the fourth consecutive year during which those veterans who 
count on us the most will increase as a percentage of all patients 
treated.
    We have made significant improvements to the actuarial model that 
was used to support our 2007 budget request, including development of 
an enhanced methodology for determining enrollee morbidity and a more 
detailed analysis of enrollee reliance on VA health care compared to 
other medical service providers. Also, we have added new data sources, 
including the Social Security Death Index, which resulted in a more 
accurate count of enrolled veterans. Finally, we have more accurately 
assigned veterans into the income-based enrollment priority groups by 
using data from the 2000 decennial census.
    VA continues to take steps to ensure the actuarial model accurately 
projects the needs of veterans from Operation Enduring Freedom and 
Operation Iraqi Freedom. However, many unknowns can impact the number 
and type of services the Department will need to provide these 
veterans, including the duration of the military action, when these 
veterans are demobilized, and the impact of our enhanced outreach 
efforts. Therefore, we have made additional investments in key 
services, such as mental health, prosthetics, and dental care to ensure 
we will be able to continue to meet the health care needs of these 
returning veterans and veterans from other eras seeking more of these 
same services.
Funding Drivers
    There are three key drivers of the additional funding required to 
meet the demand for VA health care services in 2007:
  --inflation;
  --expanded utilization of services; and
  --greater intensity of services provided.
    The impact of the composite rate of inflation within the actuarial 
model increased our resource requirements for medical care by $1.2 
billion, or 3.9 percent. This includes the effect of additional funds 
needed to meet higher payroll costs as well as the influence of growing 
costs for supplies, as measured in part by the medical Consumer Price 
Index.
    VA will experience a significant increase in the utilization of 
health care services in 2007 as a result of four factors. First, 
overall utilization trends in the U.S. health care industry continue to 
increase. Veterans who previously came to VA for a single medical 
appointment now more typically require multiple appointments in many 
different specialty clinics. And, they return more often for follow-up 
appointments in any given year. To illustrate, in 2005 we treated about 
5.3 million individual patients but had a total of over 58 million 
outpatient visits. These trends expand VA's per-patient cost of doing 
business. Second, we expect to see changes in the demographic 
characteristics of our patient population. Our patients as a group will 
continue to age, will have lower incomes, and will seek care for more 
complex medical conditions. These projected changes in the case mix of 
our patient population will result in greater resource needs. Third, 
veterans are displaying an increasing level of reliance on VA health 
care as opposed to using other medical care options they may have 
available. This increasing reliance on VA medical care is due at least 
in part to the positive experiences veterans have had with the 
Department's health care system and is a reflection of our status as 
the Nation's leader in delivering high-quality care. And fourth, 
veterans are submitting compensation claims with more, as well as more 
complex, disabilities claimed. Our Veterans Health Administration does 
the majority of disability examinations required in order to evaluate 
these claims. This results in the need for a disability compensation 
medical examination that is more complex, costly, and time consuming.
    General medical practice patterns throughout the Nation have 
resulted in an increase in the intensity of health care services 
provided per patient, due to the growing use of diagnostic tests, 
pharmaceuticals, and other medical services. This rising intensity of 
care is evidenced in VA's health care system as well. This has 
contributed to higher quality of care and improved patient outcomes, 
but it requires additional resources to provide this greater intensity 
of services.
    The combined impact of expanded utilization and greater intensity 
of services increased our resource requirements for medical care by 
nearly $1.2 billion.
Quality of Care
    VA's standing as the Nation's leader in providing safe, high-
quality health care is evident and has been well documented. For 
example:
  --in December 2004 RAND investigators found that VA outperforms all 
        other sectors of American health care across a spectrum of 294 
        measures of quality in disease prevention and treatment;
  --the Department's health care system was featured in the January/
        February 2005 edition of Washington Monthly in an article 
        titled ``The Best Care Anywhere'';
  --the May 18, 2005, edition of the prestigious Journal of the 
        American Medical Association noted that VA's health care system 
        has ``. . . quickly emerged as a bright star in the 
        constellation of safety practice, with system-wide 
        implementation of safe practices, training programs and the 
        establishment of four patient-safety research centers'';
  --the July 18, 2005, edition of the U.S. News and World Report 
        included a special report on the best hospitals in the country 
        titled ``Military Might--Today's VA Hospitals Are Models of 
        Top-Notch Care;'' and
  --on August 22, 2005, The Washington Post ran a front-page article 
        titled ``Revamped Veterans' Health Care Now a Model.''
    It should be noted that for the 6 consecutive year, VA set the 
public and private sector benchmark for health care satisfaction based 
on the American Customer Satisfaction Index survey conducted by the 
National Quality Research Center at the University of Michigan. VA's 
inpatient index was 83 compared to 73 for the private sector, and our 
outpatient index was 80 compared to 75 for the private sector.
    These external acknowledgments of the superior quality of VA health 
care when compared to other public and private health plans reinforce 
the Department's own findings. We use two primary measures of health 
care quality--Clinical Practice Guidelines Index and Prevention Index. 
These measures focus on the degree to which VA follows nationally 
recognized guidelines and standards of care that medical literature has 
proven to be directly linked to improved health outcomes for patients. 
Our performance on the Clinical Practice Guidelines Index, an internal 
accountability measure focusing on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to reach 78 percent in 2007, or a 1 percentage 
point rise over the 2006 estimate. Similarly, VA's Prevention Index, a 
set of measures aimed at preventive health care, including 
immunization, health risk assessments, and cancer screenings, is 
projected to remain at the estimated 2006 high rate of performance of 
88 percent.
Access to Care
    With the resources requested for medical care in 2007, the 
Department will be able to both maintain its current high performance 
dealing with access to medical care as well as seek ways to continually 
reduce waiting times for non-urgent care. In 2007 we expect that 93.7 
percent of appointments will be scheduled within 30 days of the 
patient's desired date. For primary care appointments, 96 percent will 
be scheduled within 30 days of the patient's desired date and for 
specialty care, 93 percent of all appointments will be scheduled within 
30 days of the patient's desired date. No veteran will have to wait for 
emergency care.
    VA is also committed to ensuring that no veteran returning from 
service in Operation Enduring Freedom and Operation Iraqi Freedom has 
to wait more than 30 days for a primary care or specialty care 
appointment.
    We have achieved these waiting times efficiencies by developing a 
number of strategies to reduce waiting times for appointments in 
primary care and specialty clinics nationwide, to include implementing 
state-of-the-art appointment scheduling systems, standardizing business 
processes associated with scheduling practices, and ensuring that 
clinicians focus on those tasks that only they can perform to optimize 
the time available for treating patients. To further improve access and 
timeliness of service, VA will fully implement Advanced Clinic Access 
nationally, an initiative that promotes the efficient flow of patients. 
This program optimizes clinical scheduling so that each appointment or 
inpatient service is most productive. In turn, this reduces unnecessary 
appointments, allowing for relatively greater workload and increased 
patient-directed scheduling.
Major Changes in Funding
    VA's 2007 request includes over $4.3 billion for long-term care 
($229 million more than the 2006 level). I can assure you that the 
patient and cost projections associated with long-term care have been 
checked to ensure that they represent our real need in this area. While 
we aim to expand all types of extended care services, we plan to 
increase the rate of growth of non-institutional care funding about 
twice as much as that for institutional care. With an emphasis on 
community-based and in-home care, the Department can provide extended 
care services to veterans in a more clinically appropriate setting, 
closer to where they live, and in the comfort and familiar settings of 
their homes surrounded by their families. During 2007 we will increase 
the number of patients receiving non-institutional long-term care, as 
measured by the average daily census, to about 36,700. This represents 
a 14.4 percent increase above the level we expect to reach in 2006 and 
a 33.7 percent rise over 2005.
    The Department's 2007 request includes nearly $3.2 billion ($339 
million over the 2006 level) to provide comprehensive mental health 
services to veterans, including our effort to improve timely access to 
these services across the country. These additional funds will help 
ensure that VA continues to realize the aspirations of the President's 
New Freedom Commission Report as embodied in VA's Mental Health 
Strategic Plan and to deliver exceptional, accessible mental health 
care.
    The Department will continue to place particular emphasis on 
providing care to those suffering as a result of their service in 
Operation Enduring Freedom and Operation Iraqi Freedom from a spectrum 
of combat stress reactions, ranging from readjustment issues to Post-
Traumatic Stress Disorder (PTSD). An example of our firm commitment to 
provide the best treatment available to help veterans recover from 
these mental health conditions is our increased outreach to veterans of 
the Global War on Terror, as well as increased readjustment and PTSD 
services. This includes the December 2005 designation of three new 
centers of excellence in Waco (Texas), San Diego (California), and 
Canandaigua (New York) devoted to advancing the understanding and care 
of mental health illness.
    VA's medical care request includes $1.4 billion ($160 million over 
the 2006 level) to support the increasing workload associated with the 
purchase and repair of prosthetics and sensory aids to improve 
veterans' quality of life. VA has already provided prosthetics and 
sensory aids to military personnel who served in Operation Enduring 
Freedom and Operation Iraqi Freedom and the Department will continue to 
provide them as needed.
Medical Collections
    As a result of improvements in our medical collections processes 
and the initiatives presented in this budget request, we expect to 
collect over $2.8 billion in 2007 that will substantially supplement 
the resources available from appropriated sources. In 2005 we collected 
just under $1.9 billion. The collections estimate for 2007 is $779 
million, or 37.9 percent, above the 2006 estimate. About 70 percent of 
the projected increase in collections is due to the provisions calling 
for implementation of a $250 annual enrollment fee, an increase to $15 
in the pharmacy co-payment, and elimination of the practice of 
offsetting VA first-party co-payment debts with collection recoveries 
from third-party health plans. The remaining 30 percent of the growth 
in collections will result from continuing improvements in billing and 
collections.
    We have several initiatives underway to strengthen our collections 
processes. These include:
  --the Department is implementing a private-sector-based business 
        model pilot, tailored to our revenue operations, to increase 
        third-party insurance revenue and improve VA's business 
        practices. The pilot Consolidated Patient Account Center will 
        address all operational areas contributing to the establishment 
        and management of patient accounts and related billing and 
        collections processes;
  --we are working with Centers for Medicare/Medicaid Services 
        contractors to obtain a Medicare-equivalent remittance advice 
        for veterans who are covered by Medicare and are using VA 
        health care services. This project will result in more accurate 
        payments and better accounting for receivables through use of 
        more reliable data for claims adjudication;
  --our Insurance Identification and Verification project is providing 
        VA medical centers with an automated mechanism to obtain 
        veterans' insurance information from health plans that 
        participate in the electronic data exchange;
  --we are testing the e-Pharmacy Claims software that provides real-
        time claims adjudication for outpatient pharmacy claims; and
  --VA is implementing the Patient Financial Services System pilot that 
        will increase the accuracy of bills and documentation, reduce 
        operating costs, generate additional revenue, reduce 
        outstanding receivables, and decrease billing times.

                            MEDICAL RESEARCH

    The President's 2007 budget includes $399 million to support VA's 
medical and prosthetic research program. This amount will fund more 
than 2,000 high-priority research projects to expand knowledge in areas 
critical to veterans' health care needs, most notably research in the 
areas of mental illness ($51 million), aging ($40 million), health 
services delivery improvement ($36 million), heart disease ($30 
million), central nervous system injuries and associated disorders ($29 
million), and cancer ($28 million).
    The requested funding for the medical and prosthetic research 
program will position the Department to build upon its long track 
record of success in conducting research projects that lead to 
clinically useful interventions that improve veterans' health and 
quality of life. Examples of some of the recent contributions made by 
VA research to the advancement of medicine are:
  --use of the antidepressant paroxetine decreases symptoms related to 
        Post-Traumatic Stress Disorder and improves memory;
  --physical activity and body-weight reduction can significantly cut 
        the risk of developing type II diabetes;
  --new links have been discovered between diabetes and Alzheimer's 
        disease; and
  --vaccination against varicella-zoster (the same virus that causes 
        chickenpox) decreases the incidence and/or severity of 
        shingles.
    In addition to VA appropriations, the Department's researchers 
compete and receive funds from other Federal and non-Federal sources. 
Funding from external sources is expected to continue to increase in 
2007. Through a combination of VA resources and funds from outside 
sources, the total research budget in 2007 will be almost $1.65 
billion, or about $17 million more than the 2006 estimate.

                       GENERAL OPERATING EXPENSES

    The Department's 2007 resource request for General Operating 
Expenses (GOE) is nearly $1.5 billion. It is $131 million, or 9.7 
percent, above the 2006 current estimate. Within the 2007 total funding 
request, $1.168 billion is for the management of the following non-
medical benefits administered by the Veterans Benefits Administration 
(VBA)--disability compensation; pensions; education; housing; 
vocational rehabilitation and employment; and insurance. This is an 
increase of $114 million (or 10.8 percent) over the 2006 level. Our 
request for GOE funding also includes $313 million to support General 
Administration activities, an increase of $17 million, or 5.7 percent, 
from the current 2006 estimate.
Compensation and Pensions Workload, Performance, and Staffing
    VA is focused on delivering timely and accurate benefits to 
veterans and their families. Improving the delivery of compensation and 
pension benefits has become increasingly challenging during the last 
few years due to a steady and sizeable increase in workload. This 
growing workload is the result of several factors--more claims are 
being filed; we are experiencing more direct contact with veterans and 
service members, particularly those who served in Operation Enduring 
Freedom and Operation Iraqi Freedom; the complexity of claims is 
increasing; and more appeals are being filed.
    The volume of claims receipts has grown substantially during the 
last few years and is now the highest it has been in the last 15 years 
as we received over 788,000 claims in 2005. This trend is expected to 
continue. We are projecting the receipt of over 910,000 compensation 
and pension claims in 2006 (which includes over 98,000 claims resulting 
from the special outreach requirements of recently enacted legislation) 
and more than 828,000 claims in 2007.
    One of the key drivers of new claims activity is the size of the 
active duty military force. The number of active duty service members 
as well as Reservists and National Guard members who have been called 
to active duty to support Operation Enduring Freedom and Operation 
Iraqi Freedom have increased. This has led to a sizeable growth in the 
number of new claims, and we expect this pattern to persist. An 
additional reason that the number of compensation and pension claims is 
climbing is the Department's commitment to increase outreach efforts. 
Our outreach efforts are critical to the men and women who are entitled 
to VA benefits and services. We have an obligation to extend our reach 
as far as possible and to spread the word to veterans about what VA 
stands ready to provide.
    Disability compensation claims from veterans who have previously 
filed a claim comprise almost 60 percent of the disability claims 
receipts each year, and the number of such claims is climbing at a rate 
of 2 to 3 percent annually. Many veterans now receiving compensation 
suffer from chronic and progressive conditions, such as diabetes, 
mental illness, and cardiovascular disease. As these veterans age and 
their conditions worsen, we experience additional claims for increased 
benefits.
    The growing complexity of the claims being filed also contributes 
to our workload challenges. Since the beginning of 2000, the number of 
veterans receiving compensation has increased 14 percent, from slightly 
over 2.3 million to more than 2.6 million. However, the total number of 
disabilities for which veterans are being compensated has increased 37 
percent during this time, from nearly 6.0 million disabilities to 8.2 
million disabilities. In addition, we expect to continue to receive a 
growing number of complex disability claims resulting from Post-
Traumatic Stress Disorder, environmental and infectious risks, 
traumatic brain injuries, complex combat-related injuries, and 
complications resulting from diabetes. Each claim now takes more time 
and more resources to adjudicate. Additionally, as the Department 
receives and adjudicates more claims, this results in a larger number 
of appeals from veterans and survivors.
    In addition to the growing complexity of compensation and pension 
claims, there are special outreach requirements that will have a 
significant impact on our workload and program performance. These 
outreach requirements will result in nearly 100,000 additional claims. 
As a result of the increasing volume and complexity of claims, the 
average number of days to complete compensation and pension claims is 
now projected to rise from 167 days in 2005 to 185 days in 2006, and to 
fall slightly to 182 days in 2007. In addition, we anticipate that our 
pending inventory of disability claims will climb throughout 2006 as we 
receive new claims, reaching nearly 418,000 by the end of this year. 
The inventory will fall by 5 percent during 2007 to around 397,000. 
Despite these significant workload challenges, we remain committed to 
reaching our strategic goal of processing compensation and pension 
claims in an average of 125 days.
    We will address our ever-growing workload challenges in several 
ways. First, we will continue to improve our productivity as measured 
by the number of claims processed per staff member. Second, we will 
continue to move work among regional offices in order to maximize our 
resources and enhance our performance. Third, we will simplify and 
clarify benefit regulations and ensure our claims processing staff has 
easy access to the manuals and other reference material they need to 
process claims as efficiently and effectively as possible. And fourth, 
we will further advance our efforts to improve the consistency and 
quality of claims processing across regional offices.
    Even though we will implement several management improvement 
practices, we will need additional staffing in order to address our 
workload challenges in claims processing. Our 2007 budget includes 
resources to support over 13,100 staff members (including nearly 7,900 
staff in direct support of the compensation and pensions programs), or 
about 170 above the staffing supported by our 2006 budget.
Education and Vocational Rehabilitation and Employment Performance
    Key program performance will improve in both the education and 
vocational rehabilitation and employment programs. The timeliness of 
processing original education claims will improve by 8 days during the 
next 2 years, falling from 33 days in 2005 to 25 days in 2007. In 
addition, the rehabilitation rate for the vocational rehabilitation and 
employment program will climb to 69 percent in 2007, a gain of 6 
percentage points over the 2005 performance level.
Funding for Initiatives
    The 2007 request for VBA includes $3.4 million to continue 
development of comprehensive training and electronic performance 
support systems. This ongoing initiative provides technical training to 
compensation and pension staff through a multimedia, multi-method 
training approach that has a direct impact on the accuracy and 
consistency of our claims processing.
    The 2007 resource request for VBA includes $2.0 million to continue 
the development of a skills certification instrument for assessing the 
knowledge base of current and new veterans' service representatives and 
will also result in a skills certification module for a variety of 
program staff. This initiative will help identify those employees who 
need additional training in order to better perform their duties and 
will allow us to improve our screening process involving applicants for 
higher-level positions.

                    NATIONAL CEMETERY ADMINISTRATION

    The President's 2007 budget request for VA includes $160.7 million 
in operations and maintenance funding for the National Cemetery 
Administration (NCA). This represents an increase of $11.1 million (or 
7.4 percent) over the 2006 current estimate. The additional funding 
will be used to meet the growing workload at existing cemeteries by 
increasing staffing and augmenting funds for contract maintenance, 
supplies, and equipment. We expect to perform over 107,000 interments 
in 2007, or 5.4 percent more than the 2006 estimate and 15.1 percent 
more than the number of interments in 2005.
    Our resource request also has $9.1 million to address gravesite 
renovations as well as headstone and marker realignment, an increase of 
$3.6 million from our funding for 2006. These improvements in the 
appearance of our national cemeteries will help us maintain the 
cemeteries as shrines dedicated to preserving our Nation's history and 
honoring veterans' service and sacrifice.
    We will expand access to our burial program by increasing the 
percent of veterans served by a burial option in a national or State 
veterans cemetery within 75 miles of their residence to 83.8 percent in 
2007, which is 6.7 percentage points above the 2005 level. In addition, 
we will continue to increase the percent of respondents who rate the 
quality of service provided by national cemeteries as excellent to 97 
percent in 2007, or 3 percentage points higher than the 2005 
performance level.
              capital (construction and grants to states)
    The President's 2007 budget request includes $714 million in 
capital funding for VA. Our request includes $399 million for major 
construction projects, $198 million for minor construction, $85 million 
in grants for the construction of State extended care facilities, and 
$32 million in grants for the construction of State veterans 
cemeteries.
    The 2007 request for construction funding for our medical care 
program is $457 million--$307 million for major construction and $150 
million for minor construction. All of these resources will be devoted 
to continuation of the Capital Asset Realignment for Enhanced Services 
(CARES) program to renovate and modernize VA's health care 
infrastructure and to provide greater access to high-quality care for 
more veterans. When combined with the $293 million that was enacted in 
the Hurricane Katrina emergency funding package in late December 2005 
to fund a CARES project for a new hospital in Biloxi, Mississippi, the 
total CARES funding since the 2006 budget totals $750 million and since 
the 2004 CARES report amounts to nearly $3 billion.
    Our major construction request for medical care will fund the 
continued development of two medical facility projects--$97.5 million 
to address seismic corrections in Long Beach; and $52.0 million for a 
new medical facility in Denver. In addition, our request for major 
construction funding includes $38.2 million to construct a new nursing 
home care unit and new dietetics space, as well as to improve patient 
and staff safety by correcting seismic, fire, and life safety 
deficiencies at American Lake (Washington); $32.5 million for a new 
spinal cord injury center at Milwaukee; $25.8 million to replace the 
operating room suite at Columbia (Missouri); and $7.0 million to 
renovate underutilized vacant space located at the Jefferson Barracks 
Division campus at St. Louis as well as provide land for expansion at 
the Jefferson Barracks National Cemetery.
    We are also requesting $53.4 million in major construction funding 
and $25.0 million in minor construction resources to support our burial 
program. Our request for major construction includes funds for cemetery 
expansion and improvement at Great Lakes, Michigan ($16.9 million), 
Dallas/Ft. Worth, Texas ($13.0 million), and Gerald B. H. Solomon, 
Saratoga, New York ($7.6 million). Our request will also provide $2.3 
million in design funds to develop construction documents for gravesite 
expansion projects at Abraham Lincoln National Cemetery (Illinois) and 
at Quantico National Cemetery (Virginia). In addition, the major 
construction request includes $12 million for the development of master 
plans for six new national cemeteries in areas directed by the National 
Cemetery Expansion Act of 2003--Bakersfield, California; Birmingham, 
Alabama; Columbia-Greenville, South Carolina; Jacksonville, Florida; 
Sarasota County, Florida; and southeastern Pennsylvania.

                    INFORMATION TECHNOLOGY SERVICES

    The President's 2007 budget for VA provides $1.257 billion for the 
non-payroll costs associated with information technology (IT) projects 
across the Department. This is $43.2 million, or 3.6 percent, above our 
2006 budget.
    The 2007 request for IT services includes $832 million for our 
medical care program, $55 million for our benefits programs, $4 million 
for our burial program, and $366 million for projects managed by our 
staff offices, most notably non-payroll costs in our Office of 
Information and Technology and Office of Management to support 
department-wide initiatives and operations.
    The most critical IT project for our medical care program is the 
continued operation and improvement of the Department's electronic 
health record system, a Presidential priority which has been recognized 
nationally for increasing productivity, quality, and patient safety. 
Within this overall initiative, we are requesting $51.0 million for 
ongoing development and implementation of HealtheVet-VistA (Veterans 
Health Information Systems and Technology Architecture) which will 
incorporate new technology, new or reengineered applications, and data 
standardization to continue improving veterans' health care. This 
system will make use of standards that will enhance the sharing of data 
within VA as well as with other Federal agencies and public and private 
sector organizations. Health data will be stored in a veteran-centric 
format replacing the current facility-centric system. The standardized 
health information can be easily shared between facilities, making 
patients' electronic health records available to all those providing 
health care to veterans.
    Until HealtheVet-VistA is operational, we need to maintain the 
VistA legacy system. This system will remain operational as new 
applications are developed and implemented. This approach will mitigate 
transition and migration risks associated with the move to the new 
architecture. Our budget provides $188 million in 2007 for the VistA 
legacy system.
    In support of the Department's education program, our 2007 request 
includes $3 million in non-payroll costs to continue the development of 
The Education Expert System. This will replace the existing benefit 
payment system with one that will allow the Department to automatically 
process education claims received electronically.
    VA's 2007 request provides $57.4 million for cyber security. This 
ongoing initiative involves the development, deployment, and 
maintenance of a set of enterprise-wide security controls to better 
secure our IT architecture in support of all of the Department's 
program operations.

                                SUMMARY

    In summary, Madam Chairman, the $80.6 billion the President is 
requesting for VA in 2007 will provide the resources necessary for the 
Department to:
  --provide timely, high-quality health care to nearly 5.3 million 
        patients, including 4.8 million veteran patients of which 79 
        percent are among those who need us the most--those with 
        service-connected disabilities, lower incomes, or special 
        health care needs;
  --address the large growth in the number of claims for compensation 
        and pension benefits; and
  --increase access to our burial program by ensuring that nearly 84 
        percent of veterans will be served by a burial option in a 
        national or State veterans cemetery within 75 miles of their 
        residence.
    I look forward to working with the members of this committee to 
continue the Department's tradition of providing timely, high-quality 
benefits and services to those who have helped defend and preserve 
freedom around the world.

    Senator Hutchison. Thank you very much. We appreciate that 
testimony.

                    MEDICAL AND PROSTHETIC RESEARCH

    And I would like to ask you a question, with my time, on 
the research budget, the area that we discussed, and you 
addressed, the Gulf War syndrome research, but the other area 
would be the ``smart limb'' technology, prosthetics, and other 
research efforts. And I just wanted to get a read from you on 
how that is progressing and what other priorities you see. I so 
appreciate your commitment to Gulf War, because I think we can 
do so much, not only for the veterans who have symptoms, but 
for prevention for future potential chemical warfare that might 
have a causal connection. But on the area of prosthetics, and 
then what other priorities do you see with your research 
budget? And are you okay with that slight decrease?
    Secretary Nicholson. I'll answer the last part first by 
saying, yes, we have--in the last two budget cycles, have had 
significant increase in research for prosthetics and for mental 
health and post-traumatic stress disorder. In the area of 
prosthetics, I think you mentioned ``smart limbs'' or C-limbs, 
we call the legs, the below-the-knee prosthetic now, which is a 
phenomenal device made of microprocessors that somehow has 
figured out how to think like the other leg and function 
accordingly. It's just astonishing. It's a product of research 
and compassion.
    I visit Walter Reed, in Bethesda, regularly, and, every 
Friday night that I can, I get together, my wife and I, for 
dinner with the wounded folks that are ambulatory enough to go 
to a restaurant that--we meet in here, and they are--they are 
just amazing. And the work that's being done for them is 
amazing, as well. And our commitment to the--you know, to the 
research, both in its--it's both clinical and practical, 
because we have the opportunity to monitor them, these new 
returnees, so closely--is--I think it's just--it's world class.
    As to the specific details that inquiries of chemicals and 
so forth, I'll defer to Dr. Perlin and ask him if he would 
flesh that out with more detail.
    Dr. Perlin. Thank you, Mr. Secretary, and thank you, Madam 
Chairman.
    The research that's being done in VA is truly spectacular. 
The Secretary mentioned things like the C-leg, but one of the 
products I'm most excited about is the artificial retina. I'm 
sure this committee has heard about the cochlear implant that 
was developed for hearing for people with loss of the outer 
ear, but with the nerves intact. Two of our sites have really 
brought the retinal implant to fruition. It's actually being 
tested in some patients, and, we believe that--for some 
individuals, it will be able to do things as exciting as 
restoring vision.
    In the area of combat-related research, we will actually 
conduct over $160 million of activity in things ranging from 
acute and traumatic injury to sensory loss, military 
occupational exposures, bioterrorism, and pathogens, brain 
disorders, and brain injury. And as the Secretary mentioned, on 
top of that our prosthetics program for the delivery of these 
devices actually increases to $1.4 billion, an increase of $160 
million, 2006 to 2007.

                     POST-TRAUMATIC STRESS SYNDROME

    Senator Hutchison. In my remaining time, would you just 
elaborate a little bit on your post-traumatic stress syndrome, 
the centers of excellence, progress on that. Is it making a 
difference, putting caregivers with that expertise into one 
facility that can be a regional magnet? I'd just like to have a 
progress report on that.
    Secretary Nicholson. The short answer is, yes, indeed. We 
now have put a certified post-traumatic stress disorder, PTSD 
expert at each one of our 154 medical centers so that we have 
at least one in each of our centers. We have positioned others 
in some of our vet centers and in some clinics. Because we're 
forward-looking, we're--we want to outreach to these young 
people who are coming back, and even be suggestive that if 
they're experiencing any of these symptoms, that they should 
come in and see us, and see one of these experts, because what 
they are experiencing is a common reaction to the uncommon 
experience they've just been through, and that if we can begin 
to treat them early enough, there's a great probability of 
success and recovery from any long-term effects of this. And we 
also are doing a considerable amount of research, that's being 
funded generously by you all, at our National PTSD Research 
Center, which is in White River Junction, Vermont.
    Senator Hutchison. Thank you very much.
    Senator Feinstein.

              PROPOSED LEGISLATION ON FEES AND COPAYMENTS

    Senator Feinstein. Thank you very much, Madam Chairman.
    Mr. Secretary, let me take on the issue of fees. As you 
know, last year Senator Burns moved an amendment on the floor 
which actually received a vote, a unanimous vote, to reject the 
fee proposal. And you've put it back again this year. The $250 
annual enrollment fee, a doubling of the pharmaceutical 
copayments, eliminating the practice of offsetting or reducing 
copayments with collections recovered through third-party 
insurers. How many veterans does the VA estimate will be 
affected by this policy? These are, I guess, the priority 7 and 
8 veterans.
    Secretary Nicholson. I think the number, Senator, would be 
approximately 200,000. I think it's 198,000.
    Senator Feinstein. Okay. That's both priority 7s and 8s.
    Secretary Nicholson. Yes.
    Senator Feinstein. Is that correct? Okay.
    Secretary Nicholson. And we also know, about them, that 
about 95 percent of them have insurance. But I think that----
    Senator Feinstein. In those--these are people that make 
under $26,000 a year, and you're saying----
    Secretary Nicholson. Not all of them. Some of them might. 
It depends on where they live.
    If I might, I would sort of frame it. Because I happen to 
personally believe in this. And I'm not just being a good 
soldier, putting this in the budget. I think that there's a 
real equity in this. And, you know, they--by the way, the 
people that enter into the armed services are never told 
they're going to have lifetime healthcare. The people who are 
told they're going to have lifetime healthcare, and who were 
told that, are those that stay in a career. And those that stay 
in for a career, maybe 30 years, and do two or three combat 
tours, when they come out of the military, they get TRICARE, 
which is a program with which they're quite pleased. And I was 
involved in that in another way at another job, getting that. 
It's a good benefit. But they have a copay and enrollment fee, 
which is significantly higher than this, that we are asking 
for, for veterans, only for categories 7 and 8, which are 
veterans that have had no service-connected disabilities and 
who have jobs, and they have served 2 years----
    Senator Feinstein. Okay. But let me talk to you about the 
real world. This was last year, the Burns amendment. It passed 
100 to nothing. This is an election year. Somebody is sure to 
make the same amendment again. You're going to lose--if that 
happens, what is the total amount that you would lose? Is it 
$795----
    Secretary Nicholson. $795.
    Senator Feinstein [continuing]. Million dollars. What would 
your plan be, then, if you lose $795 million? I mean, I think 
you've been forewarned. That happens, 100 to zero. Pretty good 
warning that somebody's going to try it again. And the 
opportunity for it passing is certainly very high.
    Secretary Nicholson. I wouldn't argue with that, Senator, 
but I--that doesn't mean that it's not the right and equitable 
thing to do. But I will tell you, the question is a good one, 
about the $795 million, because that's important, because we--
that is assumed in this budget. And if we do not get those 
policy proposals, we would need--we will need that money, to do 
what we think we have to do in this budget year.
    Senator Feinstein. So, what would you do?
    Secretary Nicholson. Well, what we would do is ask you to--
if you don't approve that, to increase the appropriation by 
that amount.
    Senator Feinstein. Okay. Has the VA worked with the Defense 
Department to run any kind of actuarial modeling to determine 
the impact of these fees on VA patient loads?
    Secretary Nicholson. I think the answer is, no, we've not 
worked with the Defense Department, but we've certainly worked 
with our own actuaries to see what----
    Senator Feinstein. Because the----
    Secretary Nicholson [continuing]. The effect of----
    Senator Feinstein [continuing]. DOD is also requesting 
these fees on the DOD healthcare system.
    Secretary Nicholson. Yes.
    Senator Feinstein. So, I would--so, no modeling has been 
done to show what the effect of that is.
    Secretary Nicholson. Well, they're two separate systems. 
And----
    Senator Feinstein. Understand that.
    Secretary Nicholson [continuing]. We have----
    Senator Feinstein. But you're one government, 
theoretically.
    Secretary Nicholson. We have not. I think we have not. But 
we've certainly modeled it ourself to know what it--the patient 
impact would be.
    Senator Feinstein. Okay. I have another question. I see the 
light is on. Perhaps we could have a second round.
    Thank you----
    Senator Hutchison. Yes, we will----
    Senator Feinstein [continuing]. Madam Chairman.
    Senator Hutchison [continuing]. We will have a second 
round.
    Senator Allard.
    Senator Allard. Thank you, Madam Chairman.

                     ROCKY MOUNTAIN REGION COLORADO

    The hospital plans for the Rocky Mountain region, for 
veterans I want to address that a little bit. The Fitzsimons 
Hospital there in Denver--and it was designed some 50 years 
ago, and obviously a lot of what people envisioned for 
healthcare then, and what we're getting now, is lot of needs in 
the hospital simply can't be met with an older facility. And 
so, you are moving ahead with the Rocky Mountain facility. And 
I truly appreciate that. My question is, how are you moving 
forward with that particular facility? And how does it fit into 
the Capital Assessment Realignment for Enhanced Services, 
commonly known as the CARES plan?
    Secretary Nicholson. Well, thank you, Senator Allard. The 
CARES plan is the predicate for the determination that there is 
a need for a new hospital in Denver. And that takes into 
account current projected patient loads and capacity to serve. 
And we are moving forward with that. We are moving forward. We 
are--need to build a new hospital in Orlando, in Las Vegas, in 
Denver. And we have a recent agreement with the authority that 
has control over the land at the old--the Fitzsimons Army 
General Hospital. We've agreed to a site and a price, and we 
are in stages of seeking approval for getting the money 
authorized to acquire the land. And the planning--the site 
planning and space planning for the hospital is ongoing. So, 
it's moving--it's moving well, but we now need to acquire the 
land here----
    Senator Allard. And the----
    Secretary Nicholson [continuing]. Shortly.
    Senator Allard [continuing]. Authorization language, that 
would come out of the Veterans Committee itself. And you're 
working on that.
    Secretary Nicholson. Yes, we are working on it.
    Senator Allard. And then, I notice that the President also 
has in his budget here some money to begin to finance the new 
facility there in Denver.
    Secretary Nicholson. Yes. And that's----
    Senator Allard. And----
    Secretary Nicholson [continuing]. And that's----
    Senator Allard. So, right now you don't see any real 
hitches. I mean, things are--seem to be moving along pretty 
good at this point?
    Secretary Nicholson. Yes, they do.
    Senator Allard. Okay. That's good news. And thank you for 
that effort.

                    NATIONAL CEMETERY ADMINISTRATION

    The other question I have to--has to deal with cemeteries. 
How is it that we establish whether an area needs cemeteries--
or is appropriate to put a cemetery in that area? How do we 
determine that?
    Secretary Nicholson. I have Under Secretary Tuerk here with 
me, who is responsible for Memorial Affairs. And I'll let him 
give you the detail. Essentially, there are criteria which set 
out a goal for the VA to have a cemetery within 75 miles of 90 
percent of the veterans in our country. And as I said in my 
testimony, we are in the greatest expansion of cemeteries since 
the Civil War, because our veterans are aging, and they're 
passing on at a pretty rapid rate. We need to be there. And 
there is another criteria of distance, and I'll ask Secretary 
Tuerk if he'd like to address that.
    Senator Allard. Mr. Tuerk.
    Mr. Tuerk. Yes, Senator. Generally speaking, we look at a 
given site and determine whether there is a national or State 
cemetery option available in proximity to that site, defined by 
75 miles away. That number is based on our own internal studies 
of the distance beyond which veterans tend not to view a 
cemetery as a practical alternative.
    Over the years, using that 75-mile criterion, we have 
identified cities and locations and ranked them according to 
the number of veterans who are unserved. For example, starting 
back in 1987, Chicago was at----
    Senator Allard. Yeah.
    Mr. Tuerk [continuing]. The top of the list, with----
    Senator Allard. Now----
    Mr. Tuerk [continuing]. A million----
    Senator Allard [continuing]. Let me get down to specifics, 
as my time's about ready to run out here.
    Mr. Tuerk. Okay.
    Senator Allard. There is a population number that goes into 
that--those statistics that you look at, isn't correct?
    Mr. Tuerk. Correct, Senator.
    Senator Allard. And my information is that this--they're--
they go back quite a distance. What is it? Clear back to the 
2000 Census.
    Mr. Tuerk. As we have come down the list of----
    Senator Allard. Or do they go back to the 1990 Census?
    Mr. Tuerk. They are based on the 2000 Census.
    Senator Allard. Census, okay.
    Mr. Tuerk. And we have come down the list, and the most 
recent newly-mandated cemeteries--we had come down to the point 
where we're selecting cities that had veteran populations of 
about 170,000 that didn't have a cemetery in proximity.
    Senator Allard. Yeah. That--you know, I've--some areas of 
the country, they really had a--not only have they had a rapid 
growth in the population there, but the veteran population has 
probably increased even more. And then, on top of the--because 
of the war, and then also because of their aging and just the 
fact the demographics of people are moving into the area--and 
so, if you have an area that, say, is maybe on the borderline 
in change, is there a mechanism in there, or do you have to 
wait til the next Census before that whole area gets 
reevaluated?
    Secretary Nicholson. You know, I think the answer, Senator 
Allard, is, absent a showing of some kind of an exponential 
growth spurt or something, we would have to wait for the next 
Census, yes.
    Mr. Tuerk. And I'm advised, Senator, that we do have 
actuaries retained who try to estimate population changes 
between the Censuses every 10 years, but they're not precise 
numbers.
    Senator Allard. I would just like to solicit your 
cooperation in, kind of, working with this formula. We've got 
one of those areas in Colorado Springs.
    Mr. Tuerk. I would also mention, Senator, that the formula 
itself, if it can be properly called that, is not set in stone. 
And, as a matter of fact, we are undergoing a program 
evaluation right now to examine the underlying assumptions of 
that formula and see if it's an appropriate way to proceed 
henceforth.
    Senator Allard. Well, yeah, I would just ask that Secretary 
Nicholson, and maybe you, Mr. Tuerk, would just kind of work 
with us a little bit and just see where we are. We've got 
somebody that's going to donate land, and there's a huge 
growing population in there. And, looking from the Census, it's 
probably grown a little bit. I need to kind of work with the 
Veterans Affairs to see where you stand on that proposal, and 
all I need from you is a commitment to, kind of, work with us a 
little bit on that, and work with that formula, and see if 
there's a potential need there that--for a cemetery, that 
perhaps qualifies, that we've somehow or the other ignored.
    Mr. Tuerk. I'm happy to do that, Senator.
    Senator Hutchison. Senator Murray.

                             VA HEALTHCARE

    Senator Murray. Mr. Secretary, I just--I want to clarify a 
response that you gave to Senator Feinstein. Are you saying 
that VA military recruiters are not using VA healthcare as a 
recruiting tool?
    Secretary Nicholson. No, I didn't say that. I said that 
there is no undertaking in the law to provide a recruit for a 
lifetime of VA healthcare----
    Senator Murray. Right. Well, it's my understanding that 
healthcare is the number one tool that recruiters are using 
today, in terms of veterans having healthcare. Is that not 
accurate?
    Secretary Nicholson. I don't--I couldn't--I couldn't tell 
you whether it is or not. I----
    Senator Murray. Well, I would just submit to this committee 
that most of our soldiers who are serving in Iraq and 
Afghanistan are under the assumption, having been told by a 
recruiter that they would get healthcare, that, indeed, they 
would get healthcare. So----
    Secretary Nicholson. Well, every member of the Armed Forces 
who serves in the combat zone is eligible for VA healthcare.
    Senator Murray. That's correct. And they are not told 
anytime by a recruiter that they are going to be based on what 
income they have when they return.
    Secretary Nicholson. They--it shouldn't be, because they're 
eligible for it, for----
    Senator Murray. Right.
    Secretary Nicholson [continuing]. For 24 months, the----
    Senator Murray. Because I misunderstood what you said to 
Senator Feinstein, then, because I thought you said that 
soldiers were not----
    Senator Hutchison. He did. He said they're not required to 
provide it for a lifetime.
    Secretary Nicholson. Right.
    Senator Murray. Right. But they are being told by 
recruiters that healthcare is part of what they will get for 
their service. So, I think----
    Secretary Nicholson. Well, I don't know what the recruiters 
are telling them. If they're injured--if they're injured in 
their service, they would be provided----
    Senator Murray. Right. I understand that. But----
    Secretary Nicholson [continuing]. Healthcare.
    Senator Murray [continuing]. I would just say that we--if 
we were not going to guarantee them healthcare, we'd better 
tell our recruiters to say something else.

                            VA BUDGET MODEL

    But, anyway, what I really wanted to ask you about was the 
model that you have for the 2007 budget. We went through a 
tremendous challenge last year, as you will recall. Have you 
changed the model for how you project how much money will be 
needed by the VA?
    Secretary Nicholson. The answer, Senator Murray, is that, 
no, we haven't changed the model. We used the same modeling 
consultant, but we've certainly supplemented it and looked 
outside of it in a--you know, in a subjective way with 
looking--more inputs and more intuitive elements. But the basic 
model is the same.
    And I'll ask Dr. Perlin if he wants to expand on that, 
because he is----
    Senator Murray. Well, what I'd really like to know is why 
you don't base the budget on demand.
    Secretary Nicholson. Well, of course, we do base it on 
demand. What we're trying to do is project what the demand will 
be.
    Senator Murray. And you're using the same model as you had 
before we had a war in Iraq and Afghanistan?
    Secretary Nicholson. Yes. But if you'll remember my 
testimony of last year, when I--that we were working on the 
2005 budget, it was based on 2002 data. And in 2002 there was 
no war. That's just a victim of our cycling times. We're 
working 2007 right now, and this--the 2007 data is based on--
you know, on 2004 numbers.
    Senator Murray. Well, I just remain sincerely concerned 
that the--what we--the demands on the VA today are dramatically 
different than they were 5 years ago, on OIF and OEF soldiers 
returning, on increasing number of Vietnam veterans who are 
accessing it, on the increased cost of healthcare overall, on 
the fact that many people are losing healthcare and going into 
the VA that weren't, necessarily, before. Why are we not 
changing the model so that we don't end up in shortfall come 
next July or August here?
    Secretary Nicholson. Well, we use the best predictive tools 
that are available. That is the model that we use. It's used by 
almost all the major healthcare providers and integrated 
systems. It's--and then we've supplemented it by some of our 
own unique offerings, like long-term care and dental, and so 
forth. But it is a dynamic field. I would tell you that. And it 
is growing. But let me say that the patient loads are 
increasing considerably, but as to the combat, the OIF/OEF, 
we--you know, we see about 5.4 million people a year right now; 
and, of that number, about 110,000 to 120,000 are those 
combatants. That's about 2 percent of----
    Senator Murray. Are they----
    Secretary Nicholson [continuing]. That total.
    Senator Murray. How many OIF and OEF veterans have you 
budgeted for this year?
    Secretary Nicholson. For 2007, 109,000.
    Senator Murray. How many did you see in the first half of 
2006?
    Secretary Nicholson. Which is about to end--we will have 
seen, I think, 85,000.
    Senator Murray. How many did you expect to see in 2007, 
which you based your budget on?
    Secretary Nicholson. 109,000.
    Senator Murray. So, in the first half of the year, you saw 
85,000, and you're budgeting a whole year on 109,000?
    Secretary Nicholson. Budget next year on 109,000, yes.
    Senator Hutchison. Did you--you're--I'm not sure I 
understand. Are you saying that there were 85,000 just in half 
a year?
    Senator Feinstein. Yes, that's right.
    Senator Hutchison. I don't think that's what you----
    Senator Murray. Well, let--you saw 85,000 in 6 months. Your 
whole budget for 2007, you said, is--you're basing it a 
hundred-and-----
    Secretary Nicholson. Nine.
    Senator Murray [continuing]. 109. I do not----
    Senator Hutchison. Well, wait a minute, let me go back and 
then ask--What was the full year, the year before?
    Secretary Nicholson. Last year?
    Senator Murray. Last year.
    Senator Hutchison. Yes.
    Secretary Nicholson. It was about--it was, like, at 
119,800.
    Senator Murray. And we're looking at 2007, and the budget 
is based on less than that, 109,000. That's my point. I'm very 
concerned about that, obviously.
    Senator Hutchison. Well, let's let him answer why that 
would be.
    Secretary Nicholson. Yeah, sure. Dr. Perlin will.
    Dr. Perlin. Thank you, Senator Murray. Your question makes 
logical sense, but I want to make sure that we distinguish the 
cumulative number of patients we've been from the annual 
number. Indeed, the 2007 budget budgets for about 109,000, and 
2006 will see--we project about 110,000. And we're running 
about 38 percent ahead. I should explain two things. First--and 
something that we're really very proud of is that we have much 
better hand-in-glove relationship with the Department of 
Defense that is reaching out to returning combat veterans, 
something I think we all want. And that has increased. And that 
gets to the model. The base of the model predicts about 25 
percent of the OIF/OEF veteran utilization. The remainder is 
the experience in reality. Because, as the Secretary said, the 
model, of necessity, is based on experience of a couple of 
years back, we don't want to put all of our eggs in that one 
basket and ever suffer a repeat of not coming up to the right 
numbers.
    Senator Murray. But from what I can see is that you are 
basing 2007 on less numbers than you saw in 2006. What you're 
asking for, for funding, is based less, yet we know that there 
are more soldiers returning, more accessing the VA, and more 
coming. So, I just have a serious concern about the reality of 
the numbers that we're going to see----
    Dr. Perlin. I think----
    Senator Murray [continuing]. Based on your budget.
    Dr. Perlin. I think, certainly, this is one of the things 
that we will discuss during our quarterly meetings, are 
discussing now, that it's running slightly ahead. I should say 
that is line with that. We are actually running below the 
projected expenses. So, in point of fact, the budget is----
    Senator Murray. Well, and----
    Dr. Perlin [continuing]. Completely robust----
    Senator Murray. I know you----
    Senator Hutchison. No, I----
    Senator Murray [continuing]. I've used my time----
    Senator Hutchison. No, I want to go ahead----
    Senator Murray [continuing]. But they're asking----
    Senator Hutchison [continuing]. And finish this thought, 
because it--I just am not----
    Senator Murray. We're asking our----
    Senator Hutchison [continuing]. I think there's a 
disconnect.
    Senator Murray [continuing]. To do more, in terms of Gulf 
War syndrome and reaching out, and we're seeing more veterans, 
but we're being asked to fund them at less. So, I'm--I just 
think we have a real problem with what we're seeing requested 
here.
    Senator Hutchison. I think the--there's an increase in the 
amount, but you are saying that you expect to see fewer 
patients----
    Senator Murray. Than we will----
    Senator Hutchison [continuing]. This year that we're 
talking about, 2007----
    Senator Murray. The budget is based on that, that's what--
--
    Senator Hutchison [continuing]. Than what you are going to 
have in 2006. And I don't think that's what you mean, or else 
there's an explanation that's not there.
    Secretary Nicholson. Let me try to clarify. The--you're 
talking OIF/OEF returnees. And, as I said, that's about 2 
percent of our total projected patient load. In total patients, 
we are predicting to see an increase. In----
    Senator Murray. That's because Vietnam veterans are aging. 
It's because a number of people are accessing the VA system for 
other reasons.
    Secretary Nicholson. Right.
    Senator Murray. So, that doesn't surprise me. And that's 
good. But for OIF/OEF, you are projecting we will see less than 
last year. I'm very worried that is not going to be reality. 
And I doubt that's what you're going to see.
    Secretary Nicholson. We're--we are projecting that we'll 
see about 11,000 fewer than we saw last year. That is, in 2007, 
we'll see that, fewer than 2006.
    Senator Murray. And I think that's----
    Senator Hutchison. What do you base that on, I think is the 
question? Is it because you have had the major part of the 
injuries or----
    Secretary Nicholson. Well----
    Senator Hutchison [continuing]. There some--must be some--
--
    Secretary Nicholson. It's a question of the cumulative 
versus new patients, and the uniques.
    I'll ask Dr. Perlin if he can explain that.
    Dr. Perlin. Thanks. I think it's important, as was 
mentioned at the beginning, there are about half a million 
veterans who have separated, having served in combat in OIF/
OEF. And, thus far, about 144,500 have come to VA since the 
inception. And so, I think we should put that number aside for 
a moment.
    Not all of those veterans will come back for return 
service, because, by and large, most veterans, fortunately, are 
younger and healthier. There will be some that will carry 
forward. And so, the way the projection goes is, it's based on 
how many veterans will come forward from previous years and how 
many new OIF veterans will come into the system.
    I think you are absolutely correct that there are, at this 
point in the year, more veterans than we had initially 
anticipated. And I make this point, because this is part of 
Department of Defense's going out and not only doing post-
deployment health assessment, but a reassessment. We're 
tracking that number. We are well within budget. And, as the 
Secretary says,--because these are obviously extremely 
significant veterans and all veterans are significant, we place 
particular attention here. The overall budget cares for 98 
percent other veterans. And we are absolutely within the 
resources, not only as budgeted for this population, but as 
budgeted for the entire population, as well.
    Senator Murray. Well, Madam Chairman, I have other 
questions, but we'll get back to them.
    Senator Hutchison. Okay, we certainly will.
    Senator Landrieu.

                    NEW ORLEANS REPLACEMENT HOSPITAL

    Senator Landrieu. Thank you, Madam Chair.
    My question is specific to the supplemental that was just 
passed by the House, Mr. Secretary, that included the $550 
million for the new hospital, which, at our agreement, was 
taken out of the previous supplemental and put on hold until we 
could do a little bit more groundwork on standing up the 
medical complex in New Orleans after Katrina and Rita. And I 
think we're making some progress on that. And I know you all 
have been working very closely with Secretary Leavitt and--as 
we try to develop a new system there.
    But the House inserted $275 million that could be taken out 
of this account for, I guess, quote, ``unanticipated medical 
costs of returning veterans fighting global war on terror.'' Do 
you support that inclusion of $275 million? Does the 
administration support that?
    Secretary Nicholson. We did not ask for that, Senator, no.
    Senator Landrieu. Is it your intention to use any of that 
$550 million for the new hospital with this line item?
    Secretary Nicholson. No. We currently do not plan to have 
to use any of that for operational purposes, no.
    Senator Landrieu. Now, let me be clear. Is it your 
intention to use any of this $550 million, which is earmarked, 
at your request, for the hospital to use for the $275 million 
that the House added into this supplemental?
    Secretary Nicholson. No. The answer is, no, we do not.
    Senator Landrieu. Okay.
    Secretary Nicholson. Which is another way of saying that we 
plan to use the $550 million plus the $75 million for the 
hospital.
    Senator Landrieu. For the purposes in which we have 
basically all agreed we need to move forward----
    Secretary Nicholson. Right.

                             MENTAL HEALTH

    Senator Landrieu [continuing]. And only postponed it last 
time because we agreed with you that it wasn't--it's critical, 
but it wasn't critical 3 months ago. It's critical now, as we 
only have--just for reference of this committee, I just 
learned, today, we only have--let me get these--I'll get the 
numbers; I don't want to give the wrong ones--but of the 3,000 
beds we had open pre-Katrina--hospital beds--I think we only 
have 400 open in the whole metropolitan area, of a city that 
had 3,000 hospital beds, of which this hospital is, of course, 
closed down. We need to stand it up. So, it's quite urgent, in 
terms of healthcare for this whole region.
    Let me ask something on mental health. I understand this is 
the first year that we've earmarked in the budget, in 
discretionary budget, something specific for mental health, or 
is that not true? Is it $2.2 million for mental health? It's 
not the first time?
    Secretary Nicholson. It wouldn't be the first time.
    Senator Landrieu. It wouldn't be the first time?
    Secretary Nicholson. No.
    Senator Landrieu. But we have a slight increase for mental 
health?
    Secretary Nicholson. We have, I think, $3.2 billion in 
the----
    Senator Landrieu. $3.2 billion.
    Secretary Nicholson [continuing]. Budget for mental health.
    Senator Landrieu. Okay. I want to commend you for trying to 
push these numbers slightly higher for mental health. It's been 
something that many of us on the committee have worked on. What 
concerns me is part of the GAO report that was just recently 
issued about the lack of assessment teams at the hospitals that 
will actually make the determination as to who might be 
eligible for these services. I understand that we only piloted 
three programs last year--one in California, one in Texas, and 
one in New York. So, is there money in this budget to establish 
the assessment teams so that we can make the proper assessments 
for these veterans to give them the mental health counseling 
that has become so obvious?
    Secretary Nicholson. Well, they're--absolutely. That's one 
of the reasons that, you know, we've--asking for $3.2 billion, 
which is an increase of $339 million. And, as I stated earlier, 
Senator, we have, in every one of our 156 major medical 
centers, like--New Orleans would be one of those--was--we have 
a PTSD expert that we've posted in each of these to head those 
teams for assessment. And we have a very comprehensive 
assessment----
    Senator Landrieu. But according to the report, that there 
are only three complete teams, and then a coordinator, is that 
not true?
    Secretary Nicholson. That is not true. I gather that you--
that you--there may be confusion, because you mentioned 
California and New York and Texas. What has happened is that 
the Congress, you all, in the last few months, have designated 
three locations to be centers of excellence----
    Senator Landrieu. Okay.
    Secretary Nicholson [continuing]. For mental healthcare. 
Those are Canandaigua, New York; Waco; Texas, and San Diego, 
California.
    Senator Landrieu. To coordinate the efforts nationally----
    Secretary Nicholson. But those----
    Senator Landrieu [continuing]. For these----
    Secretary Nicholson [continuing]. Those will just be 
supplemental to a vast system now.

                     GRANTS FOR STATE EXTENDED CARE

    Senator Landrieu. Okay. And one final, on the VA nursing 
homes, we have a total of $85 million nationally in the budget.
    Secretary Nicholson. Yes, I think that's correct. Yes, 
ma'am.
    Senator Landrieu. The budget was $104 million, last year? 
And there's earmarked a fairly large center in California. What 
is the total amount of that money, and how will it affect the 
building of the other centers around the country?
    Secretary Nicholson. I'm going to ask Dr. Perlin to respond 
to that particular area you've asked.
    Senator Feinstein. Don't think of taking it from 
California.
    Dr. Perlin. Well, first, thank you very much for the 
question. Let me confirm, as the Secretary said, the budget is 
$85 million, asked for in the 2007 budget. California is a 
large project, unequivocally. We have a few mandates in front 
of us. First, we also have to pay attention to life safety. And 
we will fund those. In fact, there is conference language that 
asked that we do that. And we have not released the ultimate 
2007 decision, in terms of priorities. But, obviously, we've 
already set aside funding for the California project very 
substantially--in fact, $68.2 million--in 2006. And we are 
working with California to make sure that we can, obviously, 
complete the project in which we both have mutual interests, 
and meet needs elsewhere in the country, including not just new 
projects, but also life safety.
    Senator Landrieu. And I want to say that I most certainly 
support it, and I'm sure that the Senator who's given great 
leadership to this committee, could justify every penny for 
this project. I just raise it that there's a whole country out 
there of other veterans' homes that are long on the waiting 
list. And to limit the budget to only that, and also try to 
accommodate a large project like this, I think, is a disservice 
to the rest of the country.
    So, I'm going to--my time is up, but let me also just say, 
for the record, I'm going to submit a suggestion on the ratios 
of how these can be funded in a little bit fairer system than 
having every State to have to come up with a match, regardless 
of the economic need of the community.
    Thank you.
    Senator Feinstein. The chairman went down to vote. She's 
coming back. And then I'll go. But you're up. So, why don't you 
go ahead?
    Senator Craig [presiding]. Thank you very much, Madam 
Chairman.
    Let me submit my full statement for the record and deal 
with a couple of questions that I think are legitimate. And 
some of them go back to what Senator Murray was discussing 
earlier, as it relates to how we get the record straight.
    [The statement follows:]

               Prepared Statement of Senator Larry Craig

    Thank you Madame Chair. My comments will be brief. Mr. Secretary, 
good afternoon and welcome. You and I have already spoken at some 
length about your budget proposal in my capacity as Chairman of your 
authorizing Committee. First, I want to compliment you and the 
President once again for making veterans one of the highest priorities 
in your budget. This historic request of nearly $80 billion 
demonstrates this Nation's commitment to our veterans.
    As you know, I supported your budget request in my ``views and 
estimates'' letter to the Budget Committee this year. As you also know, 
my authorizing Committee only has to comment on your budget. This 
Committee, on the other hand, has the responsibility of balancing your 
request against all of the other needs of the Federal Government. Mr. 
Secretary, quite frankly, that balancing act is becoming increasingly 
difficult.
    If this Committee follows the recommendations set forth in the 
budget resolution we've just passed, including the Burns amendment, we 
will provide VA's health care system with a 12.4 percent increase in 
direct appropriations. That would mean that since 2001, VA's health 
care budget has increased by nearly 70 percent.
    I know we all strongly support our veterans, especially in a time 
of war. The care of our veterans is not a partisan issue. But, this 
Committee is the place where the ``rhetoric meets the road.'' If we do 
not make some serious decisions about VA's health care spending rates, 
its budget will double every 6 years and will eventually collide with 
all other areas of Federal spending--things like agriculture, parks, 
and education. That is not a disputable fact. It's a mathematical 
reality.
    I know many of you on this Committee are not prepared to begin 
charging certain veterans or increasing the copayments many of them 
already pay for medications. I understand that. But, I strongly believe 
that the time is coming for us to take the necessary steps to properly 
manage VA's health care system even if that means charging $21 per 
month for certain veterans to access the system.
    I say to my colleagues: we are charged with the oversight and 
funding of what is now considered to be one of the Nation's best health 
care systems. It is a system of first choice, not one of last resort. 
Today's veterans enjoy good access to high quality medical care. Now we 
have a responsibility to ensure that its financial footing is sound and 
sustainable so that tomorrow's veterans will also receive the benefits 
of VA's enormous success.
    Those management decisions will not be easy. Good management rarely 
is easy. But, failure to make the decisions will be even harder on 
tomorrow's veterans than it is on us today. I am prepared to talk or 
work with any of you on ways to address this issue. In my capacity as 
Chairman of the authorizing committee, I have already challenged our 
VSOs to work with me. What I am not prepared to do is ignore this issue 
and simply pass it on to the next guy. The challenge is too real and 
the consequences too serious.
    Mr. Secretary, thank you again for being here. Thank you Madame 
Chair.

    Senator Craig. And I know Louisiana and California feed 
over money, but right now----
    Senator Feinstein. Well, I made it pretty clear.
    Senator Craig. She's got to understand who runs this 
committee. No.

                            OIF/OEF VETERANS

    During the floor debate in the Senate budget resolution, I 
heard many of my colleagues express concerns about certain 
facts. It has reemerged again today as it relates to OIF and 
OEF veterans and numbers coming in. And I think it's important 
that we get the record as clear as we can in light of this 
historic budget. And it is a historic budget in size and scope. 
You are comfortable with the 2 percent figure at this moment as 
it relates to veterans coming into the system out of these two 
conflicts.
    Secretary Nicholson. Yes, sir, we are. The size of the 
force over there is also somewhat diminished. And so, we're 
comfortable, based on the experience that we've had, yes.
    Senator Craig. More importantly, the funds that VA has 
budgeted for in OIF and OEF veterans in this fiscal year, how 
do you--how do actual expenditures compare with what VA 
budgeted for thus far?
    Secretary Nicholson. They are running less, by about 34 
percent, than we had budgeted for this category of patients.
    Senator Craig. So, in light of where the money seems to be 
headed at this moment, based on your projections, you feel 
you're on target.
    Secretary Nicholson. Yes, I do. We're, I think, in good 
shape. We are seeing somewhat more at this point, the halfway 
point in the year, but our costs are less. So, we think that we 
will be able to see--care for those that we see.
    Senator Craig. And this also includes the outreach that DOD 
is currently doing.
    Secretary Nicholson. Yes, sir.
    Senator Craig. Could you explain the distinction between 
the cumulative number of OIF and OEF veterans who have been 
treated at the VA since budget assumes will seek treatment in 
the current year--the current fiscal year of 2007?
    Secretary Nicholson. Yes. Because we see--let's say, in the 
beginning, we--you know, we see X number, and then in the next 
year, or the next measuring unit, we would see Y. But some of Y 
are made up of those that we had already seen. So, in terms of 
unique patients--that is, individual patients--it would be 
different.
    Senator Craig. Okay. Madam Chairman, I have some additional 
questions I want to ask. Are you prepared to recess, and we'll 
run and vote and come back?
    Senator Feinstein. I thought--the chairman's going to come 
back. But I thought I'd go down. And that way, we'd just keep 
it going.
    Senator Craig. All right.
    Senator Feinstein. We'll do a second round.
    Senator Craig. Okay.
    Senator Feinstein. But if you're not finished, and would 
like to do more, I can run and vote, and--well, you have to 
vote, too.
    Senator Craig. Well, why don't you go ahead, and I'll stay 
here until the--until the chairman gets back. And if I find I'm 
at risk, I'll recess it until she gets here.
    Senator Feinstein. All right, excellent.
    Senator Craig. Thank you.
    Senator Feinstein. I will go, because I don't want to miss 
you. We've got to talk reprogramming the money, which I know 
you'll be delighted about.

                    QUARTERLY REPORTING TO CONGRESS

    Senator Craig. I think, for the record, it's also important 
to establish, based on, I think, the frustration of those on 
the authorizing committee and the appropriating subcommittee 
here, had in light of the past fiscal environment and the 
shortfalls that became obvious, at our request, and your 
urgence, we have established a quarterly reporting system so 
that we can effectively monitor both outlays and anticipations 
of movement beyond where the budget was established. We've had 
that--we've had the first quarter report, and those will 
continue.
    Would you wish to comment on that as it relates to that 
process, the modeling process, and, frankly, a new tracking 
mechanism that you've incorporated that includes those kinds of 
outputs to us?
    Secretary Nicholson. Yes, Senator. Yes, Senator, I would. I 
welcome the chance to comment on that, because, as I've said 
earlier, this is a dynamic arena that we are in, with a war 
going on and a large number of patients and potential patients 
for this large system. So, we are very glad that we've gone to 
a quarterly reporting system with you, the oversight people, 
the Congress. With OMB, we're doing it monthly. And we've 
instituted that. So, to do that monthly, we have, you know, an 
almost daily tracking system, from a management point of view. 
So, we have a--we have a much better feel for what is going on 
at any given time than we've had in the past. And if we see not 
just red lights, but yellow lights, we plan to be as fully 
transparent as possible with you all about this, and the fact 
that we may need your help to help the veterans.
    Senator Craig. Well, I think that's important, that the 
record show that, from that which some have a reason to be 
concerned and have--and are making judgments to where we are 
today, it is significantly different than how we have operated 
in the past, and, I think, appropriately so, as we deal with a 
dynamic process and the potential that that might change in 
relation to conflict and activities and the outreach programs 
the DOD is working in, in relation to that 24-month window in 
which those coming out of Iraq and Afghanistan have opportunity 
of services beyond what might be connected to actual injury or 
problems arising from their service in the theater.
    For the sake of me not missing a vote, or prolonging it, 
I'm going to recess the subcommittee for a few moments. The 
chairman will return, and I will return, also. So, the 
subcommittee will stand in recess.

              INFORMATION TECHNOLOGY SYSTEMS CONSOLIDATION

    Senator Hutchison [presiding]. I want to reconvene the 
hearing. There were two, and possibly three Senators who do 
plan to come back for a second round. But I wanted to ask if 
you could give me an update on the IT consolidation.
    Secretary Nicholson. Yes, I can, Madam Chairman. By way of 
background, we've done a spectacular job at the VA--and I say 
``we,'' it's really the people who proceeded me; we're sitting 
on their shoulders--and, you know, our electronic medical 
records, it's a phenomenal achievement. But now we need to 
bring the rest of the information technology of the VA into the 
21st century. And it's a very spread-out system. It covers this 
Nation--Hawaii, Alaska, Philippines, Guam. And there are a 
lot--there have been a lot of individual kinds of systems and 
applications out there, which is very inefficient, very 
expensive, and not effective.
    And so, we hired a very prestigious consultant to come in 
and look at that, and make a set of recommendations to us. And 
they have done that. And we have chosen to implement 
essentially what they recommended, which is to centralize the 
IT in this big bureau. And that is underway. I've signed the 
implementing documents to do that. It involves the transference 
of thousands of people in the Department from where they have 
been into the governance of the chief information officer, the 
Assistant Secretary for IT.
    Senator Hutchison. Have you been able to see any results 
yet, or is it just premature to see if there are savings or 
efficiencies?
    Secretary Nicholson. Well, it's just--it has just begun.
    Senator Hutchison. Just begun.
    Secretary Nicholson. Uh-huh.

                        RIO GRANDE VALLEY, TEXAS

    Senator Hutchison. I wanted to ask you something on a 
parochial level. The veterans in South Texas, as you know, have 
been very concerned about their lack of a hospital there, and a 
major clinic. You have, I think, come out with a terrific 
proposal for a clinic in conjunction with a medical facility 
that I think is going to be--it sounds, by the description, 
like it's going to be a wonderful service for our veterans. But 
then, on the subject of the hospital, I had had a 
recommendation from a city council member that there was a 
facility that had been closed that should be suitable for a 
hospital. And you agreed to look into it. Has there been any 
result from that yet, or is that still in progress, as well?
    Secretary Nicholson. That is in progress. What I agreed to 
was to do a study, an assessment of the needs in that Rio 
Grande----
    Senator Hutchison. Valley.
    Secretary Nicholson [continuing]. Valley area to, number 
one, try to assess what the populations of veterans were, what 
their needs are, and what we have there available to serve 
them, and what is possible that we could add. But that is an--
--
    Senator Hutchison. In progress.
    Secretary Nicholson [continuing]. Ongoing progress, yes.
    Senator Hutchison. Well, that's what I asked for. And then 
I did make the suggestion, which is in your office, of just 
looking at this facility. I haven't seen it myself, so I'm not 
saying it's appropriate, but if it is something that would be 
feasible and lower cost and be more efficient, and if the 
population warrants it in your priority list. Today, they have 
to travel several hundred miles from that lower Rio Grande 
Valley to San Antonio VAMC to Audie Murphy VAMC, if they are 
going to need day surgery or day care, but some of it would be 
overnight, as well. So, I would just look forward to hearing 
about that.
    The other area was your major construction account, which 
is also somewhat reduced. And I just wanted to ask what your 
thinking was on being able to justify a reduction in the major 
construction account.
    Secretary Nicholson. Well, we have, as I mentioned, several 
ongoing projects, big projects. You know, the VA has not built 
a hospital--not opened a new hospital now, I think, in 13 
years, but we need to some new hospitals, and we're ongoing in 
that process. But you can't spend all the money at one time. 
And so, while we're going forward with Las Vegas and going 
forward with Orlando, they really didn't need a lot of money in 
the 2007 budget. So, we have in there the other projects. We 
have several that need seismic repair. They're--it's just one 
of those things, doesn't add much value to--it's like putting 
new plumbing in your house, but you have to do it, if it's 
needed. And, in this case, we have some properties that are 
subject to earthquake vulnerabilities, and we're having to 
spend, as you can see there, considerably amount of money for 
seismic. And so, it--you know, it's a matter of those felt 
safety needs versus some of the projects that needed some money 
to keep them moving in this process.
    Senator Hutchison. Are you looking, in the next 5 years, at 
a 5-year plan for new hospitals, where you do see significant 
needs? Is that part of your assessment, both for the Rio Grande 
Valley, but for other places?
    Secretary Nicholson. Yes. In fact, the CARES process, which 
is a major comprehensive assessment to the capital assets of 
the agency, versus projected populations, projected out to, I 
think, the year 2012, and we have that data, and that's been 
the basis for the decisions for new hospitals, in the case of 
those that I've mentioned.
    Senator Hutchison. And, of course, I know that I'm--I'm 
dealing right now with the supplemental, and we have a major 
commitment for New Orleans. And then there will be a major 
commitment for the Armed Forces Retirement Home in Gulfport and 
then a major commitment in Biloxi for facilities, as well. So, 
I suppose that those are going to be coming into the regular 
budget after they are built and able to operate.
    Secretary Nicholson. Well, for operating, the--indeed, they 
will. But New Orleans is in a supplemental----
    Senator Hutchison. Right.
    Secretary Nicholson [continuing]. Mode at--I think right 
now we have requested $600 million and $75 million has 
previously been appropriated.
    Senator Hutchison. Right.
    Secretary Nicholson [continuing]. It's only 8 miles away.
    Senator Hutchison. Right. And that is going to be more a 
regional center, as I understand it.
    Secretary Nicholson. Yes.
    Senator Hutchison. We're working right now on the 
supplemental for what we can do with that--the land there at 
Gulfport. I think we have a good solution for compensating the 
Veterans Affairs for that land.
    Secretary Nicholson. At Gulfport?
    Senator Hutchison. Yes.
    Secretary Nicholson. Uh-huh, yes.
    Senator Hutchison. Yes.

                           CLAIMS PROCESSING

    Can you give us an update on the progress the VA is making 
on reducing the backlog of benefit evaluations?
    Secretary Nicholson. Yes. I'll give you a--you know, kind 
of the big picture. Then I'm going to ask Under Secretary 
Cooper to, if he would, give you the detail.
    But we are hiring new people, and training them, in the 
effort to bring down the backlog. I just visited a--one of our 
major regional offices in St. Paul last week. They're hiring 
and training. There is a training gap with these people. It 
takes about 15 months to really qualify a claims adjudicator, 
you know, to do this, and do it carefully and accurately.
    And, with that, I'd ask Admiral Cooper if he'd have 
anything to add.
    Admiral Cooper. Yes. We're attempting to attack that every 
way we possibly can. We are hiring more people, and we're going 
to do centralized training to ensure that we get them trained 
properly to do the same thing across the country at 57 
different regional offices. So, training is one of the main 
things.
    We're looking at some consolidation. We have a program 
called Benefit Delivery at Discharge, which is for those people 
coming out of the service at the end of their careers, and we 
have consolidated that activity at two sites--one in Winston-
Salem, North Carolina, and other in Salt Lake City--so that 
those two regional offices are doing those particular claims 
and, therefore, hopefully doing them better and eventually a 
little bit faster.
    We do a lot of brokering. We try to look at those regional 
offices which have a little bit more capacity. And as soon as a 
claim is ready to rate, we broker it to those offices, so we 
don't have an issue of not having enough people to rate the 
claim at a specific site.
    So, we're doing a lot of moving around. Primarily, however, 
it is through training and hiring that we hope to eventually 
succeed.
    The major problem, however, is that we can do a lot for 
output, but incoming is something we can't control. And as long 
as the incoming keeps increasing, then we're sort of fighting 
against it. But eventually we will get there.
    Senator Hutchison. Senator Craig.
    Senator Craig. Thank you very much, Madam Chairman.

                               VA BUDGET

    Let me make a few comments, and then I have one last 
question. I'll stay within our time limits here that are--I 
think are important to make, because what I think I have said, 
and others have said, and I think it's important that the 
record show, that under this precedent we are looking at a 
historic request of nearly $80 billion for veterans in this 
country. That is a phenomenal prioritizing of resource, and it 
demonstrates, without any question, in my opinion, the 
commitment of this administration.
    I also want to tell you that I've had a bite at this apple 
prior to this subcommittee getting it. As chairman of the 
authorizing committee, I have the responsibility of doing views 
and estimates in a letter to the Budget Committee for the 
purpose of establishing the level of funding that we will deal 
with here, and that you in this committee must allocate. And, 
in doing so, I think it is important to understand that we have 
a problem growing here that we chose not to face this year on 
the floor. And I think the Senator from California, in part, 
touched it when she talked about the Burns amendment, stepping 
back from the fees for 7s and 8s, and also the pharmaceutical 
fee.
    Here's the reality, though. This is a 12.4 percent increase 
over last year. And I think it's important to understand that. 
That means that, since 2001, VA healthcare budgets have 
increased by 70 percent. That's also to suggest that if we 
continue this trend, VA budgets will double every 6 years. And 
I must tell this committee, that is not a sustainable course. 
No matter how much we want for our States, or expect, or try to 
find and get unique services, we cannot sustain by continuing 
to ask at the level we're asking unless we ask something 
different.
    So, I chose this year to accept the administration's 
approach, and to suggest that 7s and 8s, who have no 
connection, in the sense that they are service-connected or 
disabled--and, as you've already heard the Secretary say, of 
which many of them already have healthcare--to pay less than a 
carton of cigarettes a month to have access to the best 
healthcare system in the country. And every VSO said no. And 
the Congress said no.
    Well, what the Congress is failing to recognize is that 
they cannot sustain what they're doing. And we have to change 
that. And I'm willing now to stand up and speak out and say 
it's time to change. I accept what we've done. I accept what 
this committee's been handed. And we will monitor and try to 
act as wisely as we can. But we have a phenomenal collision on 
course at this moment, because we are dealing, as I think we 
all recognize, with largely discretionary funding that collides 
with everything else we want to do. And mathematically the 
reality at hand is the reality of great complication.
    I've challenged all of the VSOs to work with me in the 
coming year, because there was a time not long ago when they 
accepted exactly what they rejected this year. And what we have 
to look at are a variety of different approaches, I think, to 
find revenue sources, the some $790 million that we decided not 
to fund through these kind of new revenues. And, therefore, 
because we decided not to fund them, and by funding them, 
199,000, or somewhere near that, of that large number would 
have dropped off from the 7s and 8s, because they have 
alternative healthcare. That would have changed the real value 
of this--of revenue in the reality of savings over--to well 
over $800 million.
    Well, we've chosen not to do that, so it's real dollars. It 
isn't the $795 million that we would have gained by the new 
revenue sources. It's actually over $800 million. I say that. I 
think it's important that it be said for the record. It is my 
opinion. And I will speak it as loudly as I can, recognizing 
that my priority is to serve veterans, and the priority of this 
committee and the Congress is to serve veterans, is to suggest 
that we must find a sound and sustainable course of funding for 
VA, not just for today's veterans, but for tomorrow's veterans, 
in a very real problem that we have out there.
    And I'm going to fight awfully hard over the course of the 
next 12 months as to our--the priorities we establish and how 
they get funded, because there is a reality that I think can--
that all of us can withstand the test of. Those who are in 
need, those who deserve treatment, are being treated, and 
they're being treated by the best healthcare system in the 
world. And we've extended, to 24 months out, for those coming 
out of Iraq and Afghanistan, services that heretofore they had 
not had unless they were directly connected to a theater of a 
war and a disability involved. It's important that, I think, we 
say that.
    Now, in saying that, let me ask this question. Mr. 
Secretary, in my analysis of, and your feedback, over the 
period of the last several months as we've looked at this 
budget in dealing with 7 and 8 priority veterans, and 
anticipating that by the action of raising a monthly fee so 
that they could gain access, or be eligible for access, that 
there would have been a certain number who would have left, 
simply stepped back from it, because they had alternative forms 
of healthcare, they would choose not to pay the $21 a month. Is 
that correct?
    Secretary Nicholson. That's correct, Senator.
    Senator Craig. And we believe that was about how many?
    Secretary Nicholson. About, I think, 199,000--200,000.
    Senator Craig. And it is an--it is believed, based on your 
surveys, that 95 percent of those had healthcare, and that's 
why they would have stepped back.
    Secretary Nicholson. Yes, sir.
    Senator Craig. And so, the reality of the $790 million 
raised by both pharmaceuticals and prescription drug copay and 
also the fee would have been $790 million, but this loss, in 
total benefit to the budget, would have been over $800 million. 
Is that not correct?
    Secretary Nicholson. $795 million is the amount.
    Senator Craig. In new revenue.
    Secretary Nicholson. No. It's the----
    Senator Craig. Oh----
    Secretary Nicholson [continuing] Combination.
    Senator Craig [continuing]. Combination of, okay.
    Secretary Nicholson. Revenue plus----
    Senator Craig. I wanted to make sure I--I was dancing off 
the top of my head in memory, and I wasn't quite sure. So, 795.
    Secretary Nicholson. $795 million.
    Senator Craig. $795 million.
    Well, Madam Chairman and Ranking Member, that's a reality 
check. And that's why I say what I say, because we're going to 
squeeze these budgets, and squeeze them hard, to maximize 
service to our veterans. At the same time, we are on an 
unsustainable course. I do believe that. Because I think the 
three of us will be presiding over $100 billion budget to the 
VA in a very short time, and certainly within our tenure, at 
the current rate.
    And my suggestion to you is that you're going to have a 
budget chairman at some point in time tell this committee that 
that money simply is no longer available at that level of 
increase.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Craig.
    I appreciate what you have said. It is--it's a tough 
situation. And I am working with my staff on some potential 
alternatives, that are not this one, but maybe other things, 
that wouldn't hit a $28,000 level of annual income. But I would 
look forward to working with you, Senator Feinstein, with the 
VA, to see if there are other options besides the ones that are 
envisioned in the bill that might be acceptable to the VSOs and 
the committee, as well.
    Senator Craig. Well, Madam Chairman, thank you. I know that 
you and I have had those discussions. I really appreciate that 
kind of thinking, because I think to continue to serve at the 
level of service we want to provide for our veterans, we're 
going to have to become creative in looking at a variety of 
approaches to resolve this issue.
    Thank you.
    Senator Hutchison. Senator Feinstein.
    Senator Feinstein. Thank you very much, Madam Chairman.
    And I think, Senator Craig, what you've said is both wise 
and sobering. The question is really whether somebody on the 
floor comes up with something, whether there are enough 
lemmings that are going to follow along. And--oh, I'm--
shouldn't have said that word.
    But I'm really concerned, because we have a lot of wounded, 
and we have a lot of people now that are going to be using 
veterans services for a long, long time, and many with, you 
know, terrible injuries. And so, we have to be ready for it.

                     MEDICAL SERVICES REPROGRAMMING

    And I'm concerned with the planning model used, Mr. 
Secretary. And let me tell you how I'm concerned. You've 
submitted a reprogramming request, which is what I want to talk 
about. And that proposal is to transfer $370 million from the 
medical services account to the medical administration account. 
You say that it's needed to perfect the distribution of funds 
between these two accounts as a result of requesting and 
receiving the 2005 supplemental of $1.5 billion, and the 2006 
budget amendment of $1.452 billion, entirely in the medical 
services account. Both of those came to the medical services 
account.
    Now, what concerns me is that you're transferring this 
money, but you're not annualizing the cost, and you're saying 
that it was known at the time that this was going to be done. 
It was never told to us that this was going to be done, when 
last year's budget was considered. And this is going to fund 
salaries in the new account, but, as I understand it, it isn't 
annualized.
    Would you please comment on what impact this is going to 
have on the delivery of healthcare services? Do we now figure 
that you're going to be short $370 million for healthcare 
services? And, also, as you know, one budget affects the other, 
so does this mean that you're going to need, at some point 
during the year, an additional $370 million above the 
President's 2007 figure? Your comments are very important. 
They're going to be inscribed----
    Secretary Nicholson. Yes, I--thank you, Senator Feinstein. 
I hope that I can allay your apprehensions about this, because 
there should be none. Zero. This will have no impact on the 
delivery of healthcare. This is an accounting issue.
    The Congress authorized us three accounts: a medical--a 
services account, an administration account, and a facilities 
account. And we were given money and--through a supplemental. 
And it was deposited into one account, although the 
justification that we gave for it was the detail of how we're 
planning to use the account. But the money was deposited into 
one account. This is not new, by the way. This has happened in 
previous years.
    Now what we're asking is that we transfer this money, which 
happens to be in the--I think about 1.2 percent of the total; 
it's $370 million--into the medical administration account. And 
that--you're right, that is where we pay the help there. But it 
was--it is not a diminution of the resources needed for medical 
services. It was just that it was all put into one account. It 
would be like if you had, you know, gotten your paycheck into 
one account, but you use it out of three to run your 
operations. That's all it is.
    Senator Feinstein. Okay. So, it's just going to be an 
accounting. We will asterisk the record, and hopefully will not 
have to send it to you later in the year.

                         MENTAL HEALTH FUNDING

    Okay. One of my concerns is that, once again, you may--and 
I don't know that you are, but you may be underfunding. And if 
I look at just one thing, veterans patients in fiscal year 2005 
and the first 4 months in 2006--these are mental disorders. In 
2005, from October 1, 2004 to September 30, 2005, there were 
31,860. In 2006, from October 1, 2005 to January 30, 2006--
that's just 4 months--you almost reach that number. There's 
24,268. My question is--I hope your modeling is dynamic enough 
to pick up the increase, and do it accurately.
    Secretary Nicholson. Okay, I--that's a good question, and 
I'm going to ask Dr. Perlin to give you the detail on it.
    Dr. Perlin. Thank you, Mr. Secretary.
    Senator Feinstein, that's a great question. As you know, 
here we are in 2006, talking about 2007. And, of course, we're 
using data from the completed year of 2004. And that's the 
reality of the budget cycle. Now, the model is, as the 
Secretary said, really a terrific model. It's used by over 100 
million--or used to predict the costs of over 100 million 
beneficiaries, including in all the Blue Cross programs, Aetna, 
Cigna, public programs, DOD components, Medicaid programs, et 
cetera. So, it's very good. But obviously there is a lag time 
inherently. And so, I think what we've tried to say is, with 
your encouragement, we have the quarterly meetings, so, on top 
of the model, we superimpose the reality. And, in fact, the 
mental health budget is, as the Secretary has discussed, 
extremely robust, $3.2 billion, up $339 million. And, in fact, 
it actually is not only sufficient to meet the needs of those 
veterans, but to anticipate even--and improve--services to 
really the height of world-class service. So, it is a solid 
budget, but it is the reality on top that's much more dynamic 
than the model could ever be.
    Senator Feinstein. So, in other words, you've corrected the 
planning model that you had used before that got us into the 
problems where we were, and you can assure us that there isn't 
going to be a problem this year, this next year.
    Dr. Perlin. There will not be a problem this year. It's a 
solid model. And----
    Senator Feinstein. Well, this next--the 2007 year.
    Dr. Perlin [continuing]. And as changes--as changes, or if 
world conditions that can't be foreseen by any of us this 
moment change, that's the purpose of the quarterly meeting. But 
we stand by this model, these projections, and our comfort in 
them is solid.
    Senator Feinstein. Okay. I know we have a vote, Madam 
Chairman. I think that's it for me.

                            OIF/OEF VETERANS

    Why--one last question--why is the VA estimating a decrease 
of Iraq/Afghanistan veterans in 2007, when the trends suggest 
you might see more, rather than fewer?
    Secretary Nicholson. Senator, we've, you know, looked at 
that carefully. We now have several years of data also to look 
at. And the--you know, the size of the force is actually 
diminished in the deployment in the combat zone. That 
influences that number, as well. It is diminished by about 
11,000 that we're projecting in the 2007 budget from what we're 
projecting that we will see in 2006.
    Senator Feinstein. I have 109,191 in 2007.
    Secretary Nicholson. Right.
    Senator Feinstein. And for the entire fiscal year, VA has 
estimated we treated a total of 110,556 Iraq and Afghanistan 
war veterans. Is that wrong?
    Secretary Nicholson. For 2006?
    Senator Feinstein. For the entire fiscal year.
    Secretary Nicholson. Yeah.
    Senator Feinstein. That's this fiscal year, right? Yeah, in 
this fiscal year, 110,000. You're estimating, for the next 
fiscal year, 109,000. So, you're cutting it back. Now, you're 
saying there are fewer troops?
    Secretary Nicholson. Cutting it back by 1,000.
    Senator Feinstein. Right.
    Secretary Nicholson. Uh-huh.
    Senator Feinstein. It's the----
    Secretary Nicholson. It's based on--you know, we're 
consulting much closer with DOD on deployments, and it's--you 
know, it's not materially different. It's about 1,000. The 
number I gave you before was based on our 2005 experiences.
    Senator Feinstein. Well, I hope so. I hope that comes true, 
that there is not going to be some other event that's going to 
greatly increase the numbers. But----
    Secretary Nicholson. Well, I'd like to----
    Senator Feinstein [continuing]. I guess my overall----
    Secretary Nicholson [continuing. Comment on that.
    Senator Feinstein [continuing]. Point is that you--even a 
12.4 percent increase, you are really closely budgeted.
    Secretary Nicholson. I would agree with that, Senator 
Feinstein. And, as I've said, and I would say again, that I 
think we're doing, you know, an able and a careful job of 
trying to predict this. But it is a dynamic situation. We are 
at war. And there are a lot of veterans out there that are 
eligible for VA care who have not yet, you know, made it 
available--or taken advantage of it. So, it is dynamic. And 
that's why I think that we all ought to recognize that this 
could change, which is why we've instituted these quarterly 
reviews with the Congress, and a monthly review with the OMB.
    Senator Feinstein. Well, I think it'd be very useful--and 
I'm glad you're doing this quarterly--for us to know, because, 
you know, post-traumatic stress disorder is only a $5.5 million 
increase over last year, and I just cross my fingers and hope 
that this is adequate and that we don't run into the same 
problem.
    So, I thank you very much. And I thank you. The facilities 
really, I think, are greatly improved in their management and 
their care and concern, and I very much appreciate that, and--
--
    Secretary Nicholson. Thank you.
    Senator Feinstein [continuing]. I want you to know that.
    Senator Hutchison. Secretary Nicholson has asked to leave 
at 4:30. Obviously, Senator Murray, you just returned. Would 
you be able to wrap up in 5 minutes? And would you be able to 
stay, Secretary--Mr. Secretary----
    Secretary Nicholson. Sure.
    Senator Hutchison [continuing]. For another 5 minutes or 
so?
    Have you voted already on final passage? I think I'm going 
to go ahead and leave, if you will wrap up. And just know that 
he was trying to leave at 4:30, and then end the hearing. I 
would appreciate it.
    Senator Murray [continuing]. Your answers, the shorter my 
time.
    Senator Hutchison. All right. Thank you.
    Senator Murray [presiding]. No, I do have a couple of quick 
issues and really appreciate your bearing with us as we go back 
and forth on votes.

                         BELLINGHAM, WASHINGTON

    But, Mr. Secretary, I wanted to ask you about the CBOC 
situation in Bellingham, Washington. We got a white paper--
actually sent one to this committee--about evaluating those in 
the context of fiscal year 2007 budget. If I could just ask you 
real quick what the timeline is on that, and when can our 
veterans expect to see progress on the Bellingham CBOC?
    Secretary Nicholson. Senator Murray, we have that on our 
list, and we're--we have it under review. But I would be unable 
to commit to you today when we might do that.
    Senator Murray. Okay. If I could follow up with you on 
that, I was home over the recess and got asked about that 
constantly, so I told my vets I would be seeing you and I would 
ask the question. So----
    Secretary Nicholson. We have committed one to--a new one to 
North Central Washington, as you know.
    Senator Murray. Right. Right. And I was there, and that's 
why everybody in Bellingham wanted to know.

                          TRIBAL MENTAL HEALTH

    On tribal veterans, as you know, our tribal veterans have 
participated in the armed services in a higher per-capita rate 
than any other minority group. And I met with a number of 
tribal veterans over the recess, as well, who were very 
concerned about getting access to culturally relevant services. 
And I'm especially worried that out in VISN 20 Camp Chapparal, 
which is a tribal mental health camp--I don't know if you're 
aware of the services that are there--they're--they've lost 
half their funding. And they're really disappointed. And many 
tribal veterans expressed to me that they thought the VA was 
trying to--had made--actually made a conscious decision to 
ignore their needs. So, I just wanted to raise that with you. 
And if we could explore with you how we can make sure that that 
is funded----
    Secretary Nicholson. Thank you, Senator. I'm going to ask 
Dr. Perlin if he'd respond to that.
    Dr. Perlin. Thank you, Senator Murray.
    And, as you know, we make a serious commitment. Secretary 
Nicholson, in fact, in this budget, supports a $339 million 
increase to bring the mental health budget to $3.2 billion. We 
take this very seriously. And I've been driving a mental health 
strategic plan, and we appreciate your support.
    I appreciate your bringing that to my attention. I will 
look into it and we'll be back to you----
    [The information follows]

    The Veterans Integrated Service Network (VISN) 20 and its 
predecessor organizations provided funding for a week for Camp 
Chaparral from 1992 through 2004 for as many as 75 participants each 
year. Over the years, VA funding climbed from $10,000 to $50,000 per 
year.
    In fiscal year 2005, funding was discontinued for Camp Chaparral 
due to budgetary concerns and the need to direct all discretionary 
funding to direct patient care, with an agreement to reconsider funding 
the Camp in fiscal year 2006. The Yakima Tribe was able to secure 
funding elsewhere for a smaller version of the Camp and VISN 20 
facilities sent 15 participants.
    For fiscal year 2006, the Camp is a project that VISN 20 intends to 
support. Planning for this year's Camp Chaparral is proceeding, and it 
will be held in August 2006. To adjust for continued budgetary 
restraints and tight staffing levels, a smaller number of primarily 
clinical VA staff will attend in a shorter time frame, allowing VA 
staff to have this valuable experience without an entire week away from 
their duty stations. VISN 20 staff has been working directly with 
members of the Yakima Tribe on the planning of this year's Camp.

    Senator Murray. If you can--if we could have a conversation 
about that, if you could let me know, because it's an extremely 
important out there in VISN 20.
    Dr. Perlin. Right.
    Senator Murray. So, if we could follow up with you on that?
    Dr. Perlin. Absolutely.
    Senator Murray. Okay.

                         GULF WAR RESEARCH DATA

    I wanted to ask about Gulf War research data, because, at 
the end of the year, VA is going to reach its deadline for data 
collection on Gulf War veterans. We are still learning an awful 
lot about the exposure issues to our veterans from the Gulf 
War, and I wondered if you would be willing to extend, or 
eliminate, that deadline so we could continue the data 
collection.
    Secretary Nicholson. Well, we, you know, have just 
committed, and have entered into an agreement with the 
University of Texas Southwest Medical Center in Dallas, to 
extend our research endeavors with them. They've had a team of 
people there working on it for a long time under a Dr. Haley. 
And that commitment that we have is a 4-year commitment at $15 
million a year. I mean, that presupposes that--you know, the 
approval of that, although we would be able to, I think, manage 
that within our overall research budget. So, we're very 
committed to continuing that research.
    Senator Murray. Okay. Even though the deadline is this 
year? So, you'd be willing to continue to collect data past 
this year?
    Secretary Nicholson. Yeah, the answer is yes. We're very 
committed--I'm going to ask Dr. Perlin, though, because I may 
be missing the important point of the deadline.
    Dr. Perlin. Thank you, Senator Murray.
    I think one of the things that now exists that didn't exist 
10 years ago when we were first looking at how to capture 
information about Gulf War veterans and their health outcomes 
was that then one tried to establish a one-off registry. As 
you've heard a lot of discussion, and we appreciate your 
support for the electronic health record, but there is no 
better mechanism for capturing data, not just the facts that 
are in one registry, but across the entire spectrum of whatever 
the individual comes in with, than the electronic health 
record. And so, our commitment to understanding the health 
outcomes of Gulf War veterans will actually be realized in far 
better ways than we could have envisioned 10 years ago. We use 
the health record, and you actually generate a cohort of every 
Gulf----
    Senator Murray. So, you will----
    Dr. Perlin [continuing]. War veteran.
    Senator Murray [continuing]. Still be collecting that data, 
in a--but in a different way?
    Dr. Perlin. We will be collecting data that actually 
supercedes and augments in the health record.
    Senator Murray. Okay. I think that's really important, 
because we're still learning a lot.
    Dr. Perlin. Yes, ma'am.

              STANDARDIZING DIABETES MONITORING EQUIPMENT

    Senator Murray. Let me quickly ask you about the diabetes 
monitoring issues, the standardization of that. I am hearing a 
lot of concern from our folks back at home. And I know you were 
asked by the chairman in the House, but I'm not sure I knew the 
answer, that, as you know, Congress has reaffirmed its support 
for the current system on a number of occasions, and most 
recently in the fiscal year 2006 Military Quality of Life Act. 
I want to read it to you, because it's important. Section 220 
of that bill said, ``None of the funds available to the 
Department of Veterans Affairs in this act or any other act may 
be used to replace the current system by which the Veterans 
Integrated Service Networks select and contract for diabetes 
monitoring supplies and equipment.''
    As we look at your budget request, I want to take a moment 
for us--I think it's important to understand--to confirm that 
the clear congressional direction is not to allow--or not to 
have standardized diabetes equipment purchases. To your 
knowledge, in the months that has been passed, has your 
Department or any of your staff continued to pursue a proposal 
to standardize diabetes monitoring supplies and equipment?
    Secretary Nicholson. No.
    Senator Murray. Well, okay. To your knowledge, no one has 
been told to do this.
    Secretary Nicholson. No. The--no.
    Senator Murray. Okay. Well, it----
    Secretary Nicholson. Dr. Perlin, you can comment further, 
if you like.
    Dr. Perlin. Thank you, Mr. Secretary.
    Senator Murray, in fact, I think what's worth noting is 
that the ability to educate veterans well about their diabetes, 
to achieve benchmark outcomes, as in the TRIAD study, where 
diabetic patients in VA get better care than in other health 
systems in the country, comes from some degree of consistency 
and use. But the concern, as we've understood it, is that no 
veteran be forced to abandon the equipment they're using, or 
for us to have a rigid one-device type of activity.
    Senator Murray. Right.
    Dr. Perlin. So, that guidance, in terms of not transforming 
from where we are, has been well received and well understood. 
But I think I would be remiss if I didn't acknowledge that 
there is some degree of consistency so that there can be 
consistent training and supplies availability. But we are not--
--
    Senator Murray. Well, they are--it has been reported, and I 
think it's true, that a number of VISN directors still believe 
that there is direction from your Department, despite 
congressional attention, to go to a standardized approach. 
Could you write a letter to each of your VISN directors and 
tell them that the--reaffirming the current process for 
selecting diabetes monitoring equipment? And, if you could, if 
you could provide us with a copy of that correspondence, so we 
can let them----
    Dr. Perlin. Well, I would like to look into the issue, 
because there has not been instruction to--instruction has been 
to follow the precepts of what was provided.
    Senator Murray. I'm sorry----
    Dr. Perlin. I will be happy to look into the issue.
    [The information follows:]

    The Department of Veterans Affairs (VA) is not pursuing a proposal 
to standardize self monitoring blood glucose equipment through a single 
national contract. Clear communication has been provided to VA Central 
Office pharmacy program managers and VISN Formulary Leaders regarding 
the prohibition to pursue standardization contracting. This direction 
to VA came from the fiscal year 2006 Appropriation Bill, which 
prohibits VA from expending funds to pursue a national contract.

    Dr. Perlin. To the best of my knowledge----
    Senator Murray. Okay.
    Dr. Perlin [continuing]. There has not been additional----
    Senator Murray. Okay.
    Dr. Perlin [continuing]. Standardization.
    Senator Murray. Okay. If we could have a conversation with 
you about that, I'd really appreciate it, because I think there 
is confusion out there on that issue.

                 VETERANS INTEGRATED SERVICE NETWORK 20

    I will just ask one more question. And I know you are over 
your time limit. But I just want you to know that as a person 
who represents VISN 20, I am concerned about us being 
consistently the worst VISN for outcomes in primary and 
specialty care, and would just like your assurances that you 
will work with us to try and address this issue. And I'd love 
to hear your response, maybe in writing, about what we can do 
to try and get better care out there.
    Secretary Nicholson. We'd be happy to do that. We have a 
new VISN director, as you know, and have charged him with, you 
know, some certain performance expectations for improvement. 
And we're very hopeful. He's a very capable person. So----
    Senator Murray. Yeah.
    Secretary Nicholson. But we'd be happy to discuss it----
    Senator Murray. Good. I----
    Secretary Nicholson [continuing]. With you at any time.
    [The information follows:]

    As of May 5, 2006, VISN 20 has 6,443 veterans waiting for primary 
care appointments. This is an 11 percent decrease since April 1, 2006, 
when 7,246 veterans were waiting.
    The newly appointed Network Director, Mr. Dennis M. Lewis, FACHE, 
is providing aggressive leadership to improve access both for primary 
and specialty Care. In fiscal year 2005 and 2006 to date, he has 
committed over $31 million to increase operating rooms and intensive 
care units and medical/surgical beds to rebuild VISN 20's 
infrastructure and increase inpatient capacity.
    In December 2005, each facility director in VISN 20 was assigned as 
the ``champion'' of an initiative to address the challenge of 
increasing access and improving quality. The VISN has now developed 
strategies for improving performance in clinical measures of care; 
increasing enrollment in care coordination home tele-health; breaking 
the cycles of peaks and valleys in specialty care capacity, and fully 
implementing panel management.
    The initiatives are closely monitored for progress, and facility 
leadership is required to update the VISN on the results of actions 
taken. In addition, the VISN is tracking the aggressive recruitment and 
hiring of staff that will also increase capacity. More recently, each 
facility has been required to implement group clinics by the end of May 
2005 to increase capacity and to identify what services patients 
require. In all of the strategies that have been developed and are 
being implemented, the Network Director has emphasized that quality 
care requirements must be paramount in any approach that increases 
capacity and access.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Murray. We would all like to understand why it's 
the case, and what's contributing to that, and make sure we're 
focused on doing better. So, I appreciate your response.
    And thank you very much, Mr. Secretary, Dr. Perlin, and 
everyone. We really appreciate your patience with all of us.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

          Questions Submitted by Senator Kay Bailey Hutchison

    Question. I'm a little concerned the VA is presenting a research 
budget of $399 million, a 3.16 percent decrease from fiscal year 2006. 
It is even below the fiscal year 2005 appropriated level. Last year, we 
asked the VA to place a high priority on Gulf War Illness research, 
smart limb technology, prosthetics, and other research efforts. This is 
a time when your research budget should fully fund research and 
development for advanced medical technologies and prostheses.
    Would you please tell us how the VA will meet these research 
obligations, even though your budget request for research is less than 
last year's level?
    Answer. The Department of Veterans Affairs (VA) is committed to 
improving the impact of its research program by ensuring that resources 
are targeted to projects with the highest scientific merit and most 
relevance to the needs of veterans.
    VA is projecting total resources of $1.649 billion in fiscal year 
2007 which is an increase of $17 million or 1.1 percent over the 2006 
level. These resources consist of $399 million in direct appropriation; 
$366 million in medical care support funding; $676 million in other 
Federal grants such as from Department of Defense and the National 
Institute for Health; and $208 million from private or university 
funding.
    In fiscal year 2007, VA expects to fund about 2,045 direct projects 
and 2,839 full-time equivalents. In fiscal year 2006 and 2007, the 
research account no longer pays for its Information Technology (IT) 
equipment because the central IT Systems appropriation now pays for 
this type of equipment. The funding which will support IT projects for 
research is about $15 million in each of these fiscal years. The goals 
for research are to ensure a balance among the competing needs for 
meritorious projects, to evaluate and fund existing programs at 
appropriate levels, and to fund new projects to ensure the advancement 
of health care for our veterans. Strategies to accomplish these goals 
include using attrition, transitioning to shorter durations of awards, 
and conducting competitive reviews of research centers. VA is using 
performance-based criteria to decide whether to modify, terminate, or 
expand programs.
    For example:
  --Evaluation of Centers of Excellence.--Centers of Excellence (CoEs) 
        are established only on a competitive basis and their 
        performance is regularly reevaluated through explicit review. 
        In the past year, the Health Services Research and Development 
        Service (HSR&D) closed a HSR&D Center of Excellence because it 
        was not contributing sufficiently to scientific advances. In 
        addition to freeing $458,000 per year for more productive 
        activities, this action is expected to stimulate increased 
        productivity among other CoEs.
  --Evaluation of Research Enhancement Award Programs.--The Biomedical 
        Laboratory and Clinical Science Research and Development 
        Services reduced the number of Research Enhancement Award 
        Program (REAP) sites from 34 to 19. This was done to maintain 
        program quality (a REAP application success rate of 25 
        percent), improve program focus by making REAP awards for study 
        of diseases that are most commonly treated within the VA health 
        care system, and to match resources to those research groups 
        that have contributed most to scientific productivity. The 
        resulting savings of $3.75 million was used to fund an 
        increased number of individual merit review applications.
    Clinical Research Productivity.--Developing and implementing small 
clinical trials within the Medical Research Service was not resulting 
in larger clinical trials. To address this problem, the Medical 
Research Service was reorganized into the Biomedical Laboratory and 
Clinical Science Research and Development Services. The management of 
small clinical trials was transferred into the Clinical Science 
Research and Development Service (CSR&D) and the Cooperative Studies 
Program (CSP) was merged into CSR&D. As a result, the CSP clinical 
trials planning groups can now assist individual investigators planning 
small clinical trials. This is expected to significantly increase 
clinical research productivity.
    Question. The Subcommittee feels strongly that the VA establishes 
specialized medical treatment facilities for mental health and Post 
Traumatic Stress Disorder as ``Centers of Excellence.'' These centers 
will allow the VA to consolidate its specialists in personnel, 
training, and resources to reach the best results for our veterans. For 
Mental Health/PTSD, in particular, the VA was directed to establish 
three centers located in the Medical Centers in Waco, Texas; San Diego, 
California; and Canandaigua, New York.
    Please tell us what progress has been made in each of these 
centers. Are any of these Centers operational?
    Answer. While none of these sites are currently operational, the 
Office of Mental Health Services has been working closely with 
individuals from Central Texas VA Health Care System (CTVHCS) at WACO 
and VISN 17; Canandaigua VA Medical Center and VISN 2; and San Diego VA 
Medical Center and VISN 22 to develop and refine plans for implementing 
the Centers of Excellence on mental health and Post- Traumatic Stress 
Disorder. Each of the Centers will include Research and Educational as 
well as clinical missions to allow them to work toward developing new 
knowledge and new care providers, as well as to meet current care 
needs. Each of the Centers will be multifaceted in their activities. 
Nevertheless, it is possible to summarize their areas of focus: 
Canandaigua will focus on best practices for treatment of PTSD and 
other stress-related disorders and for prevention of complications. 
CTVHCS will focus on both smooth transition from the Armed Forces to 
the community and the VA and on rehabilitation and recovery. San Diego 
will focus on the clinical neuroscience underlying the onset of PTSD 
and related conditions as well as their response to treatment. The 
implementation of these Centers will proceed in steps with the early 
selection and funding for leadership and administrative staffing. This 
will be followed by expedited development and interactive review of the 
research, educational, and clinical plans, and full funding of the 
Centers to implement these programs.
    Question. The purpose of the CARES program is to systematically 
renovate and modernize the VA's health care infrastructure and to 
provide greater access to high-quality care for more veterans. The VA 
is requesting $399 million for Major Construction, a 52 percent 
decrease from the budget request level in fiscal year 2006. There are 
now 17,000 OIF/OEF wounded soldiers, sailors, Marines, airmen, National 
Guard and Reserve forces requiring medical care.
    With many of these many men and women requiring long-term care and 
rehabilitation, what impact will this increased workload have on the 
CARES decisions made in 2004?
    Does the VA have any plans for a new CARES evaluation or study?
    Answer. Since the 2004 CARES decisions were made, VA has modified 
the VA Enrollee Health Care Projection Model (VAEHCPM) to include OIF/
OEF workload projections. This additional workload has been and with 
each model update will be integrated into decisions regarding the level 
and types of services OIF/OEF veterans need, including long-term care 
and rehabilitation services. In light of the enhancements to the 
VAEHCPM and the emphasis on services to OIF/OEF veterans, we do not 
anticipate a separate evaluation or study regarding long-term care/
rehabilitation services for this group of veterans.
    Question. For the Compensation and Pension programs, the VA is 
requesting $38 billion, $4.1 billion above the fiscal year 2006 level 
or a 12 percent increase. In fiscal year 2005, the VA's average days 
pending in rate-related actions was 122; the projections for fiscal 
year 2006 is 150 and for fiscal year 2007 is 141, with a strategic 
target of 78.
    What efforts will VA make to decrease their claims from 150 in 
fiscal year 2006 to 141 in fiscal year 2007?
    Answer. In the fiscal year 2007 budget submission, VA projected a 
significant increase in the volume of incoming disability compensation 
claims as a result of the special outreach mandated in the Military 
Quality of Life and Veterans Affairs Appropriations Act for 2006. The 
increased workload is projected to be received in fiscal year 2006 and 
to continue to impact our pending workload and timeliness of processing 
into fiscal year 2007. Timeliness of processing is projected to begin 
to improve toward the end of fiscal year 2007 as these additional 
claims are processed and the pending claims inventory is returned to 
more normal levels.
    VBA is currently in the process of a major hiring initiative that 
will add over 850 new employees this year. Our aggressive fiscal year 
2006 hiring plan will allow us to enter fiscal year 2007 at or above 
our requested level for fiscal year 2007 of 13,104 FTE. We anticipate 
that the training and experience these new employees will receive this 
year will enable them to have a positive impact on workload reduction 
efforts in fiscal year 2007, resulting in improved timeliness of 
processing.
    Training for all of our employees continues to be enhanced to 
ensure they have the necessary skills and tools to perform their duties 
timely and effectively. An annual core training curriculum for all 
decision makers is now in place that includes special broadcasts on 
current issues and training on the more complex aspects of claims 
processing.
    Question. How will you reach your strategic target of 78 average 
days for claims processing?
    Answer. We are continuing to evaluate the feasibility of a 78-day 
strategic goal for the average age of claims in our pending inventory 
(``average days pending''). Last year, VA changed the strategic goal 
for average days to process a rating decision from 100 days to 125 days 
based on recent changes in the law and in the nature and number of 
disabilities being claimed that have significantly lengthened the 
disability decision process. Our review will determine whether a 
similar change is appropriate in the strategic goal for ``average days 
pending.''
                                 ______
                                 

             Questions Submitted by Senator Mitch McConnell

    Question. Since May 2004, when the Capital Asset Realignment for 
Enhanced Services (CARES) decision was released, 
PricewaterhouseCoopers' consultants have been working with the VA and 
the local community to determine the future healthcare facility needs 
for people living near Louisville, Kentucky. It is my understanding 
that its report and recommendations have been submitted to the VA.
    When do you expect the decision to be made on the future of the 
Louisville medical facility?
    Answer. The Secretary is reviewing and making his decisions 
concerning Stage I Reports for each study site independent of one 
another. This will result in multiple announcements in the near future.
    Question. Louisville and Lexington, Kentucky's two largest cities 
are part of VISN 9 which are not scheduled to receive any funding for 
fiscal year 2007 for constitution projects.
    Why is this?
    Answer. There are two reasons the Louisville and Lexington VAMCs 
are not scheduled to receive Minor Construction funding in fiscal year 
2007:
  --Of the five Minor Construction projects submitted by VISN 9 for 
        fiscal year 2007, one was from a medical center within these 
        two cities--Louisville VAMC. The rest of VISN 9's projects were 
        for the other medical centers within the VISN.
  --Louisville's project is a Research project, ``Renovate Building 8B 
        for Research.'' Although Research projects receive 
        approximately 5 percent of the Minor Construction funding, 
        there were 25 Research projects competing for the resources. 
        Based on the anticipated appropriations, this will most likely 
        fund the top two Research projects; Louisville's Research 
        project ranked in the middle of the list.
    Question. The CARES study recommends seven Community Based 
Outpatient Clinics for VISN 15, which includes Daviess, Hopkins, and 
Graves Counties in Kentucky. Although the budget request includes three 
projects for VISN 15, none of the fiscal year 2007 funds will be spent 
on any of the proposed projects in Kentucky.
    Please explain why Kentucky is not slated to receive any of the 
VISN 15 funding for fiscal year 2007.
    Answer. The Capital Asset Realignment for Enhanced Services (CARES) 
study proposed three Community Based Outpatient Clinics (CBOC) for 
Kentucky that are in the VISN 15 service area. One of the locations, 
the Hanson CBOC (Hopkins County, KY) was activated in August 2005. The 
other two CBOCs for Daviess and Graves Counties, KY, remain pending.
    Contingent upon funding available in fiscal year 2007, Marion (IL) 
VAMC will submit a business plan proposal for an additional Kentucky 
CBOC. Activation will be contingent on VHA review and VA approval.
    Question. Does the VA have criteria in place for determining the 
order in which the recommendations made in the CARES study will be 
implemented? If so, please provide those criteria to the Committee.
    Answer. The VA has a long-standing process to prioritize 
infrastructure projects. Projects are evaluated against a CARES-
specific decision model comprised of the following criteria (in 
priority order):
  --Service Delivery Enhancements (includes realignments)
  --Safeguard Assets
  --Special Emphasis Programs
  --Capital Asset Priorities/Portfolio Goals
  --Departmental Alignment
  --Financial Priorities
    Public Law 108-170, the Veterans Health Care, Capital Asset, and 
Business Improvement Act of 2003, required VA to evaluate projects 
based on a methodology that prioritizes realignments and safety 
projects in the first and second priorities. The VA decision model 
described above has been validated by OMB and Congress as a tool for 
judging competing needs for scarce capital asset project funds in 
Agency budget requests to Congress. A more detailed description of the 
decision criteria can be found in Appendix C of Volume 3, Construction 
and 5 Year Capital Plan, of the fiscal year 2007 Congressional Budget.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

    Question. The Death Pension is a benefit paid to eligible 
dependents of deceased wartime veterans. However, it is clear that 
under the current income eligibility formula, death pension does not 
meet its original intent of covering the living expenses of dependents 
of deceased wartime Veterans.
    Can you describe the current formula and income eligibility levels 
that are now employed to determine whether a dependent of a deceased 
wartime Veteran may receive compensation through the VA?
    Answer. Under the provisions of Public Law 95-588, VA's Improved 
Pension is an income maintenance program designed to assure a level of 
income to wartime veterans and their survivors. To be eligible, a 
claimant may not have income countable for VA purposes that exceeds the 
yearly income limit (maximum annual pension rate) shown in the chart 
below. The maximum pension rate is higher for veterans than for 
survivors.
    The claimant's countable income determines the amount of VA 
benefits paid. There is a dollar-for-dollar reduction from the maximum 
rate for all income received by a claimant (excluding other needs-based 
program payments such as SSI or welfare). Medical expenses that exceed 
5 percent of the maximum annual pension rate and for which the claimant 
is not reimbursed are deducted from the claimant's countable income to 
increase the amount of pension payable. The monthly rate payable is 
calculated by subtracting the claimant's countable annual income from 
the maximum annual pension rate and dividing the difference by 12.

----------------------------------------------------------------------------------------------------------------
                                                           Maximum Annual
                     Death Pension                        Pension Rate (as   Minimum Monthly    Maximum Monthly
                                                            of 12/1/05)          Payment            Payment
----------------------------------------------------------------------------------------------------------------
Surviving Spouse--Without Dependents...................             $7,094                 $1               $591
Surviving Spouse--With One Dependent...................              9,287                  1                774
Surviving Spouse Aid & Attendance--Without Dependents..             11,340                  1                945
Surviving Spouse Aid & Attendance--With One Dependent..             13,529                  1              1,127
Surviving Spouse Housebound--Without Dependents........              8,670                  1                723
Surviving Spouse Housebound--With One Dependent........             10,860                  1                905
Child Only.............................................              1,806                  1                151
----------------------------------------------------------------------------------------------------------------

    Question. What do you believe would be a more acceptable and 
appropriate yearly income threshold that would ensure that low-income 
dependents of wartime Veterans receive adequate compensation through 
death pension benefits?
    Answer. In December 2004, the Evaluation of the VA Pension Program 
concluded that survivors receiving pension are worse off, on average, 
than similarly situated low-income female and elderly Americans. On the 
other hand, veterans receiving pension were found to be generally 
better off than their peers. According to the report, this situation 
exists because veterans are eligible to enroll in VA healthcare, 
whereas survivors are not. Consequently, very few veterans in receipt 
of pension are also receiving Medicaid or SSI benefits. A much larger 
number of survivors, more than 40 percent, receive SSI and Medicaid.
    VA has not determined what, if any, changes should be made to the 
income threshold for the death pension program. It is possible that 
raising the maximum annual pension rate for survivors, especially those 
not entitled to Medicare, could jeopardize their continued eligibility 
for Medicaid. An increase in the death pension rate could potentially 
worsen some pension beneficiaries' overall financial position due to 
the loss of healthcare coverage. We believe that any proposal being 
considered by Congress to raise the income limit for death pension 
eligibility should take this factor into consideration.
    Question. Does VA have any plans to alter the current income 
threshold and eligibility formula to better provide for the needs of 
dependents of wartime Veterans through the death benefits program?
    Answer. Legislation would be required to change the current income 
threshold and eligibility formula for the death pension program. VA 
does not have any current plans to propose legislative changes to the 
death pension program.
                                 ______
                                 

            Questions Submitted by Senator Mary L. Landrieu

    Question. I would like to ask you a question regarding the New 
Orleans VA Medical Center. In the House of Representatives' passed 
version of the Hurricanes of the Gulf Coast Supplemental #4, $550 
million was appropriated to reconstruct the New Orleans VA Medical 
Center. Included in this appropriation was language allowing you to 
transfer up to $275 million to the VA Medical Services account for 
unanticipated medical costs of returning veterans fighting the Global 
War on Terror.
    Do you support the inclusion of this language?
    Answer. VA appreciates the House action in this matter; however, VA 
does not expect to utilize this authority for either the remainder of 
fiscal year 2006 or fiscal year 2007 for the medical costs of returning 
veterans fighting the Global War on Terror because these requirements 
are already funded in the fiscal year 2006 and proposed fiscal year 
2007 budgets. VA needs the referenced funds to construct a new medical 
facility for New Orleans to replace the one severely damaged by the 
Hurricanes last year.
    Question. Is this a warning sign that maybe the VA has 
miscalculated funding needs, yet again, and will need additional money 
to cover the unanticipated medical costs of returning Global War on 
Terror veterans?
    Answer. The President's amendment to the fiscal year 2006 budget 
request provided an additional $1.977 billion for the current fiscal 
year. These resources will enable VA to continue to provide the high-
quality health care to our Nation's veterans. The President's 2007 
request includes total budgetary resources of $34.3 billion for the 
medical care program, an increase of 11.3 percent (or $3.5 billion) 
over the level for 2006 and 69.1 percent higher than the funding 
available at the beginning of the Bush Administration. The cornerstone 
of our medical care budget is providing care for veterans who need us 
the most--veterans with service-connected disabilities; those with 
lower incomes; and veterans with special health care needs. A key 
element of this effort is to make sure every seriously injured or ill 
serviceman or woman returning from combat in Operation Enduring Freedom 
and Operation Iraqi Freedom receives priority consideration and 
treatment. These resources will enable VA to continue to provide the 
high-quality health care to our Nation's veterans.
    Question. If this money is transferred, it is a sure possibility 
this will prevent the final completion on the rebuilding of the new New 
Orleans VA Medical Center.
    If this is happens, how would the VA plan on funding the completion 
of the hospital?
    Answer. As previously stated, VA needs these funds for the 
construction of a new medical center for New Orleans.
    Question. Would you replace the funds in the VA's annual 
appropriations budge?
    Answer. Again, VA does not expect a need to do this. The entire 
$561 million will be required to rebuild the New Orleans VA Medical 
Center.
    Question. Many concerns regarding mental health stem from 
nondisclosure by Service members. This nondisclosure has the potential 
to disrupt early intervention and see an underestimation of future 
demand for VA mental health services.
    With an ever-growing focus on mental health, in your estimation, 
how well-equipped is the VA to deal with this problem?
    Answer. In terms of capacity to provide mental health services to 
those who do disclose problems, I have reviewed the capability of the 
Veterans Health Administration (VHA) to meet the needs for inpatient 
and outpatient Post-Traumatic Stress Disorder (PTSD) diagnosis and 
treatment as well as diagnosis and treatment of other mental health and 
substance abuse concerns of veterans. This review has included 
monitoring on a quarterly basis the mental health diagnosis and 
treatment needs of recently discharged service members from Operation 
Iraqi Freedom and Operation Enduring Freedom. I have found that VHA has 
adequate capabilities to serve their needs.
    In anticipation of any unmet needs or capabilities, VHA identified 
significant additional resources in fiscal year 2005 and fiscal year 
2006 in a variety of mental health programs, including specialized PTSD 
and Readjustment Counseling Center programs to supplement current 
services. Since PTSD often coexists with substance abuse disorder, 
depression, and homelessness, VA supplemented programs in those areas 
in fiscal year 2005 and fiscal year 2006. In fiscal year 2005, new and 
enhanced PTSD programs received funding of $9,953,186, and a new class 
of programs specifically designed for early identification and care for 
returning veterans (Returning Veterans Outreach Education and Care 
(RVOEC) programs were provided funded of $6,676,312. In addition, in 
fiscal year 2005, $7,987, 505 was provided for substance use disorder 
treatment programs; $8,249,348 was provided for Homeless Domiciliary 
programs; and $4,500,000 was provided for homeless grant and per diem 
programs. In fiscal year 2006, $10,865,874 will be provided for new/
enhanced PTSD programs; $6,932,646 will be used for new RVOEC programs; 
and $16,651,698 will be spent on substance use disorder treatment 
programs. Readjustment Counseling Service hiring of counselors who are 
veterans of the Global War on Terror will be provided up to $1,100,000 
in fiscal year 2006.
    Your question also addresses a more subtle issue, which is how to 
encourage self-disclosure of mental health concerns on the part of 
returning service members and veterans. You are correct that our system 
can only provide services when individuals do self-disclose and then 
can be guided in terms of how the system can best respond to the 
problems they are experiencing. There are several issues embedded 
within this overall concern. Generally, there are three major issues we 
can address: efforts to destigmatize mental health problems; efforts to 
help veterans progress in terms of readiness to change; and efforts to 
educate veterans and their families about resources available if they 
do self-disclose.
    First, concerning destigmatization, the Mental Health Strategic 
Plan, which is based in large part on the President's New Freedom 
Commission on Mental Health report as adapted for VA, suggests a wide 
array of activities to combat stigma in relation to mental health. Many 
of these have already been completed, including various educational 
efforts with VA staff. Ultimately, it is the larger society that needs 
to change in terms of reducing the stigma of mental health problems, 
but VA is committed to taking a leading role in that effort. VA also 
supports the efforts of the Department of Defense to deal with this 
issue in relation to active service members.
    Second, there is a large and important literature on the importance 
of understanding and respecting the process of becoming ready to seek 
help and change for mental health problems. Individuals progress from 
an early period of unawareness of and inability to identify developing 
concerns through stages to a point of readiness to engage in action to 
change the problem. It is important to match clinical services provided 
to this level of readiness in order to accomplish optimal outcomes. We 
have designed our programs to follow that natural progression, with 
outreach and educational efforts designed to help those who are earlier 
in the process and a variety of active clinical programs, as described 
in the opening paragraphs, for those who are ready to act and receive 
clinical care for their mental health concerns.
    Third, veterans may fail to self-disclose problems if they are not 
aware of the availability of services to meet their needs. 
Understanding this, we have developed the new class of programs 
described above, the Returning Veterans Outreach Education and Care 
(RVOEC) programs. These are specifically designed to meet the needs of 
newly returning veterans. As the title suggests, efforts are made to do 
outreach to identify such veterans, to educate them about available 
mental health services and the process of accessing these services, and 
to be supportive and contribute to destigmatization by normalizing 
adjustment concerns veterans may have. Similar efforts are made through 
the Veterans Readjustment Counseling programs; the RVOEC teams work 
with and through medical facilities so that such services are available 
to veterans throughout the system. These and other efforts ultimately 
are designed to teach veterans, their families, and the community at 
large that effective treatments are available for PTSD, depression, and 
other stress-related conditions and that VA has the ability to offer 
those treatments to them, if they present themselves for care. 
Ultimately, veterans are more likely to self-disclose if they know that 
their concerns will be handled respectfully, sensitively, and by 
offering appropriate, effective treatment.
    Question. Last year the Administration proposed to restrict per 
diem payments to only a small fraction of veterans living in State 
Homes and placed a moratorium on construction grants. As you also know, 
Congress restored construction grant funding to $85 million last year. 
However, this was almost a $20 million cut from fiscal year 2005 
levels. Although, the fiscal year 2007 budget request did not repeat 
these ill-advised proposals, the construction grant request was only 
for $85 million. It has been expressed to me, by the National 
Association of State Veterans Homes, that although $85 million is 
better than $0 funding, they wish to see the budget restored back to 
$104.3 million.
    Did you consult with the National Association of State Veterans 
Homes before you submitted your request for the fiscal year 2007 
budget?
    Answer. VA program staff regularly participates in the bi-annual 
national meetings of National Association of State Veterans Homes 
(NAVSH), and the Secretary has met with the organization's executive 
leadership. NAVSH interests and concerns are well known to VA through 
these continuing interactions.
    Question. How many construction grants will be given with this $85 
million, how many Homes will see a piece of the $85 million?
    Answer. It is not possible to predict how many construction grants 
will be given until: (1) the fiscal year 2007 Priority List is 
finalized and approved in September 2006; (2) the final price of the 
projects in Priority Group 1 is determined; and (3) the amount of 
carryover of fiscal year 2006 funds, if any, is established.
    Question. How will the construction of the new State Home in 
California affect availability of funds to award other contracts? How 
will it affect the repairs and such at other State Homes?
    Answer. Under the current regulations, VA's conditional award of a 
grant for the construction of the new State home in California before 
the end of this fiscal year would preclude the award of any other 
construction grants in fiscal year 2007 except those that are 
conditionally awarded a grant this fiscal year.
    Question. State Veterans Homes are critical to the healthcare needs 
of veterans throughout the United States. As critical as State Veterans 
Homes have been in my State, I have worked hard to insure the proper 
fiscal attention is given them.
    Do you share the critical need for State Homes and, if so, do you 
agree that Congress should mandate new consultation and reporting 
requirements for VA prior to the implementation of any proposed changes 
to the current per diem system?
    Answer. State Veterans Homes are an important option for veterans 
in considering their health care needs. We do not agree that Congress 
should mandate new consultation and reporting requirements for VA. VA 
consults extensively with individual State homes, with the National 
Association of State Veterans Homes (NASVH), and with the National 
Association of State Directors of Veterans Affairs (NASDVA) and 
provides relevant information regarding State Veterans Home programs to 
all of those stakeholders when it is cleared for public release.
    Question. Blinded Veterans have limited mobility and, oftentimes, 
insufficient infrastructure to deal with their specific needs. There 
are only 10 VA Blind Rehabilitation Centers across the country with a 
waiting list that causes an average waiting time of more than 9 weeks.
    How is the VA working to improve the efficiency and availability of 
care for blind veterans?
    Answer. VA Blind Rehabilitation Service is making significant 
improvements in both the efficiency and availability of care for 
blinded veterans. The VA Blind Rehabilitation Service Program Office, 
in conjunction with the Visual Impairment Advisory Board, has developed 
a continuum of care model. This model is designed to ensure that the 
visual needs of veterans are addressed throughout the progression of 
the vision loss in settings most convenient to the patient. When 
possible, services are provided in the veteran's local community. The 
inpatient Blind Rehabilitation Centers will continue to provide 
advanced rehabilitation services. The intensity of the intervention is 
tailored to the complexity of the patient's needs and additional 
services at the next level of care can be provided as the patient's 
vision rehabilitation needs increase. Placement of the services will be 
determined by patient demographics.
    Under the CARES planning process, two Blind Rehabilitation Centers 
at Biloxi and Long Beach will be created. In addition, Cleveland VAMC 
is adding a new Center. The new Centers will significantly reduce 
waiting times and service patients in those demographic areas.
    To further reduce waiting times for admission to a Blind 
Rehabilitation Center, Blind Rehabilitation Service developed a 
community-based Computer Access Training program to augment the 
inpatient Computer Access Training that is provided in the Blind 
Rehabilitation Centers. In this program, local service providers teach 
Computer Access Training to veterans in their home area, where 
feasible. Locally provided Computer Access Training has proven to be a 
cost effective alternative, which reduced waiting, increased access, 
and benefited blinded veterans.
    Blind Rehabilitation Service has expanded services to blinded 
veterans in their local communities with the establishment of Blind 
Rehabilitation Outpatient Specialist (BROS) positions at VA medical 
centers. There are now 28 BROS positions.
    Since initiating these efforts, the waiting times for admission to 
an inpatient Blind Rehabilitation Center have decreased 37 percent from 
fiscal year 2004 through fiscal year 2005. Waiting times for admission 
to a Blind Rehabilitation Center Computer Access Training program 
decreased 23 percent for the same time period.
    The VA Blind Rehabilitation Service Program Office is working with 
the Information Technology Office to develop a new national database to 
monitor all aspects of blind rehabilitation service delivery including 
waiting times. The anticipated release date is during the fall of 2006. 
This database will increase the efficiency of patient care for blinded 
veterans.

                          SUBCOMMITTEE RECESS

    Senator Murray. This Subcommittee is recessed.
    [Whereupon, at 4:38 p.m., Wednesday, March 29, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]


   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2007

                              ----------                              


                          TUESDAY, MAY 9, 2006

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:28 p.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Allard, and Feinstein.

                         DEPARTMENT OF DEFENSE

STATEMENT OF HON. TINA W. JONAS, UNDER SECRETARY OF 
            DEFENSE (COMPTROLLER)
ACCOMPANIED BY PHILIP W. GRONE, DEPUTY UNDER SECRETARY OF DEFENSE 
            (INSTALLATIONS AND ENVIRONMENT)

           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. I will call our hearing to order and 
thank you very much for being with us today. We have the 
Honorable Tina Jonas, the Under Secretary of Defense, 
Comptroller, and of course the Honorable Philip Grone, the 
Deputy Under Secretary of Defense for Installations and 
Environment. We have certainly worked well with you and 
appreciate all the efforts that you are making.
    The Defense Department is executing a very bold 
restructuring plan. I would have to say that I feel very good 
about what you are doing because I think our committee started 
really focusing on overseas basing and wanting to look at the 
overseas bases at the same time that we were looking at our 
domestic bases, and I think that the Department of Defense has 
now determined, because of that look, that we should have 
50,000 or perhaps even as much as 70,000 troops, mostly Army, 
coming back to the United States.
    The Army is in the midst of a huge reorganization effort to 
make its brigades more combat ready and we have the global war 
on terror, which is being fought, of course, in Iraq and 
Afghanistan and around the world. It is against this backdrop 
that we began to examine the budget request for military 
construction. At first glance it appears to be a robust 
request. The total requested is $16.7 billion, a 37.8 percent 
increase from last year's request. However, $3.75 billion of 
this is an increase in the BRAC account, which provides for 
realignment of troops, but does not address the backlog of 
facilities that need to be replaced or rebuilt.
    In the military construction budget, the Army's $2.06 
billion request is 39.2 percent over last year's request. I 
stated in our MILCON hearing last year that the Army should be 
investing in more infrastructure, so I am pleased to see this 
development. The Army continues to bear the brunt of the 
fighting in Iraq. Much is being asked of our soldiers and we 
need to be doing as much as possible to provide facilities that 
will help the Army recruit and retain quality soldiers and 
families.
    I am also pleased to note that the Army National Guard and 
Army Reserve requests have continued last year's trend with 
good growth. The Guard and Reserve have been underfunded for so 
long and really have been asked to do a lot. So we have a long 
way to go to bring them into the right level, but their 
military construction budgets are improving.
    The Navy has requested $1.162 billion for 2007 and that is 
a 12.9 percent increase over last year. This includes an 
increase in Marine Corps funding, including facilities for the 
newly established Marine Corps Special Ops Command and a 
special emphasis on barracks projects. Given the level of 
sacrifice our young marines have made in Iraq, I think it is 
most appropriate that we focus on providing them the quality 
housing for when they return.
    The growth of the Air Force's budget has slowed this year 
and I think that too is the right approach. Most of this budget 
is traditional construction to provide housing at bases where 
privatization is not viable. I do hope the Air Force is going 
to continue to fully examine all of the tools available, 
including privatization and build to lease authorities to 
provide quality housing, before making large financial 
commitments such as housing projects, and we can certainly go 
into that in further detail later.
    With that, I would like to call on my distinguished 
colleague Senator Feinstein, the ranking member of this 
committee.

                 STATEMENT OF SENATOR DIANNE FEINSTEIN

    Senator Feinstein. Thank you very much, Madam Chairman, and 
thank you for your leadership of this subcommittee. As you 
know, it is a great pleasure to work with you.
    I also am pleased to welcome Secretary Jonas and Mr. Grone 
and look forward to their testimony. Obviously, the first 
consideration of this committee is to meet the needs of our 
military personnel, and hopefully that we pay particular 
attention, not only to mission support projects, but also the 
quality of life issues that are so important.
    I note the very large amount that is added to our budget 
for the BRAC, the new round of BRAC, and I would like to 
commend the Department for the advances that it has made in 
military housing through privatization and express the hope 
that you will track this carefully and maintain careful 
oversight to ensure that projects are not only well planned and 
executed, but that it achieves its potential. My experience of 
this has been that you have to watch it over time and make some 
judgments based on a time line that is more than the time you 
cut the ribbon.
    I also am concerned about the execution of the BRAC program 
and particularly about the pace of environmental remediation. I 
have been concerned about this for years and do the best I can 
to include additional dollars for remediation. My State, 
California, has huge needs in terms of environmental 
remediation and it has dramatically slowed down the 
transitioning of closed bases into the private sector. So I 
think it is very important that the Department finishes what it 
starts in terms of BRAC cleanup and do it as expeditiously as 
possible before we have a whole new host of requirements from 
the BRAC 2005 round.
    I think Senator Hutchison has said it very clearly on 
global rebasing. I will not go over it again, but I think we 
are interested in an update on this with regard to recent 
agreements reached with Japan, Romania, and Bulgaria. I am 
interested in your assessment of recent Italian elections and 
whether that would impact any of the basing that the United 
States does in Italy and particularly to expansions at Vicenza.
    Thank you very much and I look forward to the testimony.
    Senator Hutchison. Well, thank you, Senator Feinstein.
    One of the things that we are hearing in the underground, I 
guess you would say, is that the implementation of the BRAC 
recommendations is moving more slowly than predicted. There 
are, as you know, some major areas where there are going to be 
relocations. Two happen to be in my State, Fort Bliss, which 
will be taking some of the troops that will be coming home from 
Germany, and Fort Sam Houston, which is going to take so many 
of the medical training responsibilities from other areas of 
the country and consolidate them.
    My question for you, Secretary Grone, is, are we moving as 
expeditiously as we need to be moving? Are you concerned that 
we are not going to be able to provide housing and facilities 
for the people to comply with the BRAC recommendations?
    Mr. Grone. Madam Chairman, that is a very important and 
comprehensive question. Let me provide the subcommittee with a 
sense of where we are today----
    Senator Hutchison. My staff just reminded me that I did not 
let you make your opening statements. I apologize. Please, let 
me let both of you make your opening statements, and then you 
already know what the question is, so we will start the 
questioning right after. Excuse me.
    Mr. Grone. I thought that was a statement on value added.
    Senator Hutchison. So Secretary Jonas.

                       STATEMENT OF TINA W. JONAS

    Ms. Jonas. Maybe we can make this quick. I will just submit 
my statement for the record if that is all right with you. I 
just want to thank this committee for its support of our fiscal 
year 2007 budget request. Just to put in context where we are, 
our overall Department of Defense budget request was $439.3 
billion, which of course is divided among the various 
committees. This committee has responsibility for $16.7 billion 
of military construction and family housing included in our 
request. I would just urge that the committee view this request 
favorably and I am going to submit the balance of the statement 
for the record.
    [The statement follows:]

                  Prepared Statement of Tina W. Jonas

    Madam Chairman, members of the Committee, I am pleased to be here 
today to discuss the military construction component of President 
Bush's fiscal year 2007 budget request for the Department of Defense.
    I would like to begin by saying thank you to the Committee for your 
continued strong support for the men and women of America's Armed 
Forces and their families. The Department looks forward to continuing 
to work with this Committee to ensure that our service members have 
everything they need to accomplish their mission.
    The President's fiscal year 2007 budget request is $439.3 billion 
for the Department of Defense. This is a 7 percent increase over the 
fiscal year 2006 enacted level of $410.8 billion.
    This Committee has jurisdiction over $16.7 billion for military 
construction and family housing. This is a $4.7 billion increase over 
the fiscal year 2006 enacted level of $12 billion.

                          STRATEGIC PRIORITIES

    The budget supports the President's 2005 National Security 
Strategy, the long war against terrorist extremists, and the strategic 
priorities of the 2006 Report of the Quadrennial Defense Review. The 
budget invests in the capabilities and forces the Nation needs to:
  --prevail in irregular warfare operations, including wars of long 
        duration, like the global war on terror;
  --defend the homeland, especially against catastrophic terrorism and 
        other advanced threats;
  --maintain America's military superiority, to ensure our ability to 
        deter or defeat threats from other nation-states; and
  --continue the Department's strong support of our military men and 
        women and their families.

           MILITARY CONSTRUCTION AND FAMILY HOUSING OVERVIEW

    The military construction and family housing portion of the 
President's fiscal year 2007 request supports the Department's most 
pressing facilities requirements.
    Through the maintenance and modernization of existing facilities, 
the request improves working and living conditions, replaces facilities 
that are no longer economical to repair, and advances the restructuring 
of bases and facilities, at home and abroad.
    The budget funds 48 new barracks projects for unmarried personnel 
living on-base, as well as meets the Department's goal of funding the 
elimination of remaining inadequate military family housing units in 
the continental United States by 2007.
    The Department's privatization program has been central to 
achieving our housing goal of providing high-quality accommodations for 
military families much sooner than would otherwise be possible. By the 
end of fiscal year 2007, the Department will have privatized 186,000 
family housing units.

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    The fiscal year 2007 budget provides $5.6 billion to implement the 
decisions of the 2005 Base Realignment and Closure Commission.
    Those decisions, which became law on November 9, 2005, support 
several of the Department's goals including: force transformation; a 
rebasing of our forces to address new threats, strategy, and force 
protection concerns; the consolidation of business-oriented support 
functions; and the promotion of joint and multi-Service basing.

                                CLOSING

    Madam Chairman, I thank you for this opportunity to describe these 
components of the President's budget for fiscal year 2007. These funds 
will enhance the well being of our service members and their families, 
strongly support current requirements and missions, and provide needed 
streamlining and recapitalization of DOD facilities. I urge the 
Committee's support for the President's request.
    Thank you.

    Senator Hutchison. Thank you. I will say I have read your 
opening statements, so that might be why I was not focusing on 
your giving them. But I do want it to be a part of the record, 
so please, Mr. Secretary.

                      STATEMENT OF PHILIP W. GRONE

    Mr. Grone. Madam Chairman, I will likewise be brief and 
will also submit both the written and the oral statement for 
the record. I do want to make a couple of points, if I might.
    You spoke of the robustness of budget request in general 
terms, but also spoke about the condition of facilities. I 
think it is important to point out that the budget request 
supports a facilities recapitalization rate of 72 years, which 
nearly achieves the Department's goal of a 67-year 
recapitalization rate cycle for our real property assets. In 
2001 that rate stood at 192 years. So with the assistance of 
the Congress, we have brought our regular program very much 
with BRAC and with other investments here we are making to 
improve assets generally; and while we still have a lot of work 
to do, we are making significant progress with the support of 
this subcommittee.
    You also spoke about, you and Senator Feinstein both spoke 
about, the importance of military housing privatization and 
certainly that remains a central part of our overall strategy 
to improve the quality of life for servicemen and women and 
their families. In the end state we expect about 89 percent of 
the Department's military family housing inventory to be 
privatized, and the response we are getting from a perspective 
of competition, new entrants to the market, we are very 
satisfied with what we are seeing in the market in terms of 
interrelationship with the services and I hope we will have an 
opportunity to explore some of the thoughts Senator Feinstein 
had in her opening remarks as we continue this afternoon.
    With regard to BRAC, it's important to point out a couple 
of points. First, as you know, we are going to carry out 25 
major base closures, 24 major realignments, and over 760 other 
actions across the total force, active, guard, and reserve, as 
a result of the recommendations that are now law. That is 
nearly twice the number of actions undertaken in all prior 
rounds of BRAC combined. So this is an important and extensive 
effort at installation transformation that supports the mission 
transformation of the armed forces.
    Importantly in that regard, 40 percent of the 
recommendations affect more than one component. So there is a 
high level of cross-service, inter-service joint activity that 
is deeply embedded in the BRAC recommendations that we must 
carry out. So too, as the chairman spoke of, our global posture 
efforts and BRAC are also linked in the return of forces from 
abroad to places like Fort Bliss, Fort Riley, Fort Carson, and 
other locations. It is critically important that we are able to 
proceed with the resources on the time and the schedule that we 
have laid out in order to accomplish everything that needs to 
be accomplished by September 15, 2011, which is the legal 
deadline.
    Importantly in relation to BRAC, because I know it is an 
interest of members, just last week we conducted our first 
comprehensive conference with communities that are affected by 
this round of BRAC, both those communities that will go through 
closure and downsizing as well as those communities that are 
going to grow as a result of realignment activities. We brought 
together nearly 950 people from across the country, members of 
the Federal inter-agency, a full array of the Department's 
assets, to begin to work with communities in a comprehensive 
way to plan both for the transition of assets to effective 
civilian economic reuse, as well as to plan for the future for 
those assets and those installations that are going to be 
enduring to the Department's mission over the long term.

                           PREPARED STATEMENT

    The investments that we have requested for BRAC are 
critical in that regard and we look forward to the support of 
the subcommittee and of the Senate for that request. In the 
end, we are working very hard, as both of you have indicated, 
working with you to reposition, reshape, and sustain our 
installations for the future, and we look forward to continuing 
to work with you to ensure that we can realize those objectives 
in the most cost efficient and effective way possible.
    Thank you, Madam Chairman.
    [The statement follows:]

                 Prepared Statement of Philip W. Grone

    Madam Chairman, Senator Feinstein, and distinguished members of the 
Subcommittee, I appreciate the opportunity to appear before you today 
to address the President's Budget request for fiscal year 2007 and the 
management approach the Department of Defense has undertaken to 
reposition, to reshape, and to sustain the Nation's military 
installation assets.
    In 2001, the Department issued its first ever Defense Facilities 
Strategic Plan. Three years later, in September 2004, a comprehensive, 
capabilities-based, and performance-oriented Defense Installations 
Strategic Plan was in place. The 2004 plan addressed recommendations 
made by the Government Accountability Office (GAO) and was approved by 
OMB as being consistent with the guiding principles of the Federal Real 
Property Council in meeting the objectives of the President's 
Management Agenda. An update in 2005 reflected ongoing efforts, recent 
progress, and the changes resulting from decisions that produced the 
fiscal year 2006 President's Budget. The next full issue of the plan 
will be published in the fall of 2006. This new plan will more fully 
integrate environmental management systems, safety, and occupational 
health into a comprehensive approach to asset management.
    For the past several years, the Department of Defense has been 
vigorous in its pro-active efforts in managing the Department's 
facilities and infrastructure. DOD's infrastructure investment strategy 
rigorously utilizes key metrics to provide the quality facilities that 
directly support mission and readiness. To that end, DOD developed 
advanced business processes that align more closely to warfighter 
mission area requirements. The rigor provided by these practices in 
planning, managing, and maintaining DOD installations improves overall 
efficiency while improving investment decision-making.
    The President's budget request for fiscal year 2007 will permit the 
Department to continue its efforts to manage installation assets 
comprehensively and efficiently. Along with continued improvement in 
business practices and a focus on environmental sustainability, the 
Department is improving the quality of military installations.
Global Defense Posture Realignment
    While the Department addresses better business practices, it is 
also working to realign infrastructure to effectively address military 
transformation and 21st Century security challenges. The Defense 
posture of the past 50 years reflected the Cold War strategy, with 
United States. forces forward deployed primarily to fight near where 
they were based. Today's challenges require a more agile, faster, and 
leaner force that can project power into areas further from where they 
are based. This agility requires not only a shift in military forces, 
capabilities and equipment, but also a new strategy for United States 
global defense posture.
    In September 2004, the Department completed a 2-year comprehensive 
review of its global posture strategy. This review led to the most 
thorough restructuring of U.S. military forces overseas since the major 
elements of the U.S. Cold War posture were set in 1953. The new posture 
will enable the Department to respond more quickly to worldwide 
commitments and make better use of its capabilities.
    The Department has already begun the process of realigning or 
closing a number of large permanent bases in favor of small and more 
scalable installations better suited for rapid deployments. In July 
2005, the return of eleven Army bases in Germany was announced as part 
of the 1st Infantry Division headquarters' redeployment plan, scheduled 
to occur in the summer of this year. The United States signed an 
agreement with the Government of Romania in December 2005 that will 
allow access for U.S. forces to Romanian training facilities. The 
United States and Japan issued the Security Consultative Committee 
document entitled, ``U.S.-Japan Alliance: Transformation and 
Realignment for the Future,'' on October 29, 2005, outlining several 
initiatives, including posture realignments that will adapt the 
Alliance to today's regional and global security environment. In Korea, 
we are working closely with our partner to implement the 2004 Amended 
Land Partnership Plan and the Yongsan Relocation Plan. These efforts 
are reshaping United States presence on the peninsula significantly in 
recognition of the Republic of Korea's increasing lead in the 
conventional defense of the ROK and the evolving role of U.S. forces.
    The Global Defense Posture realignment identified an overall plan 
for returning overseas forces back to military installations in the 
United States. This plan was integrated into the BRAC process regarding 
relocations from overseas to domestic bases during the prescribed BRAC 
time period. All Services factored requirements of returning forces 
into their domestic infrastructure requirements and this resulted in 
recommendations to accommodate forces at U.S. installations. Some 
overseas changes have already been implemented in accordance with 
ongoing Service transformation efforts and within the framework of 
negotiations with host nations. In many cases, the changes involve 
units that are inactivating or transforming with no significant BRAC 
impact. As we begin implementing the BRAC recommendations there are 
overseas changes still being developed or being phased to be 
implemented after the BRAC implementation period. DOD will continue to 
consult with Members of Congress on its plan and will seek your support 
as we implement these far-reaching and enduring changes to strengthen 
America's global defense posture.
Base Realignment and Closure 2005
    The Department has effectively accounted for the domestic 
implications of the global posture review--with forces and personnel 
either returning to or moving forward from U.S. territory--within the 
BRAC decision-making process. Even though global posture changes will 
be executed over several years and will continue to be adjusted as 
strategic circumstances change, the Department will incorporate 
projected overseas posture changes into the BRAC implementation 
process.
    The 2005 Base Realignment and Closure (BRAC) process was designed 
to rationalize the Department's base infrastructure within the United 
States in support of the Department's long-term strategic capabilities. 
The Department's BRAC process addressed five key goals:
  --Transforming the current and future force and its support systems 
        to meet new threats,
  --Eliminating excess physical capacity,
  --Rationalizing the base infrastructure with defense strategy,
  --Maximizing both warfighting capability and efficiency; and
  --Examining opportunities for joint activities.
    The Secretary of Defense transmitted his recommended closures and 
realignments to the 2005 Defense Base Closure and Realignment 
Commission and to the Congress on May 13, 2005, and published them in 
the Federal Register on May 16, 2005, pursuant to Public Law 101-510, 
as amended. The recommendations strengthen national security by 
reshaping the domestic installations at which U.S. military forces 
perform their assigned missions and aligns the Department's base 
structure with the force structure that is expected to be needed over 
the next 20 years, an unprecedented long view. Additionally, the 
recommendations accommodate the Department's global reposturing of its 
forces; facilitate the ongoing transformation of U.S. forces to meet 
the challenges and opportunities of the 21st Century; and restructure 
important support functions to capitalize on advances in technology and 
business practices.
    The BRAC Commission reviewed the 222 recommendations submitted by 
the Secretary and accepted, without change, about 65 percent. The 
Commission's resulting recommendations will affect over 800 locations 
through 25 major closures, 24 major realignments, and 765 lesser 
actions. On November 9, 2005, the Department became legally obligated 
to close and realign all installations so recommended in the 
Commission's report to the President because the President accepted 
those recommendations and the congressional review period lapsed 
without enacting a resolution of disapproval. Although these 
recommendations are estimated to save the Department tens of billions 
of dollars over 20 years and significant amounts annually after 
implementation, the investment needed to support the transformation of 
domestic military infrastructure in support of the Total Force is 
substantial--estimated, based on our COBRA-based assessment of the 
Commission's actions, at $22.8 billion.
BRAC Implementation
    The large number of transformation recommendations, particularly 
recommendations to establish joint operations, present significant 
implementation challenges. To meet these challenges, the Department 
initiated a process to develop Business Plans that lay out the 
requisite actions, timing of those actions, and associated costs and 
savings associated with implementing each recommendation. The Business 
Plans will serve as the high level foundation for the complex program 
management necessary to ensure BRAC 2005 recommendations are 
implemented efficiently and effectively.
    The Department recently delivered its report describing the 
specific programs, projects, and activities for the $1.46 billion 
appropriated in fiscal year 2006 to begin implementing the BRAC 
recommendations. This initial spending plan will begin the planning and 
design and environmental studies that serve as the foundation for 
constructing and renovating facilities to accommodate missions at 
receiving sites. For fiscal year 2007, the Department is requesting 
$5.62 billion for BRAC 2005 implementation and $191.22 million for 
previous rounds.
    The Department recognizes it has an obligation to assist 
communities affected by BRAC 2005; communities that have an honored 
heritage of support to the Armed Forces. The Defense Economic 
Adjustment Program will continue to assist communities to plan for the 
civilian redevelopment of available real and personal property; and 
implement local adjustment actions to assist impacted workers, 
businesses, and other affected community interests. The Department 
actively partners with affected communities as we both seek 
opportunities for quick civilian reuse of former military 
installations. For communities engaged with installations that will 
receive new missions, the Department also recognizes the importance of 
ensuring communities have the capacity to support the Defense mission 
with adequate planning, housing, education, infrastructure, and 
community services, and the Department is working with these 
communities to enhance their ability to support DOD installations and 
our men and women in uniform. To facilitate these actions, resources 
from 22 Federal Agencies have been drawn together through the 
coordination of the Economic Adjustment Committee (EAC). The Secretary 
of Defense, through the DUSD (I&E), chairs the EAC. Secretaries of 
Commerce and Labor, through their designees, are Co-Vice Chairs. For 
these purposes, the budget request contains $60 million for the 
Department's Office of Economic Adjustment to enable affected 
communities to plan and carry out adjustment strategies, engage the 
private sector in ventures to plan and undertake economic and base 
redevelopment, and partner with the Military Departments as they 
implement BRAC actions. An important milestone took place last week in 
Atlanta, GA, as the Department held the OSD/Military/Community 
Conference that brought together hundreds of State and local 
representatives of BRAC 05 communities to obtain information from OSD 
and Military Service representatives regarding BRAC implementation.
Managing Infrastructure
    Managing DOD real property assets is an integral part of 
comprehensive asset management. The Department currently manages nearly 
507,000 buildings and structures with a plant replacement value of over 
$650 billion, and more than 46,000 square miles of real estate.
    The quality of infrastructure directly affects training and 
readiness. To that end, the Department is incorporating installations 
more fully into the Defense Readiness Reporting System. This will allow 
us to measure the capability of defense installations and facilities 
and other elements of our infrastructure to provide appropriate support 
to forces in the conduct of their wartime missions. To better manage 
infrastructure investments, the Department developed models and metrics 
to predict funding needs: Sustainment and Recapitalization.
    Facilities sustainment provides funds for maintenance and major 
repairs or replacement of facility components that are expected to 
occur periodically throughout the life cycle of facilities. Sustainment 
prevents deterioration, maintains safety, and preserves performance 
over the life of a facility. To forecast funding requirements, DOD 
developed the Facilities Sustainment Model using standard benchmarks 
for sustainment unit costs by facility type (such as cost per square 
foot of barracks) drawn from the private and public sectors. This model 
has been used to develop the Service budgets since fiscal year 2002 and 
for several Defense Agencies since fiscal year 2004. On January 24, 
2006, DOD joined 16 other Federal agencies in signing a Memorandum of 
Understanding (MOU) for Federal Leadership in High Performance and 
Sustainable Buildings. The MOU indicates a commitment to incorporate 
sustainable design principles through a comprehensive approach to 
infrastructure management.
    Full funding of facilities sustainment has been and continues to be 
the foundation of long-term facilities strategy and goal. In fiscal 
year 2006, the Department-wide sustainment funding rate is 92 percent. 
In balancing risk across the Department's program, the fiscal year 2007 
budget request reflects a slight decrease in the department-wide 
sustainment funding rate to 90 percent. Our long term goal remains a 
department-wide sustainment funding rate of 100 percent to optimize our 
investment in facilities.
    Recapitalization, which includes restoration and modernization, 
provides resources for improving facilities, and is the second element 
of our facilities strategy. Recapitalization is funded primarily with 
either operations and maintenance or military construction 
appropriations. Restoration includes repair and replacement work to 
restore facilities damaged by inadequate sustainment, excessive age, 
natural disaster, fire, accident, or other causes. Modernization 
includes alteration of facilities solely to implement new or higher 
standards, to accommodate new functions, or to replace building 
components that typically last more than 50 years.
    Similar private sector industries replace their facilities every 50 
years, on average. The current DOD goal is 67 years, based upon an 
assessment of the Department's inventory in the late 1990's. In fiscal 
year 2001, the Department's recapitalization rate was 192 years. This 
budget request supports a recapitalization rate of 72 years, and 
includes investments associated with BRAC and Global Defense Posture 
realignment. The Defense Department remains committed to achieving a 
rate of investment in facilities recapitalization that will improve, 
modernize, and restore its facilities consistent with expected future 
service lives. Currently, DOD is in the process of developing and 
fielding a new recapitalization model for assessing the replacement 
cycle that will improve upon the existing recapitalization metric 
through the inclusion of depreciation schedules and other benchmark 
improvements.

                SUSTAINMENT AND RECAPITALIZATION REQUEST
               [President's budget in millions of dollars]
------------------------------------------------------------------------
                                                    Fiscal year
                                         -------------------------------
                                           2006 Request    2007 Request
------------------------------------------------------------------------
Sustainment (O&M-like) \1\..............           6,529           6,267
Restoration and Modernization (O&M-like)           1,008             984
 \1\....................................
Restoration and Modernization (MilCon)..           3,474           6,093
                                         -------------------------------
      Total SRM.........................          11,011         13,344
------------------------------------------------------------------------
\1\ Includes O&M as well as related military personnel, host nation, and
  working capital funds.

    In 1998, the Department undertook a 6-year program to eliminate 80 
million square feet of obsolete and excess facilities. Six years later, 
DOD concluded that effort by exceeding its target--removing a total of 
86 million square feet. In a continuation of that effort, the 
Department completed a survey of disposal requirements in December 
2004. Based on that survey, the military services and selected Defense 
agencies have established new targets to rid the Department of an 
additional 50 million square feet of unneeded facilities by the year 
2013. These demolition targets are not included as part of BRAC 
disposal.
    The Department has established a common definition for Facilities 
Operation, formerly referred to as ``Real Property Services.'' The 
budget request includes $6.06 billion for this program, to address 
utilities, leases, custodial services, ground maintenance, and other 
related functions. A prototype model for Facilities Operation will be 
fielded in the coming year.
Installations Support
    The Defense Installations Strategic Plan articulates the need to 
define common standards and performance metrics for managing 
installation support. Our objective is to introduce capabilities-based 
programming and budgeting within a framework for the Common Delivery of 
Installations Support framework which will link installation support 
capabilities to warfighter requirements. To that end, we are developing 
common definitions for Facilities Operation.
    The Common Delivery of Installations Support will form the basis 
for implementing guidance for twelve Joint Base sites identified in 
BRAC 2005. Guidance for implementing Joint Basing is being developed in 
coordination with the Military Components and using input from 
installation level leadership.
    During the past year, DOD made significant progress toward 
developing Common Output Level Standards for all other functions of 
Installations Support to include Environment, Family Housing Operations 
and Services, which were formerly knows as Base Operations Support. 
This effort is yielding common definitions and tiered performance 
output levels. These metrics are currently being further refined and a 
costing model initiative will soon be underway.
    The Military Construction appropriation is a significant source of 
facilities investment funding. The fiscal year 2007 Defense Military 
Construction and Family Housing appropriation request totals $16.7 
billion. This budget request will enable the Department to rapidly 
respond to warfighter requirements, enhance mission readiness, and 
provide for our people. This is done, in part, by restoring and 
modernizing enduring facilities, acquiring new facilities where needed, 
and eliminating those that are excess or obsolete.

     COMPARISON OF MILITARY CONSTRUCTION AND FAMILY HOUSING REQUESTS
      [President's budget in millions of dollars--budget authority]
------------------------------------------------------------------------
                                            Fiscal year
                                               2006         Fiscal year
                                           appropriation   2007 request
------------------------------------------------------------------------
Military Construction...................           6,161           6,385
NATO Security Investment Program........             177             221
Base Realignment and Closure IV.........             255             191
Base Realignment and Closure 2005.......           1,504           5,626
Family Housing Construction/Improvements           1,811           2,092
Family Housing Operations & Maintenance.           2,206           1,990
Chemical Demilitarization...............  ..............             131
Family Housing Improvement Fund.........               3               3
Energy Conservation Investment Program..              50              60
                                         -------------------------------
      Total.............................          12,167          16,698
------------------------------------------------------------------------

Housing Revitalization
    At the outset of this Administration, the President and Secretary 
Rumsfeld identified elimination of inadequate family housing and 
revitalizing housing, largely through privatization, as a central 
priority for the Department. An aggressive target of 2007 was 
established to meet that goal. The Administration has relied on three 
pillars to improve housing thereby, enhancing the quality of life for 
our Service members: (1) Provide the basic allowance for housing (BAH) 
at zero-out-of-pocket expense for the average Service member living in 
private sector housing (achieved in 2005, now maintaining); (2) 
Privatization of family housing, where feasible; and, (3) Military 
Construction funding for all other domestic and all overseas locations. 
Sustaining the quality of life for our military families is vital to 
recruitment, retention, readiness, and morale.
    Through the expanded use of the privatization authorities granted 
under the fiscal year 1996 Military Housing Privatization Initiative, 
the Department has achieved the elimination of inadequate housing at 
U.S. based installations where those authorities apply. The fiscal year 
2007 budget funds elimination of all inadequate domestic family housing 
by 2007, and eliminates remaining inadequate houses overseas by 2009.
    The Department relies on a ``community first'' (private sector) 
policy to provide quality housing to its members and their families. 
Only when the private market demonstrates that it cannot supply 
sufficient levels of quality, affordable housing does the Department 
provide housing to our military families; first through the use of 
privatization, and where that is not feasible through government-owned 
and leased housing. For example, in the absence of privatization 
authorities overseas, we address our housing needs there through 
military construction and leasing.
    To ensure the Department is making the best investment decisions 
when determining the appropriate level of housing, the government 
provides a single and consistent methodology for calculating its 
housing requirement. This methodology was introduced in January 2003 
and is being utilized extensively by the Services. Currently, 75 
percent of military families living in CONUS, Alaska, and Hawaii 
receive Basic Allowance for Housing (BAH) (with 60 percent living in 
the local community, and 15 percent in privatized housing). An 
additional 22 percent of our military families are provided government-
owned housing and 3 percent live in leased housing.
    The Department has skillfully used privatization to more quickly 
eliminate inadequate housing and to provide additional housing where 
shortfalls existed. As of May 2006, the Department has awarded 60 
privatization projects. This includes over 124,000 military family 
housing units privatized. The total number of units privatized has 
increased by more than 35 percent, over this same time last year. DOD 
policy requires that privatization yield at least 3 times the amount of 
housing as traditional military construction for the same amount of 
appropriated dollars. The 60 awarded projects have permitted the 
Department, in partnership with the private sector, to provide housing 
for about $1.2 billion in military construction investment. The same 
level of construction activity would otherwise have required over $14 
billion if the traditional military construction approach was utilized. 
This reflects an average ratio of over 14 to 1, well exceeding program 
expectations.
    Additionally, the private sector's cumulative contribution to the 
60 awarded deals totals over 90 percent of the $14 billion in total 
project costs. Prudent business practice requires the private sector to 
be committed to each project with a significant financial investment in 
the project's ultimate success. The Services have funded the remaining 
$1.2 billion in development costs primarily through equity investment 
or government direct loans. (The Total Project Funding graph (Enclosure 
1) depicts the cumulative total contribution of the private sector and 
government.)
    The Department's privatization plans in the fiscal year 2007 budget 
will ultimately result in the privatization of 87 percent of its 
domestic family housing inventory, or roughly 186,000 units privatized 
by the end of fiscal year 2007. By the end of fiscal year 2006, we will 
have privatized 153,000 housing units. The overall goal is to privatize 
89 percent of the domestic housing inventory or about 195,000 housing 
units by the end of fiscal year 2010.
    For fiscal year 2007, the Department requests $4.081 billion in new 
budget authority for family housing construction and operations and 
maintenance:
  --$1.94 billion to construct 3,073 new/replacement units and improve 
        3,330 existing units.
  --$1.99 billion to operate and maintain approximately 95,052 
        government-owned family housing units, and lease another 25,935 
        units worldwide.
    Funding to support the privatization of family housing is 
programmed and budgeted in the family housing construction 
appropriations and is transferred to the DOD Family Housing Improvement 
Fund (FHIF) when the privatization projects are executed. The fiscal 
year 2007 construction account requests a total of $154 million in 
funding for privatization. This amount, anticipated to be transferred 
to the Family Housing Improvement Fund during fiscal year 2007 along 
with $261 million in previously appropriated construction funds. This 
$415 million will be used to finance the privatization of approximately 
32,377 units.
Competitive Sourcing
    The Department of Defense continues to strongly support the 
President's Management Agenda Initiative for Competitive Sourcing. 
Introducing private sector competition into commercial functions 
performed by the Department improves business efficiency and reduces 
cost to the taxpayer. Public/private competitions using the procedures 
of OMB Circular A-76 have demonstrated substantial savings whether the 
in-house or private sector wins the competition. During the fiscal 
years 2000 through 2005, the Department completed 848 such competitions 
encompassing about 87,018 positions. These competitions will have 
resulted in over $10 billion in savings (cost avoidance) over the life 
of the resulting performance periods, normally about 5 years. The 
Department currently has an additional 2,800 positions undergoing 
competition and expects to increase competitions in fiscal year 2006.
    These new competitions use the procedures of the revised OMB 
Circular A-76, which evaluates public and private proposals 
concurrently using the Federal Acquisition Regulations. As the 
Department's designated Competitive Sourcing Official (CSO), my office 
is working to improve the competition process. For example, 
competitions that used to take up to 48 months to complete should now 
be completed in as little as 12 months. Such improvements will reduce 
stress on our workforce and will make savings available earlier to 
reinvest in priorities for our war fighters.
Utilities Privatization and Energy Management
    The Department seeks to reduce its energy consumption and 
associated costs, while improving utility system reliability and 
safety. To that end, DOD developed a comprehensive energy strategy and 
issued updated policy guidance incorporating the new provisions and 
goals of the Energy Policy Act of 2005. This strategy will continue to 
optimize utility management by conserving energy and water usage, 
improve energy flexibility by taking advantage of restructured energy 
commodity markets when opportunities present themselves, and modernize 
our infrastructure by privatizing deteriorated and outdated utilities 
infrastructure where economically feasible.
    DOD, as the largest single energy consumer in the Nation, consumed 
over $2.97 billion of facility energy in fiscal year 2005. Conserving 
energy and investing in energy reduction measures makes good business 
sense and frees up resources for higher DOD priorities, such as 
readiness and modernization. Our program includes investments in cost-
effective renewable energy sources or energy efficient construction 
designs, and aggregating bargaining power among regions and the 
Services to achieve more effective buying power.
    The Department's efforts to conserve energy are paying off. In 
fiscal year 2005, military installations reduced consumption by 3.3 
percent despite a 6 percent increase in the cost of energy commodities 
from fiscal year 2004. With a 28.3 percent reduction in standard 
building energy consumption in fiscal year 2005 from a 1985 baseline, 
the Department fell just short of the 2005 and 2010 facility energy 
reduction goals stipulated by E.O. 13123 (see Energy Progress Chart, 
Enclosure 2). This is mostly attributable to the lapse of Energy 
Savings Performance Contract (ESPC) authority in fiscal year 2004. 
Energy conservation projects accomplished through ESPC contracts 
typically account for more than half of all facility energy savings. 
However, with ESPC authority reauthorized in the fiscal year 2005 
National Defense Authorization Act and extended for an additional 10 
years in the Energy Policy Act of 2005, DOD has launched an aggressive 
awareness campaign and is well on its way to meeting the new goals 
established in the Energy Policy Act of 2005. DOD reduced energy 
consumption in energy intensive and industrial facilities by 21.6 
percent from the 1990 baseline, exceeding the 20 percent goal of E.O. 
13123 (See Energy Progress Chart, Enclosure 3).
    DOD has significantly increased its focus on purchasing renewable 
energy and developing resources on military installations. The 
Department has increased the use of Energy Conservation Investment 
Program (ECIP) funds for renewable energy projects from $5 million and 
$11 million in fiscal year 2003 and fiscal year 2004, respectively, to 
$13 million in fiscal year 2005, $17 million in fiscal year 2006, and 
$17 million in fiscal year 2007. The fiscal year 2007 program for ECIP 
also contains $2.6 million in hydrogen fuel cell projects. The 
Department easily exceeded the E.O. 13123 renewable energy goal of 2.5 
percent in fiscal year 2005. The Department's total renewable energy 
purchases and generation accounted for 8.3 percent of all electricity 
use. Also, while E.O. 13123 did not articulate a specific water 
reduction goal, the Department has saved an impressive 28.3 percent 
since the fiscal year 2000 baseline year.
    To improve utility systems, the Department has reaffirmed its 
preference to modernize military utility systems through privatization. 
The DOD Utilities Privatization Program has made solid progress over 
the past 2 years. The Services have greatly simplified and standardized 
the solicitation process for obtaining industry proposals. Of 2,601 
utility systems serving the DOD, the Department has privatized 512 
systems. When taken together with the 736 systems that were already 
owned by other entities, that reflects a significant portion of systems 
serving the Department that benefit from private sector ownership. Over 
475 additional systems are currently under evaluation as each Service 
and the Defense Logistic Agency continue aggressive efforts to reach 
privatization decisions on all systems.
Environmental Management
    The Defense Department continues to lead in every aspect of 
environmental management. The Department is proud of and committed to 
its environmental program in support of the global basing mission. 
Developing natural infrastructure capacity tools and models for 
installation planning and sustainment is a priority.
Environmental Management Systems
    DOD is implementing environmental management systems (EMS) as 
required by Executive Order 13148 at all appropriate facilities, except 
for six installations affected by hurricane Katrina. This 
transformation embeds environmental management as a systematic process, 
fully integrated with mission planning and sustainment and is essential 
for continued successful operations at home and abroad. Implementing 
EMS will help preserve range and operational capabilities by creating a 
long-term, comprehensive program to sustain capability while 
maintaining healthy ecosystems.

              ENVIRONMENTAL PROGRAM--SUMMARY OF REQUEST \1\
      [President's budget in millions of dollars--budget authority]
------------------------------------------------------------------------
                                                    Fiscal year
                                         -------------------------------
                                           2006 request    2007 request
------------------------------------------------------------------------
Environmental Restoration...............           1,370           1,403
BRAC Environmental \2\..................             449             553
Compliance..............................           1,561           1,527
Pollution Prevention....................             143             128
Conservation............................             205             195
Technology..............................             206             200
International \3\.......................               3               3
                                         -------------------------------
      Total.............................           3.934           4.006
------------------------------------------------------------------------
\1\ Includes operations & maintenance, procurement, RDT&E, and military
  construction funding.
\2\ Funding levels reflect total requirement.
\2\ International is included in Pollution Prevention and Compliance.

    For fiscal year 2007, DOD's budget request includes $4.006 billion 
for environmental programs. This includes $1.403 billion for cleanup, 
$0.553 billion for BRAC environmental, $1.527 billion for compliance; 
about $0.1 billion for pollution prevention, and about $0.2 billion 
each for conservation and environmental technology.
Managing Cleanup
    The Department is committed to cleaning up property that, as the 
result of past military activities, is contaminated with hazardous 
substances, pollutants, or military munitions. DOD has achieved 
``remedy in place'' or ``restoration complete'' status at 78 percent 
(16,591 out of 21,192) of its contamination sites on active 
installations. As of the end of fiscal year 2005, 83 percent (4,287 out 
of the 5,183) of the contamination sites at BRAC locations closed or 
realigned by the first four rounds of BRAC have a cleanup remedy 
constructed and in place and operating successfully, or have had all 
necessary cleanup actions completed in accordance with Comprehensive 
Environmental Response, Compensation, and Liability Act (CERCLA) 
standards.
    Hazardous waste cleanup at Formerly Used Defense Sites (FUDS) has 
achieved ``remedy in place'' or ``restoration complete'' status at 49 
percent (2,263 out of the 4,668) of known sites.
Leading Compliance through Pollution Prevention
    The Department continues its commitment to going beyond compliance 
in executing its environmental initiatives. Using compliance as the 
baseline the Department has instituted processes that effectively and 
efficiently execute compliance using pollution prevention (P2) 
strategies and focusing on sustaining the warfighter mission. The 
Department issued DOD Directive 4715.1E on Environment, Safety, and 
Occupational Health (ESOH) Management, delineating policies and 
responsibilities that enable the Department to invest in initiatives 
that support mission accomplishment, enhance readiness, reduce future 
funding needs, prevent pollution, prevent illness and injury, and 
ensure cost-effective compliance.
    One example is the Department's risk management approach to 
integrating ESOH considerations into systems acquisitions. DOD 
successfully integrated MIL-STD 882D (Standard Practice for System 
Safety) into the acquisition process to ensure that Program Managers 
identify know their ESOH risks and take the measures necessary to 
manage or mitigate those risks early in the design process, reducing 
environmental burdens and mission impacts throughout the life-cycle of 
the system.
    Another example is the DOD Green Procurement Program. The DOD Green 
Procurement Program was established to ensure DOD compliance with 
Federally mandated green procurement programs, yet DOD enlarged its 
program to consider such factors as energy use, conservation of 
resources, price, performance, and safety to support both DOD's mission 
and protection of the environment. DOD demonstrated its commitment to 
going beyond mere compliance by signing the Federal Agency Memorandum 
of Understanding on electronic stewardship; actively participating in 
the Federal Electronics Challenge; and participating in the Green 
Suppliers Network to incorporate process, energy, and material 
efficiencies into the supply chain--all of which can lead to 
substantial environmental benefits and reductions in costs.
Range Sustainment
    The sustainability of military installations, particularly testing 
and training ranges, is critically important to readiness. The often 
accelerating pace of development in the vicinity of our installations 
and ranges poses ongoing challenges and leads to secondary effects 
including loss of habitat for endangered species; more noise complaints 
from new neighbors; diminished usable airspace due to new structures or 
increased civil aviation; and a compromised ability to test and train 
with the frequency resources needed in time of war.
    Exacerbating the encroachment challenge, the demands of the 
military mission are not static in nature and a number of factors are 
changing the way the Department will need to test and train in the 
future. Upcoming mission adjustments and relocations associated with 
the recent BRAC decisions and the return of large numbers of troops and 
their families to bases in the United States as a part of global 
rebasing will require expanded training opportunities and place a 
growing demand on receiving installations. And the integration of 
training opportunities necessary to satisfy joint mission requirements, 
combined with the increasing testing and training battlespace needs of 
new weapons systems and evolving tactics associated with force 
transformation, point to a military need for more, rather than less 
range space. The confluence of these competing trends makes it clear 
that encroachment remains a powerful challenge to military readiness, 
and requires a comprehensive and continuing response.
    Sustainable Ranges Initiative.--The White House Conference on 
Cooperative Conservation, held last summer in St. Louis, Missouri, 
brought together land managers and conservation advocates from Federal 
agencies, states, academia, and industry to look for a new path towards 
collaborative conservation of the Nation's natural resources.
    Consistent with its desire to balance its duty to conduct life-
saving military training with its stewardship responsibilities, the 
Department has been very active in its efforts to mitigate encroachment 
effects and to ensure the long-term sustainability of both its military 
test and training missions and the natural resources entrusted to DOD's 
care. In 2006, DOD's range sustainment initiative will focus on 
addressing emerging encroachment issues and taking advantage of 
opportunities to extend our outreach and partnering gains. At the same 
time, DOD will build on past efforts to institutionalize capabilities, 
tools, and processes that will support range sustainment goals well 
into the future.
  --Conservation Partnering and Buffer Program Expansion.--
        Congressional support for DOD's Readiness and Environmental 
        Protection Initiative has enabled DOD to establish an effective 
        and growing program to partner with conservation entities to 
        protect key lands in the vicinity of military ranges that offer 
        the dual promise of preserving natural resource values and 
        allowing more flexible use of DOD lands inside the fence line. 
        In 2005, the first year of this funded program, DOD used the 
        $11.5 millions appropriated by Congress to execute a number of 
        landmark conservation buffer projects near Army and Marine 
        Corps ranges and installations. Buffering successes at Fort 
        Carson, CO; Marine Corps Base Camp Lejeune, NC; and the Navy's 
        La Posta Mountain Warfare Training Facility, CA, are notable 
        2005 program accomplishments. Congress has allocated $37 
        million to expand the Conservation partnering program in fiscal 
        year 2006. Projects are still being finalized, but will include 
        a significantly greater number of projects supporting Army, 
        Marine, and Navy buffering priorities across the United States.
  --Regional Partnering Initiatives.--In 2005, the Department 
        participated in a pilot partnership effort called the Southeast 
        Regional Partnership for Planning and Sustainability, or 
        SERPPAS. Teaming Service flag officers with leaders from the 
        State governments of Florida, Georgia, South Carolina, and 
        North Carolina, this effort has demonstrated potential as a 
        vehicle for effective communication and joint action to 
        identify issues and implement solutions of mutual benefit to 
        the partners. This pilot offers promise not only in the 
        Southeast, but as a model for regional action elsewhere.
  --Range Assessments.--Military use of munitions on its ranges is an 
        elemental aspect of effective testing and training. However, to 
        ensure that the effects of our ongoing and legacy use of 
        munitions do not harm public health or the environment, DOD is 
        actively assessing all its ranges to ensure there is no off-
        range migration of munitions' constituents into surrounding 
        lands or waters.
Warfighter Support through Safety and Health
     The Nation's leading businesses see the prevention of injuries and 
illnesses as a core business value that reduces human, social, 
financial, and productivity costs and improves the bottom line. DOD 
also has a bottom line: operational readiness.
    The Department's efforts to integrate safety and health into every 
aspect of the mission, gives commanders the flexibility they need to 
make informed risk decisions--decisions that enable them to eliminate, 
modify, or accept risks based on the situation they are encountering. 
In March of 2005 DOD published policy requiring safety and occupational 
health management systems at all management levels. This industry 
proven approach horizontally integrates safety across all of our 
business areas. The Department is accelerating this initiative by 
partnering with the DSOC (Defense Safety Oversight Council) to 
establish a Center of Excellence to help installations achieve OSHA VPP 
(Voluntary Protection Program) recognition. DOD has also issued policy 
to include Military Flight Operations Quality Assurance. This process, 
gives pilots the ability to ``review the game tape'' of virtually every 
mission they fly and identify potentially dangerous tendencies that can 
be corrected before they become habits.
    The Department is also transforming explosives safety. The 
Department of Defense Explosives Safety Board (DDESB) continually 
assesses and improves explosives safety throughout the ammunition and 
explosives life cycle, proactively seeking early awareness and 
consideration of explosive safety in operational and contingency 
planning activities. This year DOD updated its policy to assist 
commanders in making informed risk decisions involving explosives while 
ensuring maximum operational capabilities and the protection of 
personnel, property, and the environment from the damaging effects of 
explosives.
Integrating the Business Enterprise
    As our Nation's security challenges become more complex, our 
military must become an increasingly agile joint force that is dominant 
across the full spectrum of operations. The highly flexible, yet 
precise, Armed Forces of the 21st Century require an equally flexible 
and responsive business and financial support infrastructure that can 
adapt to rapidly changing conditions in both peace and war. Defense 
Business Transformation is being driven by a series of strategic 
objectives, which include: supporting a joint warfighting capability; 
enabling rapid access to information for strategic decisions; reducing 
the cost of Defense business operations; and improving the financial 
stewardship of assets.
    To support the Department's process of identifying joint needs, 
analyzing capability gaps, and implementing improvements, the DOD 
Business Mission Area is aligned with the warfighting mission. This new 
unifying framework, documented in the DOD's roadmap for transformation, 
the Enterprise Transition Plan, is a capabilities and lifecycle-based 
approach to enterprise business planning and execution, and consists of 
five integrated Core Business Missions, or CBMs: Human Resources 
Management; Weapon System Lifecycle Management; Real Property & 
Installations Lifecycle Management; Material Supply & Service 
Management; and Financial Management. The Deputy Under Secretary of 
Defense (Installations & Environment) is the leader of the Real 
Property & Installations Lifecycle Management CBM. Working with the 
Military Components, considerable progress has been made in 
transforming business processes over the last 2 years.
    Last year, DOD completed a Business Process Reengineering (BPR) 
effort for managing the Department's real property inventory. The 
inventory reform effort will provide the DOD warfighter and business 
mission with relevant access to needed information on real property. 
The Services and Defense Agencies have begun to re-architect their 
business processes and systems to ensure that they will be able to 
comply with the standard business processes and data elements 
identified during the BPR. Together, these processes and data elements 
will enable greater visibility of real property assets and associated 
financial resources. The Department has also completed a thorough 
assessment of information systems that will support the inventory. The 
Military Components are developing plans for economic and timely 
investment in, and achievement of, this new information environment.
    In addition to the inventory, these efforts led to development of a 
site-unique identifier, or UID registry that will improve the 
visibility of our real property assets. The process of assigning a UID 
to sites has already begun. This year the registry effort will be 
expanded to address real property assets, such as facilities, runways, 
and piers. Ultimately, this registry will provide a link between real 
property resources and their locations to our warfighting and business 
personnel and the property they operate.
    Organizing the Department's extensive geospatial and imagery assets 
through the Defense Installation Spatial Data Infrastructure program, 
or DISDI, has enabled business transformation on many fronts. For 
example, the innovative use of commercial satellite imagery combined 
with locally validated mapping features significantly heightened the 
quality of the fiscal year 2005 Base Realignment and Closure, or BRAC, 
deliberations. During this first year of operations, DISDI saved more 
than $20 million across the business mission simply by sharing 
commercial satellite imagery across the Department. 2005 also saw DISDI 
completing the first worldwide inventory of geospatial assets. This, in 
turn, is enabling Defense-wide software licensing agreements which will 
reduce future software costs by more than 25 percent.
    Reengineering of environment, safety, and occupation health focused 
on two initiatives. First, DOD completed reengineering associated with 
recognizing, valuing, and reporting environmental liabilities, and 
created a standard data model for the majority of these liabilities. 
The Department will finish the remaining environmental liabilities this 
year, resulting in a complete, accurate, and visible inventory of 
environmental liabilities reconciled with asset records. Completion of 
this project will also eliminate a material weakness. Second, DOD began 
re-engineering the management of hazardous materials throughout the 
Department. Although the Services and Agencies handle many hazardous 
materials, different processes are in place to manage the products and 
their support information. These reengineering efforts are designed to 
eliminate the costly, redundant, and ultimately unsafe practices 
associated with these multiple processes.
    The Department's plans for this fiscal year, also documented in the 
Enterprise Transition Plan, will see the continuation of the unique 
identification implementation through the continued population of the 
site registry. The DISDI program will complement the site registry 
development effort by accurately mapping the physical extent of DOD's 
sites, based on their legal descriptions. Of greater significance, the 
Department will build and deploy the infrastructure to manage asset 
UIDs, and begin the process of assigning them to facilities in our 
portfolio. In addition, two new reengineering efforts will be 
undertaken, focusing on construction in progress and explosives safety 
management.
Conclusion
    In closing, Madam Chairman, I sincerely thank you for this 
opportunity to highlight our successes and outline our plans for the 
future. I appreciate your continued support of our installations and 
environment portfolio, and I look forward to working with you as we 
transform our plans into actions. 



    Senator Hutchison. Thank you.
    Now, I will open with my questions on what seems to be a 
slow start, at least, in providing for the people who are going 
to be adding, as opposed to obviously you do need to take care 
of the people that are being subtracted from. But can you tell 
me how you are going to deal with people who are scheduled to 
be coming in and are not having the facilities for them and 
what are you doing to address that?
    Mr. Grone. Well, we are addressing that through our 
planning process. The planning process that we undertook, 
keeping in mind given where we are now in May 2006, the 
recommendations became law in November, our first Congressional 
appropriation was secured in December. In the intervening 
months we have gone about a fairly robust planning scenario for 
the execution, particularly for those moves that are involved 
in the fiscal 2006-fiscal 2007 timeframe. We have a number of 
critical approved business plans, and certainly for the Army, 
for everything that has been requested and appropriated for 
fiscal 2006, as well as for those things we are working through 
in fiscal 2007.
    We have business plans and a planning process that can 
begin to lay out the schedule and the expenditure of those 
funds. I fully expect that we are going to obligate all of the 
fiscal year 2006 money by the end of the fiscal year, based on 
what I know today. Certainly the fiscal year 2007 funds are 
critical in that regard as well.
    From a community perspective, the Army and the components 
are engaged, but particularly the Army, in a fairly intensive 
dialogue with local communities. It is important that we have 
facilities in place, ready to receive forces, with a minimal 
use of temporary facilities. We do not want temporary 
facilities to be the permanent solution. But we are also 
working critically with local communities, particularly in West 
Texas, but certainly not exclusively in West Texas, on key 
questions involving housing, schools, transportation, and the 
like. We believe that we have a very good handle working with 
the community there on what the needs are and how we might sort 
of tier that so that we schedule the moves in such a way that 
we can take the maximum use of the time that we have, the 
resources that we have, but parallel that with a community 
planning process which is very important to our overall 
success.
    Senator Hutchison. Well, I think we need to--I hope that 
you are going to be really carefully looking at that and 
monitoring it, because there are concerns.
    Secretary Jonas, your budget request for the NATO security 
investment program is up 25 percent from last year's enacted 
levels. Could you explain why there is such a large increase?
    Ms. Jonas. I will. My understanding of the increase of $14 
million is due to missions associated with Iraq and 
Afghanistan. Phil may be able to clarify further on those 
points, but that is my understanding of the increase over the 
enacted level.
    My understanding is that a number of projects of the 
funding is to support the infrastructure program are also not 
just for the standard infrastructure that we require for the 
capability packages that we build inherently, but also for 
those things that are needed to stand up and help stand up the 
NATO response force as a long-term NATO investment in alliance-
wide security. We can certainly provide for the subcommittee in 
whatever level of detail is required the assumptions for that, 
for that increase.
    But in order to ensure that the alliance continues with its 
ongoing transformational activity to meet ongoing needs, needs 
of the United States and the allies for infrastructure, as well 
as to support the stand-up of the NATO response force, this was 
the level of funding that was judged to be necessary to support 
that. But certainly we can provide whatever else is necessary 
to help you with that.
    [The information follows:]

    NATO has substantially increased the amount of funds to support 
operations and missions. The NATO operations and missions in 
Afghanistan, Iraq and the Balkans directly support the GWOT.
    Below are the NSIP expenditures for NATO Missions/Operations for 
2005 and prior and the estimated expenditures for 2006 and 2007. The 
NSIP expenditures have increased and are expected to continue to do so. 
The total operations and mission expenditures (NATO-wide) are:
  --2002--$53 million
  --2003--$61 million
  --2004--$77 million
  --2005--$108 million
  --2006--$143 million (estimated)
  --2007--$226 million (estimated)
    In addition to the above, we also anticipate substantial 
expenditures during 2007 for two capability packages to provide the 
deployable assets to support the NATO Response Force (NRF). The NRF is 
NATO's immediate reaction force with Notice to Move of 5 days (concept 
briefed to the Staffers in April) and would be the initial forces 
deployed for any new GWOT operations. The total NSIP estimated 
expenditures are $244 million for NRF deployable communications assets 
(recently approved) and $176 million for the NRF deployable facilities 
(this CP under review not yet approved) and the anticipated NSIP 
expenditure profile is as follows:
  --2007--$31 million
  --2008--$124 million
  --2009--$223 million
    NATO's contribution to coalition operations could allow the United 
States to draw down forces in Afghanistan by as many as 3,000. 
Additional U.S. forces in Afghanistan could transition from a war-
fighting to a peacekeeping role.

    Senator Hutchison. Well, I would want to be assured that 
these facilities would be used for the war on terror, for Iraq 
and Afghanistan, because I think, while NATO is beginning to be 
more helpful in Afghanistan and somewhat in Iraq, it has been a 
slow start. I do not want to build a lot more infrastructure 
for NATO that does not go for our mutual threat. I consider the 
war on terror our mutual threat, but NATO has been perfectly 
willing to let America carry the major share of this burden.
    So what I would like is backup that in fact this is all 
going for Iraq and Afghanistan and the war on terror, which is 
legitimate and I am hopeful that NATO will take a major role. 
But if it is for more NATO facilities that are just European-
based, then I would have a problem. So I would like that backup 
and assurance that it is for the war on terror.
    My last question to you, Ms. Jonas, is, I have been working 
with General Hobbins, commander of the U.S. Air Forces, Europe, 
to get the Air Force to pursue more creative options for 
housing around Spangdahlem, and particularly to get the German 
government to be more helpful. He tells me that they are 
working on getting extensions of loan guarantees on build-to-
lease housing agreements that would go up to 15 years, to make 
build-to-lease more attractive to private developers. The 
German standards are very high. It is very expensive. I have 
talked to General Hobbins on several occasions about it, as 
well as General Jones.
    I just want to ask you if you are also looking at this 
issue with the Air Force and at the Department-wide level 
trying to assure that we get some of the same help from the 
German government that the Army has gotten and that we have 
gotten from other governments where they desire our troops to 
be there?
    Ms. Jonas. Madam Chairman, I appreciate the question and of 
course the Secretary is very interested in making sure that we 
get proper host Nation support in all types of areas. So I'm 
sure this would be no different. My understanding is that 
legislation has been submitted to the Congress to extend the 
lease period to 15 years. Some of the committees I guess have 
acted on that already. But we will certainly do whatever we can 
to try to get the best deal for the taxpayers. So you have my 
assurance that we will work with the Air Force to try to get 
the very best outcome we can.
    Senator Hutchison. Thank you.
    Mr. Grone. Madam Chairman, if I might. There was one piece 
in the answer to your question I want to make sure that the 
subcommittee understands, the question of the dialogue and the 
oversight. When Ms. Jonas's deputy and I delivered the budget 
justification materials earlier this year, we committed to all 
of the oversight committees that we would periodically come 
back up and give you sort of an in-progress report on where we 
were, both in terms of where we were having successes and where 
we were hitting hard spots.
    It is my view that we not simply make that an annual 
discussion at the time of the budget request, but as a matter 
of our commitment we will be up here every quarter or so to 
have conversations with you and your staff about exactly where 
we are in the implementation process in order to address any 
questions or concerns that you may have. So I want to make sure 
that the subcommittee understands that we view this as an 
important part of the dialogue to ensure that we can execute 
implementation as effectively as we can. I neglected to mention 
that earlier and I appreciate the opportunity to clarify that.
    Senator Hutchison. Thank you very much.
    Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Madam Chairman.
    I wanted to just ask you a question about northern Italy, 
particularly the Vicenza area and Camp Ederle, which I had the 
pleasure of visiting. It is my understanding that additional 
property has been acquired nearby because Ederle is just 
packed, and the new site, which runs as I understand it, next 
to an air strip, would also be very full.
    What is the position of the new Italian government, or is 
there a position, on these facilities and how do you see the 
MILCON coming down for this new base?
    Mr. Grone. Well, Senator Feinstein, I am not aware of any 
particular position, change in position, certainly. We have an 
understanding with the government of Italy for the rebasing of 
the 173d in the Vicenza area. I am certainly not aware of 
anything that would upset that, would upset that understanding 
and that commitment between allied partners.
    The combatant commander, EUCOM, and the Army looked very 
carefully at the siting for those units and came to the 
conclusion that for both purposes of efficiency, cost, and 
schedule and performance to be able to get those units based 
when they need to be resited, as well as the ability to access 
the savings that would accrue from getting out of non-enduring 
sites in Germany, which is about a $22 million a year savings, 
that the current siting in the Dal Molin area was the 
appropriate location.
    I understand that some of the members have, including 
yourself, have some questions about that and we will work with 
EUCOM to provide whatever backup you require. But it is the 
combatant commander and the Army's judgment that this is the 
right site for the mission as they see it for the foreseeable 
future.
    Senator Feinstein. It would be interesting to watch and see 
what happens.
    Let me ask you a BRAC question. You testified before the 
Armed Services Readiness Subcommittee in March on the outlook 
for funding in the 2005 BRAC program through completion. In 
response to a question as to whether the Pentagon had 
identified enough funding in its long-term spending plan to 
cover the cost of the program in the out years, you were quoted 
as saying, quote: ``I cannot tell you how short or imbalanced 
the program might be.''
    Have you now completed the detailed planning for the 2005 
round and can you tell this committee whether the Defense 
Department has allocated sufficient resources in the out years 
to fully fund the program?
    Mr. Grone. Well, Senator Feinstein, we have allocated 
significant resources over the program.
    Senator Feinstein. How much?
    Mr. Grone. $18 billion.
    Senator Feinstein. Is it not estimated at $23 billion?
    Mr. Grone. Yes. In the period in which I answered the 
question, although we know more today, we are not quite 
finished with all of the business plans. For those things that 
require near-term funding, in 2006 and 2007, to support the 
budget request we have very solid plans and planning processes 
to support the execution of those funds, as we have detailed to 
the committees in the budget justification documents. For those 
things that are beginning to be implemented 2008 and out, we 
were working through them and we are still in the tail end of 
working through all of the cost structure. I expect it will be 
somewhere around that $23 billion figure in the end, but 
whether it will be a little bit more or a little bit less we 
are still not yet prepared to say. We likely will be prepared 
to say so in a matter of weeks as we finish some of the more 
complex business plans.
    Senator Feinstein. Would you be willing to provide this 
committee with a detailed BRAC funding plan, much like a FYDP, 
essentially for the years 2005 to 2011?
    Mr. Grone. Well, we will be able to tell you in the near 
term an estimate of what we expect the total program costs to 
be. What we will sort out in the program review is exactly 
which money will go in what year, but the leadership is 
committed, after we have done all of this reestimation of the 
costs, to marry that up against detailed implementation plans 
to fully fund the program. So that when you receive the fiscal 
2008 budget request it will reflect a fully funded program from 
2008 to the balance of the program.
    We have resources in every year of the FYDP for BRAC today. 
We will have more when we bring up the next budget request. As 
I indicated to Senator Hutchison a few moments ago, this is 
part of the continuing dialogue between the Department and the 
oversight committees, to ensure that you have a sense of where 
we are at any one given point in time.
    So we will continue to work the costs. One of the issues 
here is that we want to make sure that BRAC dollars are being 
expended solely to execute BRAC decisions and that there are 
not other facility requirements or other things that sort of 
get in there as people see an opportunity here to perhaps get 
well at the installation level, which is understandable. But we 
owe it to ourselves and we owe it to the oversight committees 
to ensure that all we are doing with BRAC dollars is the things 
that are required from a facility perspective to implement the 
BRAC decisions, and that is what we are working through right 
now.
    Senator Feinstein. Well, now that people are beginning to 
come back from Iraq, are there adequate places to put them?
    Mr. Grone. Yes.
    Senator Feinstein. So you will not need any additional 
funds for that?
    Mr. Grone. I think that is a divisible question from the 
BRAC question.
    Senator Feinstein. It is different, I understand.
    Ms. Jonas. With regard to your overall question, Senator, 
about fully funding BRAC, I can assure you that this is one of 
the highest priorities of the Deputy Secretary as we begin to 
go into our programming period for the 2008 and beyond program. 
He is well aware of the requirements. So we commit to you to 
fully fund the program.
    Senator Feinstein. Okay. Let me ask you about the housing 
and particularly the GAO report on management issues involving 
the military housing privatization program. I gather they found 
that 36 percent of the 44 awarded housing projects had 
occupancy rates below expectations, rates below 90 percent. For 
example, the GAO flagged one Air Force project, Patrick Air 
Force Base in Florida, in which the occupancy rate by military 
families was only 29 percent. They raised the concern that 
significantly below expected occupancy rates could impact the 
financial viability of housing projects, private housing 
projects, and could impact the amount of money the Department 
needs to budget for military housing allowances.
    What are you doing to ensure that these privatization 
projects are really used fully?
    Mr. Grone. Well, certainly, Senator, housing privatization 
is a key to our overall strategy. In recent years we have 
continued to refine our housing requirements process to ensure 
that as we bring projects on line they fill in the gap between 
what is already provided by the private sector and what we 
truly require in terms of housing privatization.
    The occupancy rates are interesting in the sense that they 
give you sort of a snapshot in time of how well they are 
occupied by military families. But in no case of which I am 
aware, and I went back as recently as yesterday to look at this 
question--there is no project that is in fiscal or financial 
distress as a result of occupancy rates. Each of the projects 
has a waterfall associated with them that allows occupancy by 
non-military personnel, usually starting with DOD civilians, 
retired military personnel and the like.
    Senator Feinstein. So in other words, in the Florida case, 
that 29 percent is military families, the rest is replaced by 
others?
    Mr. Grone. Well, I do not know in that case and I would 
have to go back and look at it, and I would be happy to do that 
for the record----
    Senator Feinstein. Would you do that?
    Mr. Grone [continuing]. How many of the other units were 
off line due to renovation and reconstruction schedules. So to 
say that 29 percent or 30 percent or whatever, 80 percent or 90 
percent, is occupied by military families is only part of the 
snapshot. The question is what is happening in the rest of 
those units and is it along the schedule that the developer 
expected when they were turning the units over. That is 
something we would have to go back into each project and look 
at. We would be happy to do that.
    Generally, the work we have done with GAO, frankly, has 
been very positive. They have been very helpful, provided a 
very helpful oversight perspective on a number of aspects of 
the program, and we have improved program implementation, 
program evaluation and oversight over the months and years as a 
result of some of that independent look. So I actually view 
that GAO report a little bit more positively in terms of the 
direct suggestions that they have for program improvement, many 
of which we are going to take on board.
    [The information follows:]

    Patrick AFB housing privatization project was awarded in October 
2003, at that time, the Air Force transferred 960 inadequate housing 
units to the new ownership, who planned to replace 552 units and 
demolish 408 units without replacement. A total 592 family housing 
units were consistently ``online'' during the reporting period covered 
in the GAO Report (Military Housing: Management Issues Require 
Attention as Privatization Program Matures). The family housing units 
off-line at Patrick AFB were quickly demolished by the developer to 
clear an area for new construction prior to the GAO reporting period. 
The only other units off-line temporarily were those in transition 
between tenants for approximately 1 week for change of occupancy 
maintenance (COM). They are considered available/online for rental and 
were often rented while in COM.
    Responding to the larger question concerning construction/
renovation schedules, MHPI developers have achieved 90 percent of their 
new construction goals and over 100 percent of their renovation goals 
identified in their original proposals. The achievement of over 100 
percent in renovations is related to some re-scoping of projects, in 
terms of shifting from deficit reduction (new unit construction) to an 
emphasis on accelerating renovations, as is the case at Fort Meade, 
Maryland.
    Please see the attached MHPI Project construction/renovation 
progress graph.



    Senator Feinstein. I do not want to waste a lot of time, 
but my point is that if you would take a look at this and get 
back to us I would appreciate it.
    Mr. Grone. Absolutely.
    Senator Feinstein. Let me ask one other question. Has the 
Department identified adequate resources to fully fund the 
environmental cleanup of the 2005 BRAC round?
    Mr. Grone. That will be part of the fully funded program as 
we bring it forward.
    Senator Feinstein. I bet the answer is no.
    Mr. Grone. In all honesty, Senator Feinstein, I understand 
from prior rounds of BRAC we expended about $24 billion to date 
on all activities associated with that. About $8 billion of 
that is in the environmental remediation category. For this 
round of BRAC, we are not closing significant operational 
ranges. Some of the installations that might have had some 
remediation challenges associated with them the commission 
chose to leave open. So we are frankly expecting in this round 
a far more manageable, far more understood in terms of the 
universe of environmental remediation challenge.
    I think the cost to complete, based on what we know today, 
is somewhat on the order of less than $1 billion. We would be 
happy to keep you up to date on that as we go forward. But I 
think----
    Senator Feinstein. Total cost is under $1 billion?
    Mr. Grone. For the 2005 decisions. That is not the cost to 
complete from prior rounds. That is a different question. We 
are looking at the discrete decisions that were made for the 
BRAC 2005 round. The environmental liability associated with 
that is far less than it was in prior rounds of BRAC, because 
of the nature of the installations that were closed and the 
investments we have made to date in environmental cleanup at 
those locations. They are two different sets of installations 
and we would be happy to parse that for you so you understand 
it as well as you can.
    Senator Feinstein. Thank you, Madam Chairman.
    Senator Hutchison. Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Thank you, Madam Chairman.
    Briefly, I just want to comment that people in Colorado and 
particularly around the Colorado Springs area, where we have a 
number of bases down there, are particularly pleased with the 
results of the BRAC round. They were apprehensive about it, and 
we were not all winners, there were some losers, but I think 
overall they were pleased with it.
    I think they are viewing that the implementation of that, 
at least up to this point, has been successful from their 
perspective. So I just wanted to let you know that.
    Colorado Springs as a community has been extremely 
supportive of their military personnel and they have a lot of 
supportive programs there. I think that Fort Carson in 
particular is one of the bases that is desirable as far as the 
Army is concerned and I think that is reflected in the 
reenlistment rate. Fort Carson has one of the highest 
reenlistment rates of any of the bases in the country. So there 
are a lot of positive things that are really happening there.
    One of the things that is being discussed is actually 
expanding Fort Carson, particularly expanding its training 
area. The head of the Fort Carson mentioned that possibility 
and I encouraged him to go ahead and begin to talk to residents 
that would be affected to expand the Pinion Canyon area. That 
is where a large--it is about 235,000 acres there for training.
    I do believe that there is a necessity there because of the 
increased number of Army units who will be coming into Fort 
Carson, as well as the high technology that is now on the 
ground. You have to have more training area in order to be able 
to train with the high technology. So I like the--I generally 
have encouraged them to move ahead with that, but with the 
caveat they need to talk with the land owners down in that 
area.
    They are looking at an area that is more than 5 times, I 
think, what the original training area down there. So there is 
a lot of land to look around. It is going to be difficult, I 
think, for any one ranch, for example, to block an expansion 
because you can always go in another direction.
    So acting on some assurances from the commander there at 
the Air Force, he said he did not think it was going to be 
necessary to require any eminent domain. They had enough 
choices there and enough different directions, he did not think 
that would be a problem.
    So the first question I want to place to you, Secretary 
Grone, has to do with land acquisitions as far as the Army is 
concerned. Eminent domain is not a good word as far as the West 
is concerned. I would like to know, do you support the use of 
eminent domain for expanding military installations?
    Mr. Grone. Senator, that is a very complex question. My 
view is--and we have done this, as you know, in the context of 
the readiness and environmental protection initiative, where we 
have recently as part of that program worked with some willing 
sellers around the Fort Carson, around Fort Carson proper----
    Senator Allard. Yes.
    Mr. Grone [continuing]. To provide buffer and some 
additional area within which----
    Senator Allard. That is moving along very successfully.
    Mr. Grone [continuing]. The service can conduct its 
mission.
    As a general rule we always prefer to work with willing 
sellers. I would not want to say that in all cases eminent 
domain should be ruled out as an option or a tool. Sometimes it 
is a necessary tool, depending on the circumstances, the 
specific circumstances of a case.
    Senator Allard. Sure.
    Mr. Grone. So I would never want to take any legally 
available tool to the Department for the execution of its 
national security mission off the table. But in general, as you 
know, our presumption as we have gone through a good deal of 
these activities has been to work with willing sellers, and we 
have had a lot of success in doing so.
    So I frankly would defer a specific answer to the question 
without knowing context.
    Senator Allard. I think that is a reasonable response and 
it is what I would have expected in response. So then, looking 
at the Pinon Canyon area, do you see any real need for using 
eminent domain in the Pinon Canyon area?
    Mr. Grone. Well, I cannot comment on that because I know 
what I have read in the press, frankly, about the case. The 
Army has not yet presented an option or a plan for acquisition.
    Senator Allard. So it has not been approved by DOD or 
anything like that?
    Mr. Grone. No, not at this time. The Secretary has not been 
presented with a set of options on that question.
    Senator Allard. Do you like the idea that when you make the 
property purchases that you go with fair market value?
    Mr. Grone. We have executed a good deal of our land 
acquisitions at fair market value.
    Senator Allard. Yes. The reason for my questions is that I 
have introduced some legislation that addresses the eminent 
domain issue, but it also says that you will not pay more than 
fair market value. The idea is that you do not want anybody 
holding out with the idea that they are going to get some super 
price over here. So if we legislatively say you are not going 
to get it, maybe that would discourage that type of behavior.
    We want this to be fair. We want a willing seller, we want 
a willing buyer. We want to be fair to the taxpayers. We do not 
want to overpay on some of the property in that. Do you have 
any concerns about that kind of approach?
    Mr. Grone. It is very difficult to comment specifically 
until we have a plan or a request to proceed from the Army. So 
I think I would like, frankly, to defer the answer to the 
question until we get to the point where we are actually 
talking about a specific proposal. We can have an appropriate 
discussion about it at that time. I just do not know enough 
about the context to know whether it is the right answer or the 
wrong answer. It is too early.
    Senator Allard. Okay. Madam Chairman, I see my time has 
expired.
    Senator Hutchison. No, go ahead and finish, because if you 
have something else----
    Senator Allard. Yes, there is another follow-up I wanted, 
if I might.
    Senator Hutchison. Sure.
    Senator Allard. Also in there, we have put in the 
legislation that you study the economics of the area, impact on 
the economics and the environmental impact on the area. I would 
assume this is something you are going to do anyhow. Am I 
correct in that?
    Mr. Grone. Certainly from an environmental perspective, 
with any major land acquisition we would have to conduct the 
appropriate NEPA analysis, whether it is a full EIS or an EA 
depending upon the circumstances and concerns. We would have to 
do an environmental analysis in any event.
    Senator Allard. Now, I am going to move on to another 
subject and that has to do with the Department of Defense's 
request for an assembled chemical weapons alternative program. 
You provided money here for the first year and we appreciate 
what you have done here in the first year. Again the question 
is on the out years, similar to what Senator Feinstein had 
brought up.
    Can I have some assurances that you are going to be looking 
at at least a similar amount of appropriations as you put in 
this year--I think it is $100 million if I am correct--and for 
the next 2 years trying to sustain that level of funding?
    Mr. Grone. I do not have the--go ahead.
    Ms. Jonas. Senator, we will be working with----
    Senator Allard. Yes, maybe it is Secretary Jonas. That 
should be directed to you.
    Ms. Jonas. Obviously, this is a high priority program, and 
I know Secretary Krieg has worked this very hard. So it will be 
one of the things that is on our mind as we work the 2008 and 
out process. I am not sure how that is going to turn out, but I 
know that the Deputy Secretary is well aware of your concerns 
on this and we want to move positively forward.
    Senator Allard. Now, also to Secretary Jonas, on the 
readiness and environmental protection initiative, which again 
was mentioned earlier here, about the buffer around Fort Carson 
so that we do not have urban encroachment onto that base and 
continue to carry out their missions there. I think you had $20 
million was put in there. I do not think that is adequate. From 
what I understand, there are a lot of bases that are beginning 
to understand the impact of urban encroachment on their bases 
and their mission.
    I am pleased that the House and Senate Armed Services 
Committee agreed to add $30 million to the program. I guess it 
brings it up to a total of $50 million altogether. Why did the 
Department of Defense provide only $20 million for the 
readiness and environmental defense initiative when there is a 
clear need for that money and agreed--not only would I agree 
with that, but the House Armed Services Committee as well as 
the Senate Armed Services Committee agreed that there was a 
greater need?
    Mr. Grone. Well, Senator, based on the resource trades we 
had to make as we were building the budget, $20 million was the 
amount that we came to in the last program review. I think you 
agree that it is proving to be a very effective program, 
although it is a young program.
    Senator Allard. Yes.
    Mr. Grone. A number of the activities we had--I do not want 
to call them pilots because they are beyond pilots. But it is a 
new program. We are having great success with it. Frankly, it 
is a program that I would like to continue to see us work to 
expand as necessary if we have defined requirements. That is 
one of the sort of key aspects of this.
    It is not the only way in which we resource that program 
because the components have the ability to marry those funds up 
or on their own initiative use their operations and maintenance 
funding to take advantage of unique opportunities that arise in 
the year of execution, working with willing sellers. We are 
building the program around the priorities of the components. I 
appreciate very much the support that the committees have given 
us for the program and I think as we mature the program, 
continue to have success with it, continue to build the right 
relationships locally and among the States for partnership and 
cooperation in this area, the program will settle in at a level 
that is reasonable.
    But for the purposes of the President's budget, looking at 
all the other requirements that we had in front of us, that was 
the amount of money we settled on for the President's budget. I 
understand what the authorizers have done and we will continue 
to work with you on that.
    Senator Allard. We are very pleased with the program, the 
way it is starting out with Fort Carson. We do have a lot of 
open space around there, but people are starting to build homes 
right up to the edge of the fort, and the next thing you know 
there are complaints about the gunfire and everything else that 
is going on. So I think this is a vital program and the sooner 
we can get to this and deal with it, not only in Colorado but I 
think throughout the country, we will sort of have a buffer 
zone and try and work out a relationship with the conservation, 
wildlife conservation groups and what-not, there might be a way 
of kind of coming to a solution here that would benefit the 
military as well as those who want open space. It is 
reasonable, I think, to say that somebody should not be 
building their home right next to a base and then complain 
about the loud noise when they do. But people do it. They build 
up to airports the same way. I do think that we need to do 
everything we can to prevent that from happening, to sustain 
the bases we have left, because there are fewer of them and 
they become more vital, I think, to the function of our 
military.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Allard, and I thank 
this panel. I appreciate your time and the efforts you are 
making, and you are excused.
    Mr. Grone. Thank you, ma'am.
    Senator Hutchison. I would like to call the second panel: 
the Honorable Keith Eastin, the Assistant Secretary of the 
Army; the Honorable B.J. Penn, the Assistant Secretary of the 
Navy; and the Honorable William C. Anderson, the Assistant 
Secretary of the Air Force.
    Secretary Eastin, would you like to start.

STATEMENT OF HON. KEITH E. EASTIN, ASSISTANT SECRETARY 
            OF THE ARMY, INSTALLATIONS AND EQUIPMENT, 
            DEPARTMENT OF THE ARMY
    Mr. Eastin. Yes, I have an opening statement and I also 
have a longer statement. I would request that be included in 
the record today.
    Senator Hutchison. Without objection.
    Mr. Eastin. In the interest of saving the committee's time, 
I will try to abbreviate what my clever staff has put here in 
these many, many pages, just to say that the Army has a very 
ambitious program. The BRAC program, which started last year, 
includes not only the traditional BRAC, which is closing bases, 
realigning bases, making things more efficient, but it also 
includes bringing back approximately 52,000 soldiers from Korea 
and Europe. It includes resetting the force from a division-
centric force to a brigade-centric force. It also includes the 
actions bringing back and rotating troops in and out of Iraq 
and Afghanistan, as well as some other actions. So it is a very 
complicated process and, I might add, an ambitious process that 
I think the Army has well planned.

                           PREPARED STATEMENT

    It takes care of our soldiers. We see that they have places 
to come home to when they come home from Europe and Korea, and 
it takes care of our soldiers' families.
    So we would hope that you would see this as an integrated 
and ambitious plan, but one that is necessary in the pursuit of 
the defense of the Nation, and would support it as you have 
before, and we appreciate it. Thank you.
    [The statement follows:]

                 Prepared Statement of Keith E. Eastin

                              INTRODUCTION

    Madam Chairman and members of the Subcommittee, it is a pleasure to 
appear before you to discuss the Army's Military Construction budget 
request for fiscal year 2007. We have a robust budget that is critical 
to the success of the Army's new initiatives and sustainment of ongoing 
programs of critical importance to the Army. We appreciate the 
opportunity to report on them to you. We would like to start by 
thanking you for your unwavering support to our Soldiers and their 
families serving our Nation around the world. They are and will 
continue to be the centerpiece of our Army, and they could not perform 
their missions so successfully without your steadfast support.

                                OVERVIEW
          TRANSFORMING INSTALLATIONS WHILE THE ARMY IS AT WAR

    Installations are the home of combat power--a critical component of 
the Nation's force capabilities. Your Army is working to ensure that we 
deliver cost-effective, safe, and environmentally sound capabilities 
and capacities to support the national defense mission.
    The tremendous changes in our national security environment since 
the terrorist attacks on our Nation clearly underscore the need for a 
joint, integrated military force ready to defeat all threats to United 
States interests. To meet these security challenges, we require 
interrelated strategies centered on people, forces, quality of life, 
and infrastructure. Regarding infrastructure, we need a global 
framework of Army installations, facilities, ranges, airfields, and 
other critical assets that are properly distributed, efficient, and 
capable of ensuring that we can successfully carry out our assigned 
roles, missions, and tasks that safeguard our security at home and 
abroad.
    Army infrastructure must enable the force to fulfill its strategic 
roles and missions in order to generate and sustain combat power. As we 
transform our operational forces, so too must we transform the 
institutional Army and our installation infrastructure to ensure this 
combat power remains relevant and ready.

                               STATIONING

    To transform from a forward-deployed to a U.S.-based power 
projection force, we are consolidating overseas units at enduring 
locations and bringing back units to the United States through the 
effort we collectively call ``stationing.'' Our stationing effort is an 
integrated plan driven by the convergence of three distinct 
initiatives: Base Realignment and Closure (BRAC) 2005, Integrated 
Global Presence and Basing Strategy (IGPBS), and the Army Modular Force 
(AMF) Initiative. Stationing will allow the Army to focus its resources 
on installations that provide the best military value and to best 
posture units for responsiveness and readiness. Eliminating Cold War 
era infrastructure and employing modern technology to consolidate 
activities allows the Army to free financial and human resources that 
we can then focus on our core warfighting mission. The stationing 
initiative is a massive undertaking, requiring the synchronization of 
base closures, realignments, military construction and renovation, unit 
activations and deactivations, and the flow of forces to and from 
current global commitments. Our decisions to synchronize activities 
associated with restationing and realigning our global basing posture 
have been guided by the following key criteria:
  --Meeting operational requirements
  --Providing economic benefits
  --Using existing infrastructure to reduce cost and excess capacity
  --Funding critical requirements to achieve unit mission
  --Compliance with applicable laws
  --Minimizing the use of temporary facilities
  --Giving facility priority to ranges, barracks, housing, vehicle 
        maintenance shops, headquarters and operations, dining and 
        instruction facilities
    The completion of this combined set of stationing initiatives will 
result in an Army that is better positioned to respond to the needs and 
requirements of the 21st Century security environment, with our 
Soldiers and families living at installations that are truly 
``Flagships of Army Readiness.''

                         INFRASTRUCTURE QUALITY

    In addition to mission support, our installations provide the base 
of support for Soldiers and their families. The environment in which 
our Soldiers train, our civilians work, and our families live plays a 
key role in recruiting and retaining the high quality people the Army 
needs. Through efforts such as Barracks Modernization and the 
Residential Communities Initiative (RCI), the Army has made tremendous 
progress in improving the quality of life for Soldiers and their 
families. These efforts will combine with the Army's stabilization of 
the force to forge greater bonds between units, Soldiers, families, and 
the communities in which they live.
    The quality of our installations is critical to the support of the 
Army's mission, its Soldiers, and their families. Installations serve 
as the platforms we use to train, mobilize, and rapidly deploy military 
power. When forces return from deployments, installations enable us to 
efficiently reset and regenerate combat power for future missions. In 
the past year, the Army has made tremendous progress in enhancing 
training and improving its ability to generate and reset the force. 
Through its stationing plans, the Army will be able to focus future 
resources on key installations that provide the most value to our 
mission and provide the quality of life that our Soldiers and families 
deserve.

                BASE REALIGNMENT AND CLOSURE (BRAC) 2005

    BRAC 2005 is the fifth round of BRAC actions that is now approved 
for implementation beginning in fiscal year 2006. BRAC 2005 actions are 
designed to optimize the Army's infrastructure assets in concert with, 
and in support of, the operational capacity and warfighting 
capabilities of the Army. BRAC 2005 is also designed to enhance the 
opportunities for joint activities with the creation of joint 
installations and joint operations that create more efficient and 
effective common business-oriented functions within the Department of 
Defense. As with prior rounds, the Army will achieve savings by 
divesting of installations that are no longer needed and are less 
efficient and effective in supporting a Joint and Expeditionary Army. 
BRAC 2005 goes beyond savings and provides transformational facilities 
and new opportunities for Joint operations and Joint business 
functions. As we reposition forces from overseas, our installations 
must support a Joint and Expeditionary Army.
    BRAC recommendations became law on November 9, 2005, and by law, 
all recommendations must be completed by September 14, 2011. The 
Department of Defense and the Army recommended 12 major and 1 minor 
Army base closures and 53 Army base realignments. In addition, 176 Army 
Reserve and 211 National Guard facilities will close across 39 States 
and territories whose units will relocate to 125 new Armed Forces 
Reserve Centers.
    BRAC execution should contribute to the following Army goals:
  --Reducing cost and generate savings which can be reinvested
  --Optimizing military value
  --Advancing the Army Modular Force Initiative
  --Accommodating the rebasing of overseas units
  --Enabling the transformation of both the Active and Reserve 
        Components as well as rebalancing the forces
  --Contributing to joint operations

         INTEGRATED GLOBAL PRESENCE AND BASING STRATEGY (IGPBS)

    IGPBS will relocate over 50,000 Soldiers and their families from 
Europe and Korea to the United States over the next 5 to 6 years. These 
moves are critical to ensure Army forces are properly positioned 
worldwide to respond in support of our National Military Strategy. The 
majority of the moves/restationing actions are incorporated within the 
BRAC Budget, but IGPBS also includes intra-theater moves. These include 
moves within Korea relocating units from north of Seoul to Camp 
Humphreys; within Germany from numerous installations to our major hub 
at Grafenwoehr/Vilseck, and moves from Germany to Italy to support the 
standup of a full Airborne Brigade Combat Team in Vicenza.

                           ARMY MODULAR FORCE

    The fiscal year 2007 budget includes projects to ensure that our 
facilities continue to meet the demands of force structure, weapons 
systems, and doctrinal requirements. As of fiscal year 2006, we have 
funded 93 percent of the Military Construction requirements for the 
Stryker Brigade Combat Teams, including National Guard requirements in 
Pennsylvania. Remaining construction funding for both the Active Army 
and Army National Guard will be requested in future budget requests.
    The Army Modular Force (AMF) initiative transforms the Army from 
units based on the division organization into a more powerful, 
adaptable force built on self-sufficient, brigade-based units that are 
rapidly deployable. These units, known as Brigade Combat Teams (BCTs), 
consist of 3,500 to 4,000 Soldiers. BCTs increase the Army's combat 
power while meeting the demands of global requirements without the 
overhead and support previously provided by higher commands.
    New facility requirements for transforming units are being 
provided, where feasible, through the use of existing assets. Where 
existing assets are not available, the Army is programming high-
priority projects to support Soldiers where they live and work. The 
Army is requesting $242 million in fiscal year 2007, to support BCTs. 
The remaining AMF requirements will be addressed in future budgets.

                   BRAC 2005 IMPLEMENTATION STRATEGY

    The Army will execute BRAC 2005 by implementing interrelated events 
starting with realignment of the operational forces of the Active Army, 
both inside and outside the United States, at installations DOD-wide, 
capable of training modular formations at home station. The Army will 
create Joint and Army Training Centers of Excellence to enhance 
coordination, doctrine development, training effectiveness, and improve 
operational and functional efficiencies.
    The Army will transform the Reserve Components by realigning and 
closing facilities to reshape the command and control functions and 
force structure and to create Joint or multi-functional installations. 
The Army will close 387 Army Reserve and National Guard facilities and 
build 125 new multi-component Armed Forces Reserve Centers distributed 
throughout the United States and Puerto Rico. The new Armed Forces 
Reserve Centers will improve the readiness and ability of Reserve and 
National Guard units to train, alert, and deploy in support of current 
and future contingency operations, including homeland defense. In 
addition, the Army will disestablish ten Army Reserve Regional 
Readiness Commands and establish four Regional Readiness Sustainment 
Commands and six new deployable warfighting units.
    In the United States, the Army will consolidate four Installation 
Management Agency regions into two and also consolidate the 
Installation Management Agency, Army Community and Family Support 
Center, and the Army Environmental Center in San Antonio, Texas.
    The Army will partner with DOD to consolidate DOD Research, 
Development, Test, and Evaluation organizations to enhance support of 
DOD transformation and Joint Operations and realign or close 
installations to co-locate headquarters with subordinate commands or to 
station organizations with their service counterparts to provide 
responsive, quality, and cost-effective medical and dental care. 
Finally, the Army will transform materiel and logistics operations by 
realigning or closing installations to integrate critical munitions 
production and storage, manufacturing, depot-level maintenance, and 
materiel management to enhance Joint productivity and efficiency and to 
reduce cost.

                            BRAC 2005 BUDGET

    The Army will apply all the necessary resources to accomplish the 
BRAC 2005 mission. In fiscal year 2006, the Army will execute over $865 
million to initiate both BRAC and IGPBS, and begin required National 
Environmental Policy Act actions for all BRAC 2005 requirements. The 
Army will begin planning and design for projects in fiscal years 2006, 
2007, and 2008, and begin construction of ten projects in fiscal year 
2006. The Army will execute $3,608 million to continue actions for BRAC 
2005 requirements in fiscal year 2007.

                               PRIOR BRAC

    In 1988, Congress established the Defense Base Realignment and 
Closure Commission to ensure a timely, independent, and fair process 
for closing and realigning military installations. Since then, the 
Department of Defense has successfully executed four rounds of base 
closures to reduce infrastructure and align the military's 
infrastructure to the current security environment and force structure. 
Through this effort, the Army estimates approximately $10.7 billion in 
savings through 2006--more than $900 million annually from previous 
BRAC rounds..
    The Army is requesting $51.3 million in fiscal year 2007 for prior 
BRAC rounds ($6.2 million to fund caretaking operations of remaining 
properties and $45.1 million for environmental restoration). In fiscal 
year 2007, the Army will complete environmental restoration efforts at 
two installations, leaving eight remaining BRAC installations requiring 
environmental restoration.
    To date, the Army has spent $2.5 billion on BRAC environmental 
restoration. We have disposed of 229,129 acres (89 percent of the total 
acreage disposal requirement of 258,607 acres), with 29,478 acres 
remaining to dispose of at 15 installations.

                             THE WAY AHEAD

    To improve the Army's facilities posture, we have undertaken 
specific initiatives or budget strategies to focus our resources on the 
most important areas--Range and Training Lands, Barracks, Family 
Housing, and Workplaces.
    Range and Training Lands.--Ranges and training lands enable our 
Army to train and develop its full capabilities to ensure our Soldiers 
are fully prepared for the challenges they will face. Our Army Range 
and Training Land Strategy supports Army transformation, and the Army's 
Sustainable Range Program. The Strategy identifies priorities for 
installations requiring resources to modernize ranges, mitigate 
encroachment, and acquire training land.
    Barracks.--Providing safe, quality housing is a crucial commitment 
the Army has made to its Soldiers. We owe single Soldiers the same 
quality housing that is provided to married Soldiers. Modern barracks 
are shown to significantly increase morale, which positively impacts 
readiness and quality of life. The importance of providing quality 
housing for single Soldiers is paramount to success on the battlefield. 
The Army is in the 14 year of its campaign to modernize barracks to 
provide 136,000 single enlisted permanent party Soldiers with quality 
living environments. The new complexes meet DOD ``1+1'' or equivalent 
standard by providing two-Soldier suites, increased personal privacy, 
larger rooms with walk-in closets, new furnishings, adequate parking, 
landscaping, and unit administrative offices separated from the 
barracks.
    Family Housing.--This year's budget continues our significant 
investment in our Soldiers and their families by supporting our goal to 
have contracts and funding in place to eliminate inadequate housing at 
enduring installations by fiscal year 2007 in the United States and by 
fiscal year 2008 overseas. For families living off-post, the budget for 
military personnel maintains the basic allowance for housing that 
eliminates out of pocket expenses.
    Workplaces.--Building on the successes of our family housing and 
barracks programs, we are moving to improve the overall condition of 
Army infrastructure by focusing on revitalization of our workplaces. 
Projects in this year's budget will address requirements for 
operational, administration, instructional, and maintenance facilities. 
These projects support and improve our installations and facilities to 
ensure the Army is deployable, trained, and ready to respond to meet 
its national security mission.

                          LEVERAGING RESOURCES

    Complementary to these budget strategies, the Army also seeks to 
leverage scarce resources and reduce our requirements for facilities 
and real property assets. Privatization initiatives such as the 
Residential Communities Initiative (RCI), Utilities Privatization, and 
build-to-lease family housing in Europe and Korea represent high-payoff 
programs which have substantially reduced our dependence on investment 
funding. We also benefit from agreements with Japan, Korea, and Germany 
where the Army receives host nation funded construction.
    In addition, Congress has provided valuable authorities to utilize 
the value of our non-excess inventory under the Enhanced Use Leasing 
program and to exchange facilities in high-cost areas for new 
facilities in other locations under the Real Property Exchange program. 
In both cases, we can capitalize on the value of our existing assets to 
reduce un-financed facilities requirements.
    The Army is transforming military construction by placing greater 
emphasis on installation master planning and standardization of 
facilities as well as planning, programming, designing, acquisition, 
and construction processes. Looking toward the immediate future, we are 
aggressively reviewing our construction standards and processes to 
align with industry innovations and best practices. In doing so, we 
expect to deliver quality facilities at lower costs while meeting our 
requirements more expeditiously. By encouraging the use of manufactured 
building solutions and other cost-effective, efficient processes, the 
Army will encourage non-traditional builders to compete. Small business 
opportunities and set-aside programs will be addressed, as well as 
incentives for good performance. Work of a repetitive nature coupled 
with a continuous building program will provide the building blocks for 
gaining efficiencies in time and cost.

                         MILITARY CONSTRUCTION

    The Army's fiscal year 2007 budget request includes $7.63 billion 
for Military Construction appropriations and associated new 
authorizations, Army Family Housing, and Base Realignment and Closure.

----------------------------------------------------------------------------------------------------------------
                                                                             Authorization of
          Military Construction Appropriation              Authorization      Appropriations     Appropriation
                                                              Request            Request            Request
----------------------------------------------------------------------------------------------------------------
Military Construction Army (MCA).......................     $1,982,432,000     $2,059,762,000     $2,059,762,000
Military Construction Army National Guard (MCNG).......                N/A        473,197,000        473,197,000
Military Construction Army Reserve (MCAR)..............                N/A        166,487,000        166,487,000
Army Family Housing Construction (AFHC)................        594,991,000        594,991,000        594,991,000
Army Family Housing Operations (AFHO)..................        676,829,000        676,829,000        676,829,000
BRAC 95 (BCA) \1\......................................         51,340,000         51,340,000         51,340,000
BARC 2005 (BCA) \1\....................................      3,608,234,000      3,608,234,000      3,608,234,000
                                                        --------------------------------------------------------
      TOTAL............................................      6,913,826,000      7,630,840,000      7,630,840,000
----------------------------------------------------------------------------------------------------------------
\1\ BRAC Fiscal Year 2007 Budget will be submitted by OSD in March 2006.

                   MILITARY CONSTRUCTION, ARMY (MCA)

    The Active Army fiscal year 2007 Military Construction budget 
request is $1,982,432,000 for authorization and $2,059,762,000 for 
authorization of appropriations and appropriation. These projects will 
provide the infrastructure necessary to ensure continued Soldier 
readiness and family well-being.
    Soldiers as our Centerpiece Projects.--The well-being of our 
Soldiers, civilians, and families is inextricably linked to the Army's 
readiness. We are requesting $934 million or 46 percent of our MCA 
budget for projects to improve well-being in significant ways.
    The Army continues to modernize and construct barracks to provide 
enlisted single Soldiers with quality living environments. This year's 
budget request includes 24 barracks projects to provide improved 
housing for 5,450 Soldiers and new barracks in support of major 
stationing moves. With the approval of $840 million for new barracks in 
this budget, 89 percent of our requirement will be funded at the 
``1+1'' or equivalent standard.
    We are requesting the second increment of funding, $135 million, 
for four previously approved, incrementally funded, multiple-phased 
barracks complexes. In addition, we are requesting full authorization 
of $408 million for an incrementally funded brigade complex, but only 
requesting $102 million in appropriations for this project in fiscal 
year 2007. Our plan is to award this complex subject to subsequent 
appropriations, as single contracts to gain cost efficiencies, expedite 
construction, and provide uniformity in like facility types. The fiscal 
year 2007 budget also includes a $26 million physical fitness center, 
which incorporates a child development center, and eight additional 
child development centers for $68 million. This will provide more than 
1,800 child spaces to allow Soldiers to focus on their missions, 
knowing their families are being provided for.
    Overseas Construction.--Included in this budget request is $526 
million in support of high-priority overseas projects. In Germany, we 
continue our consolidation of units to Grafenwoehr as part of our 
Efficient Basing--Grafenwoehr initiative. This is our fifth and next to 
last year of funding. Funding requested this year will bring us to 89 
percent funded for this initiative. This initiative allows us to close 
numerous installations as forces relocate to the United States and 
within Europe saving base support and enhancing training. In Korea, we 
are again requesting funds to further our relocation of forces on the 
peninsula. This action is consistent with the Land Partnership Plan 
agreements entered into by the United States and Republic of Korea 
Ministry of Defense. Our request for funds in Italy is IGPBS related 
and relocates forces from Germany to Vicenza to create a full Airborne 
BCT as part of the Army's transformation to a modular force. The 
Airborne BCT complex also includes new barracks to house 570 Soldiers. 
Additional locations in Germany will close as construction is 
completed.
    Current Readiness Projects.--Projects in our fiscal year 2007 
budget will enhance training and readiness by providing deployment and 
maintenance facilities, brigade complexes and headquarters, other 
operational and administration facilities, and an overseas Forward 
Operating Site base camp for $34.8 million that will provide a brigade 
(minus)-sized operational facility to support rotational training, 
allow for increased U.S. partnership training, and promote new military 
to military relationships.
    We will also construct a battle seminar facility, combined arms 
collective training facilities, shoot houses, digital multipurpose 
training ranges, and purchase land to support collective training. 
These facilities will provide our Soldiers realistic, state-of-the-art 
live-fire training. We are requesting a total of $613 million for these 
high-priority projects. We are also requesting the second and final 
phase of funding of $13 million for a defense access road.
    Army Modular Force Projects. Our budget supports transformation of 
the Army to a modern, strategically responsive force. Our budget 
request contains $276 million for five brigade complexes and other 
facilities. Additionally, there are eight child development centers, 
and new barracks to house 1,130 Soldiers in support of the Army Modular 
Force.
    Other Support Programs.--The fiscal year 2007 MCA budget includes 
$192 million for planning and design of future projects. As executive 
agent, we also provide oversight of design and construction for 
projects funded by host nations. The fiscal year 2007 budget requests 
$21 million for oversight of approximately $800 million of host nation 
funded construction for all Services in Japan, Korea, and Europe.
    The fiscal year 2007 budget also contains $23 million for 
unspecified minor construction to address unforeseen critical needs or 
emergent mission requirements that cannot wait for the normal 
programming cycle.

               MILITARY CONSTRUCTION, ARMY NATIONAL GUARD

    The Army National Guard's fiscal year 2007 Military Construction 
request for $473,197,000 (for appropriation and authorization of 
appropriations) is focused on Current Readiness, Transformation, and 
other support and unspecified programs.
    Current Readiness.--In fiscal year 2007, the Army National Guard 
has requested $161 million for eight projects to support current 
readiness. These funds will provide the facilities our Soldiers require 
as they train, mobilize, and deploy. Included are four maintenance 
facilities, two training projects, one Readiness Center, and an Armed 
Forces Reserve Center.
    Army Modular Force.--This year, the Army National Guard is 
requesting $234 million for 32 projects in support of our new missions. 
There are 12 projects for the Stryker Brigade Combat Team initiative, 
eight for our Army Division Redesign Study, seven Range projects to 
support the Army Range and Training Land Strategy, and five Aviation 
Transformation projects to provide facilities for modernized aircraft 
and change unit structure.
    Other Support Programs.--The fiscal year 2007 Army National Guard 
budget also contains $57 million for planning and design of future 
projects and $21 million for unspecified minor military construction to 
address unforeseen critical needs or emergent mission requirements that 
cannot wait for the normal programming cycle.

                  MILITARY CONSTRUCTION, ARMY RESERVE

    The Army Reserve's fiscal year 2007 Military Construction request 
for $166,487,000 (for appropriation and authorization of 
appropriations) is for Current Readiness and other support and 
unspecified programs.
    Current Readiness.--In fiscal year 2007, the Army Reserve will 
invest $125.1 million to construct five new Army Reserve Centers and 
two Armed Forces Reserve Centers; and invest $13.7 million to construct 
a general purpose warehouse--for a total facility investment of $138.8 
million. Construction of the seven Reserve Centers will support over 
3,800 Army Reserve Soldiers and civilian personnel. In addition, the 
Army Reserve will invest $5.2 million to construct three training 
ranges, which will be available for joint use by all Army components 
and military services.
    Other Unspecified Programs.--The fiscal year 2007 Army Reserve 
budget request includes $19.5 million for planning and design for 
future year projects and $3.0 million for unspecified minor military 
construction to address unforeseen critical needs or emergent mission 
requirements that cannot wait for the normal programming cycle.

                ARMY FAMILY HOUSING CONSTRUCTION (AFHC)

    The Army's fiscal year 2007 family housing request is $594,991,000 
(for authorization, authorization of appropriation, and appropriation). 
It continues the successful Whole Neighborhood Revitalization 
initiative approved by Congress in fiscal year 1992 and our Residential 
Communities Initiative (RCI) program.
    The fiscal year 2007 new construction program provides Whole 
Neighborhood replacement projects at five locations in support of 538 
families for $241.8 million using traditional military construction.
    The Construction Improvements Program is an integral part of our 
housing revitalization and privatization programs. In fiscal year 2007, 
we are requesting $180.1 million for improvements to 1,084 existing 
units at four locations in the United States and three locations in 
Europe, as well as $156.8 million for scoring and direct equity 
investment in support of the privatization of 1,615 units at five RCI 
locations.
    In fiscal year 2007, we are also requesting $16.3 million for 
planning and design for future family housing construction projects 
critically needed for our Soldiers.
    Privatization.--RCI, the Army's Family Housing privatization 
program, is providing quality, sustainable housing and communities that 
our Soldiers and their families can proudly call home. This highly 
successful program is a critical component of the Army's effort to 
eliminate inadequate family housing in the United States. The fiscal 
year 2007 budget request of $156.8 million provides equity investment 
to privatize housing at two installations and revise development plans 
to build new housing at three previously privatized installations.
    We are leveraging appropriated funds and Government assets by 
entering into long-term partnerships with nationally recognized private 
sector real estate development/management and homebuilder firms to 
obtain financing and management expertise to construct, repair, 
maintain, and operate family housing communities.
    The RCI program currently includes 43 installations with a 
projected end state of over 82,000 units--over 90 percent of the family 
housing inventory in the United States. The Army has privatized over 
60,000 homes through December 2005, and by the end of fiscal year 2007, 
we will have privatized housing at 36 installations with an end state 
of more than 76,000 homes.

                 ARMY FAMILY HOUSING OPERATIONS (AFHO)

    The Army's fiscal year 2007 family housing operations request is 
$676,829,000 (for appropriation and authorization of appropriations), 
which is approximately 53 percent of the total family housing budget. 
This account provides for annual operations, municipal-type services, 
furnishings, maintenance and repair, utilities, leased family housing, 
demolition of surplus or uneconomical housing, and funds supporting 
management of the Military Housing Privatization Initiative.
    Operations ($125 Million).--The operations account includes four 
sub-accounts: management, services, furnishings, and a small 
miscellaneous account. All operations sub-accounts are considered 
``must pay accounts'' based on actual bills that must be paid to manage 
and operate family housing.
    Utilities ($106 Million).--The utilities account includes the costs 
of delivering heat, air conditioning, electricity, water, and 
wastewater support for family housing units. While the overall size of 
the utilities account is decreasing with the reduction in supported 
inventory, per-unit costs have increased due to general inflation and 
the increased costs of fuel.
    Maintenance and Repair ($205 Million).--The maintenance and repair 
(M&R) account supports annual recurring projects to maintain and 
revitalize family housing real property assets. Since most Family 
Housing operational expenses are fixed, M&R is the account most 
affected by budget changes. Funding reductions result in slippage of 
maintenance projects that adversely impact Soldier and family quality 
of life.
    Leasing ($215 Million).--The leasing program provides another way 
of adequately housing our military families. The fiscal year 2007 
budget includes funding for 12,091 housing units, including existing 
Section 2835 (``build-to-lease''--formerly known as 801 leases) project 
requirements, temporary domestic leases in the United States, and 6,387 
units overseas.
    RCI Management ($26 Million).--RCI management program provides 
operating funds for the privatization of military family housing. RCI 
costs include pay and travel of Army personnel, selection of private 
sector partners, environmental studies, real estate surveys, 
consultants to assist with developing and implementing projects, and 
oversight and analyses of the privatized housing portfolio.

                       OPERATION AND MAINTENANCE

    The fiscal year 2007 Operation and Maintenance budget includes 
$2.384 billion in funding for Sustainment, Restoration, and 
Modernization (S/RM), $30.6 million for demolition, and $6.396 billion 
in funding for Base Operations Support (BOS). The S/RM and BOS accounts 
are inextricably linked with our Military Construction programs to 
successfully support our installations. The Army has centralized the 
management of its installations assets under the Installation 
Management Agency to best utilize this funding.
    Sustainment, Restoration, and Modernization (S/RM).--S/RM provides 
funding for the Active and Reserve Components to prevent deterioration 
and obsolescence and restore the readiness of facilities on our 
installations.
    Sustainment is the primary account in installation base support 
funding responsible for maintaining the infrastructure to achieve a 
successful readiness posture for the Army's fighting force. It is the 
first step in our long-term facilities strategy. Installation 
facilities are the mobilization and deployment platforms of America's 
Army and must be properly maintained to be ready to support current 
missions and future deployments.
    The second step in our long-term facilities strategy is 
recapitalization by restoring and modernizing our existing facility 
assets. Restoration includes repair and restoration of facilities 
damaged by inadequate sustainment, excessive age, natural disaster, 
fire, accident, or other causes. Modernization includes alteration or 
modernization of facilities solely to implement new or higher 
standards, including regulatory changes to accommodate new functions, 
or to replace building components that typically last more than 50 
years, such as foundations and structural members.
    Base Operations Support.--This account funds programs to operate 
the bases, installations, camps, posts, and stations for the Army 
worldwide. The program includes municipal services, government civilian 
employee salaries, family programs, environmental programs, force 
protection, audio/visual, base communication services, and installation 
support contracts. Army Community Service and Reserve Component family 
programs include a network of integrated support services that directly 
impact Soldier readiness, retention, and spouse adaptability to 
military life during peacetime and through all phases of mobilization, 
deployment, and demobilization.

                  HOMEOWNERS ASSISTANCE FUND, DEFENSE

    The Army is the DOD Executive Agent for the Homeowners Assistance 
Program (HAP). This program provides assistance to eligible military 
and civilian employee homeowners by providing some financial relief 
when they are not able to sell their homes under reasonable terms and 
conditions as a result of DOD announced closures, realignments, or 
reduction in operations when this action adversely affects the real 
estate market. For fiscal year 2007, HAP will maintain a baseline 
program. The fiscal year 2007 baseline program will be sustained with 
prior year unobligated funds and revenue from sales of acquired 
properties. The HAP baseline program assistance will be continued for 
personnel at installations that are impacted by non-BRAC DOD closure or 
realignment activities resulting in adverse economic effects on local 
communities.

                                SUMMARY

    Madam Chairman, our fiscal year 2007 budget is a balanced program 
that supports our Soldiers and their families, the Global War on 
Terrorism, Army transformation, readiness, BRAC 2005, and DOD 
installation strategy goals. We are proud to present this budget for 
your consideration because of what this $7.63 billion fiscal year 2007 
budget will provide for our Army:
  --New barracks for 7,150 Soldiers
  --New housing for 1,622 families
  --Management of 76,668 privatized homes
  --Operation and sustainment of 45,454 government-owned and leased 
        homes
  --New or improved Readiness Centers for over 3,300 Army National 
        Guard Soldiers
  --New Reserve Centers for 3,800 Army Reserve Soldiers
  --$175 million investment in training ranges
  --Facilities support for two Stryker Brigades
  --Facilities support for the Integrated Global Presence and Basing 
        Strategy, European Theater
  --Facilities support for six Modular Force Transformations
    Our long-term strategies for installations will be accomplished 
through sustained and balanced funding, and with your support, we will 
continue to improve Soldier and family quality of life, while remaining 
focused on Army and Defense transformation goals.
    In closing, we would like to thank you again for the opportunity to 
appear before you today and for your continued support for America's 
Army.

    Senator Hutchison. Secretary Penn.

STATEMENT OF HON. B.J. PENN, ASSISTANT SECRETARY OF THE 
            NAVY, INSTALLATIONS AND ENVIRONMENT, 
            DEPARTMENT OF THE NAVY
    Mr. Penn. Madam Chairman, members of the subcommittee: I am 
honored to represent the sailors, marines, and civilians who 
serve in harm's way, along with those who provide critical 
support roles, to defend our freedom in far-away places and 
under difficult circumstances.
    I would like to talk about one specific aspect that is of 
great interest. That is implementation of BRAC 2005. BRAC 2005 
recommendations differ from previous rounds in that there are 
fewer closures and many more realignments. We have put in place 
the management structure, oversight, and funding to accomplish 
all our closures and realignment actions within the 6-year 
statutory timeframe. Once implemented, we predict savings in 
excess of $1 billion per year for the Department of the Navy.
    For those locations we are departing due to closure or 
realignment, the Department of the Navy is deeply grateful for 
the support communities have given us over the years. They 
understand our unique mission needs and made our sailors, 
marines, and their families feel at home and a part of the 
community during your typical 2- to 3-year assignment.
    Whether closing or realigning, change inevitably brings 
turbulence and uncertainty. That turbulence can be felt at 
bases we are saying goodbye to or at our new receiver base 
locations. To the affected communities, we will work with each 
of you to find equitable solutions during the 6-year statutory 
implementation period. To our sailors, marines, and 
particularly our dedicated civilian employees, we will work 
with you to ease your transition.
    I recognize the concern by some members of Congress and 
communities regarding whether the substantial revenues the 
Department of Navy has obtained from the sale of property 
closed under the four previous BRAC rounds will lead us to seek 
property sale as the primary or exclusive disposal method for 
BRAC 2005. I want to emphasize that we will tailor a disposal 
strategy for each individual closing base in close consultation 
with local community representatives. We will not resort to one 
size fits all pursuit of public sale.
    For example, in the less than 2 years since closing the 
former Naval Station Roosevelt Roads, Puerto Rico, the Local 
Redevelopment Authority has progressed rapidly in developing a 
reuse plan that uses just about all the disposal actions 
available--public benefit conveyances for conservation areas, 
port, airport, hospital and medical clinics, economic 
development conveyance for a science and research park, 
property transfer to the Army and the Coast Guard, along with a 
portion for public sale.

                           PREPARED STATEMENT

    For properties appropriate for sale, we will work with the 
local municipality regarding any entitlements, land use zoning, 
or timing concerns before initiating the sale. Any revenue from 
land sale will be deposited in the BRAC 2005 account and used 
to defray BRAC 2005 implementation costs.
    I look forward to working with the members of this 
committee and I wish to thank you for what you do for us. Thank 
you, ma'am.
    [The statement follows:]

                    Prepared Statement of B.J. Penn

    Madame Chairman and members of the committee, I am pleased to 
appear before you today to provide an overview of the Department of 
Navy's shore infrastructure.
    The Navy-Marine Corps team continues to operate in a complex, 
uncertain, and threatening global security environment. We must 
capitalize on our strengths as a rotational, forward-deployed, surge-
capable force if we are to meet the challenges of a new era. We 
demonstrated our capabilities last year as we continued efforts to win 
the Global War On Terror while responding to major natural disasters, 
the Indonesian Tsunami and Hurricane Katrina, while continuing recovery 
efforts from Hurricane Ivan in 2004. We have a well skilled, highly 
motivated military, civilian and contract workforce; with the help of 
this committee, we must provide them the necessary tools to accomplish 
the mission.

                       HURRICANE RECOVERY EFFORTS

Hurricane Ivan
    Ivan ravaged the Florida panhandle on mid September 2004, damaging 
570 housing units, 850 structures, and destroying 100 buildings across 
Naval Air Station Pensacola and Naval Air Station Whiting Field. A 
facilities task force, led by RADM Shear, worked rapidly to restore 
critical mission capabilities and initiated the deliberate planning 
required to restore both bases.
    As we look back, the Hurricane Ivan recovery is a tremendous 
success story. In parallel with initial recovery actions, we sought not 
simply to rebuild, but to reshape our facilities footprint to improve 
operational effectiveness, consolidate functions, and eliminate on-base 
excess capacity. Using the Navy Ashore Vision 2030 as a guiding vision 
and other strategic host and tenant planning documents, we project an 
overall 900,000 square foot reduction, along with reduced operating and 
maintenance costs, and efficiency improvements such as consolidating 
like functions from damaged facilities, and relocating destroyed 
facilities to more storm resistant locations.
    The fiscal year 2005 Disaster Supplemental provided $468 million in 
Operations and Maintenance and $139 million military construction funds 
for our recovery efforts. We have obligated all Operations and 
Maintenance funds, and five of the eight planned construction projects. 
We plan to award the remaining three construction projects by May 2006. 
Despite additional damage from Hurricane Katrina, NAS Pensacola and 
Whiting Field are fully mission capable.
Hurricane Katrina
    Hurricane Katrina and subsequent storms severely impacted seven 
major bases, destroying buildings, rendering thousands homeless, and 
effectively shutting down operations for weeks while recovery began in 
earnest. Less than 20 percent of the 1,160 buildings across the seven 
affected bases escaped damage. Using techniques developed after 
Hurricane Ivan, we were prepared to promptly initiate recovery actions 
to ensure mission requirements were met while being good stewards of 
taxpayer funds.
    The Department of Navy has received $1.5 billion in Operations and 
Maintenance funds, of which $853 million provided immediate facility 
and base support needs. Over 60 percent of these funds have been 
obligated to date. We have received an additional $411 million in 
military construction to support 34 construction projects. We expect to 
award all of these construction projects by the end of this fiscal year 
and I am confident that our facility execution is on pace to meet 
requirements and support recovery efforts.
    The Administration recently requested a fourth Supplemental for 
Hurricane Recovery, which included $43 million in Operations and 
Maintenance and $78 million military construction. These funds will 
replace collateral equipment, complete facility repairs, and provide 
military construction funds at Naval Air Station Joint Reserve Base 
Belle Chase LA; Construction Battalion Center, Gulfport MS; and John C. 
Stennis Space Center, MS. This Supplemental request also includes 
important fund transfer authority that will allow us to more 
effectively use available funds as we continue recovery efforts.
Task Force Navy Family
    The devastation to our infrastructure wrought by the recent spate 
of hurricanes has also left a wide swath of devastation in the personal 
lives of our military, civilian, retirees and their families as they 
tackle their own recovery efforts. The Navy established Task Force Navy 
Family immediately after the hurricane to provide personalized 
assistance to help our Navy family members return to a sense of 
normalcy. A case manager helps family and service members on all 
aspects of personal recovery, from securing accommodations, replacing 
vital documents, filing insurance claims, or reuniting with their pets. 
As we transition Task Force Navy Family functions into our existing 
Navy personnel support architecture, we will continue to help each 
member and family through this time of crisis until all needs are met.

                  THE NAVY'S INVESTMENT IN FACILITIES

    The Department of Navy's shore infrastructure is a critical factor 
in determining our operational capabilities and shaping our security 
posture. It's where we train and equip the world's finest Sailors and 
Marines, while developing the most sophisticated weapons and 
technologies. The Department of Navy manages a shore infrastructure 
with a plant replacement value of $180 billion on 4 million acres. Our 
fiscal year 2007 shore infrastructure budget totals $10.3 billion, 
representing about 8 percent of the Department of Navy's fiscal year 07 
request of $127 billion.
    The Base Operating Support request of $5.0 billion, excluding 
environmental, comprises the largest portion of the Navy's facilities 
budget request. This account funds the daily operations of a shore 
facility, e.g., utilities, fire and emergency services; air and port 
operations; community support services; and custodial costs.



    Our request for fiscal year 2007 of $5.0 billion reflects a $321 
million increase from the enacted fiscal year 2006 level. This change 
is due in part to pricing changes as well as transfer of Norfolk and 
Portsmouth Naval Shipyards to mission funding.
    Fiscal year 2007 military construction request of $1.2 billion is 
the same as the enacted fiscal year 2006 level. The request includes 
$48 million for Navy and Marine Corps reserve construction efforts. 
This level of funding keeps us on track to eliminate inadequate 
bachelor housing, and provides critical operational, training and 
mission enhancement projects.
    While our fiscal year 2007 Family Housing request of $814 million 
is about the same as fiscal year 2006 enacted level of $808 million, 
there are substantial changes within the account: construction funds 
increase, including seed funds for Navy and Marine Corps privatization, 
and operations and maintenance funds decline as government owned 
inventory falls by 4,820 homes due to privatization.
    Sustainment, Restoration and Modernization (S/RM) includes military 
construction and operation and maintenance funds. Our fiscal year 2007 
request of $1.7 billion represents only the amount of S/RM funded with 
Operations and Maintenance, and is $192 million below the enacted 
fiscal year 2006 level due to efficiencies.
    Our $897 million environmental program at active and reserve bases 
is comprised of operating and investment appropriations, which combined 
are $31 million below the fiscal year 2006 enacted level. Most of the 
reduction is due to reduced shipboard procurement needs and not 
continuing one-time Congressional adds in research and technology 
development.
    Our BRAC program consists of environmental cleanup and caretaker 
costs at prior BRAC locations, and implementation of BRAC 2005 
recommendations.
  --Our prior BRAC request is $334 million, an increase of $31 million 
        over our fiscal year 2006 program of $303 million. The entire 
        prior BRAC effort is financed with revenue obtained from the 
        sale of prior BRAC properties.
  --This fiscal year 2007 budget continues to implement the BRAC 2005 
        recommendations. The Department of Defense recently submitted 
        the fiscal year 2006 plan to the Congress, including $247 
        million for the Department of Navy. The fiscal year 2007 
        request rises to $690 million.
    Here are some of the highlights of these programs.

                         MILITARY CONSTRUCTION

Military Construction Projects
    The Department of Navy's fiscal year 2007 Military Construction 
program requests appropriations of $1.2 billion including $67.8 million 
for planning and design and $9 million for Unspecified Minor 
Construction. The authorization request totals $825.6 million. The Navy 
and Marine Corps Reserve Military Construction appropriation request is 
$48.4 million.
    The active Navy program consists of:
  --$85 million for four quality of life projects for Homeport Ashore, 
        Great Lakes Recruit Training Command recapitalization and the 
        Naval Academy.
  --$348 million for ten waterfront and airfield projects. $207 million 
        of this is for six projects supporting new weapons platforms 
        such as H60R/S, SSGN, F/A 18 E/F/G, and T-AKE.
  --$48 million for four special weapons protection projects.
  --$88 million for six Operational Support projects such as the Joint 
        Deployment Communications Center in Norfolk, VA.
  --$29 million for two Research, Development, Testing and Evaluation 
        (RDTE) projects supporting new VXX and MMA weapons platforms; 
        and
  --$30 million for three training facilities supporting simulators for 
        MH60 and a Damage Control Wet Trainer.
    The active Marine Corps program consists of:
  --$180 million for five bachelor quarters, three dining facilities 
        and a battle aid station;
  --$85 million for seven operations and training facilities;
  --$33 million for continuing an environmental compliance project at 
        Marine Corps Base Camp Pendleton;
  --$60 million to provide six maintenance facilities at Marine Corps 
        Air Station New River, Camp Pendleton CA, and Marine Corps Air 
        Ground Task Force Center Twentynine Palms CA;
  --$51 million for a variety of projects including land acquisition, 
        armories, a missile magazine, ammunition supply point upgrades, 
        and a fire station;
  --$62 million for the final settlement for acquiring Blount Island 
        property
    The Navy and Marine Corps Reserve program consists of two 
Administrative and Boat Storage Facilities for Inshore Boat Units, five 
Reserve Centers, and an Aviation Joint Ground Support Facility.
Incremental funding of Military Construction Projects
    Military construction projects are said to be incrementally funded 
when full authorization and only partial appropriation is sought in the 
first year. None of the annual appropriation requests provide a 
``complete and usable'' portion of the facility. The Office of 
Management and Budget directed a new policy beginning with the fiscal 
year 2007 budget submission that permits incremental funding of new 
construction projects only on an exception basis. Previously approved 
incrementally funded projects, and construction projects for BRAC are 
exempted. This new policy replaces the previous policy, which allowed 
incremented projects in part if the cost exceeded $50 million and 
construction was expected to exceed 2 years. Our fiscal year 2007 
budget request includes only one new incrementally funded project, the 
National Maritime Intelligence Center.
Marine Corps Special Operations Command (MARSOC)
    On 28 October 2005, the Secretary of Defense approved a Marine 
component within the Special Operations Command. The new Marine 
component will provide approximately 2,600 Marine and Navy billets 
within U.S. Special Operations Command (SOCOM), led by a Marine 
Brigadier General. The MARSOC will conduct direct action, special 
reconnaissance, counterterrorism and foreign internal defense. MARSOC 
will have an initial operational capability this fall and full 
operational capability by 2010. The budget request includes $152 
million for construction projects at Camp Lejeune and Camp Pendleton 
for the standup of MARSOC.
Certification of fiscal year 2007 construction costs
    The Conference Report accompanying the Military Quality of Life and 
Veterans Affairs Appropriations Act of 2006 directed each Assistant 
Secretary with responsibility for installations to certify that the 
impact of natural disasters on project costs had been considered in 
preparing the budget submission. Our fiscal 2007 military construction 
request includes a directed 3.1 percent inflation cost adjustment. 
While we have been experiencing up to a 30 percent cost increase for 
construction costs in the Southeast and Gulf Coast, our fiscal year 
2007 request contains relatively few projects in this area. We expect 
that labor and material costs will stabilize by the time these projects 
are ready to be executed in fiscal year 2007.

                         FACILITIES MANAGEMENT

Facilities Sustainment, Restoration and Modernization (SRM)
    The Department of Defense uses a Sustainment model to calculate 
life cycle facility maintenance and repair costs. These models use 
industry-wide standard costs for various types of building and 
geographic areas and are updated annually. Sustainment funds in the 
Operation and Maintenance accounts are used to maintain facilities in 
their current condition. The funds also provide for preventative 
maintenance, emergency responses for minor repairs, and major repairs 
or replacement of facility components (e.g. roofs, heating and cooling 
systems) that have reached the end of their service life. Both the Navy 
and the Marine Corps are budgeting and nearly achieving the Department 
of Defense goal of 95 percent sustainment.

                                                    [Percent]
----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year
                       Percent sustainment                       -----------------------------------------------
                                                                       2005            2006            2007
----------------------------------------------------------------------------------------------------------------
USN Budget......................................................              95              95              95
USN Actual/Plan.................................................              90              92  ..............
USMC Budget.....................................................              95              94              93
USMC/Actual/Plan................................................              94              92  ..............
----------------------------------------------------------------------------------------------------------------

    Restoration and modernization provides major recapitalization of 
our facilities using Military Construction, Operation and Maintenance, 
Navy Working Capital Fund, and Military Personnel funds. The ``recap'' 
metric is calculated by dividing the plant replacement value by the 
annual investment of funds and it is expressed as numbers of years. The 
Department of Defense goal is to attain a 67-year rate by fiscal 2008. 
This is a relatively coarse metric, as demonstrated by the dramatic 
improvement in execution from the substantial investment of the fiscal 
year 2005/2006 Hurricane Supplemental, which substantially improved 
only those bases affected by the storm. We are working with the Office 
of the Secretary of Defense and the other Components to develop a recap 
model similar to the Sustainment model.

----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year
                           Recap years                           -----------------------------------------------
                                                                       2005            2006            2007
----------------------------------------------------------------------------------------------------------------
USN Budget......................................................             136             105              83
USN Actual/Plan.................................................              78              56  ..............
USMC Budget.....................................................              95             102             112
USMC Actual/Plan................................................              72              94  ..............
----------------------------------------------------------------------------------------------------------------

Base Operating Support Models
    The Navy uses business-based models and capabilities based approach 
to budget for Base Operating Support costs. The models use defined 
metrics and unit costs that are benchmarked against historic 
performance and industry standards, and link resources to definable, 
variable levels of outputs. Funding requirements are identified for at 
least three levels of output (or capability level) for each major shore 
service and support function, and the cost and risk of each output 
level. This new CBB process allows us to set funding levels on needed 
output levels, deliverables, and associated risks rather than prior 
funding levels. In a resource-constrained environment, it is imperative 
that we program, budget and execute the right resources at the right 
time for the right service.
Naval Safety
    Navy Secretary Winter has continued former Navy Secretary England's 
commitment to making mishap reduction one of the top five Department of 
Navy performance objectives. We want safety to be an active--not 
passive--aspect of our work and play. In addition to keeping our people 
safe, there are substantial cost avoidance through robust risk 
management. Fiscal year 2005 produced solid progress in Navy and Marine 
Corps mishap reduction. At the end of fiscal year 2005, we performed 
better than the 5-year average in two-thirds of the mishap categories.
    One very successful effort has been the Occupational Safety and 
Health Administration (OSHA) Voluntary Protection Program (VPP), which 
focuses on management leadership and employee involvement teaming 
together to improve safety. Portsmouth VA , Norfolk VA, and Puget Sound 
WA Naval Shipyards have successfully achieved VPP STAR recognition from 
OSHA, while Pearl Harbor Naval Shipyard's application is under review. 
Lost workday rates due to injury have been reduced by 50 percent at 
Norfolk and 60 percent at Puget Sound in 3 years, 37 percent at Pearl 
Harbor in 2 years, and Portsmouth has consistently exceeded the 
Department of Defense 50 percent mishap reduction goal.
Facilities Management Consolidation
    Commander, Navy Installations (CNI) has now successfully completed 
its second year and has made significant improvements to Navy shore 
services. Among the many significant CNI efforts this year was the 
hurricane disaster recovery response in the Gulf Coast Region. Recovery 
and assessment teams responded promptly to restore infrastructure, make 
immediate repairs and capture critical data to plan for long term 
rebuilding of devastated bases like the Seabee Base in Gulfport, MS; 
Stennis Space Center in Bay St. Louis, MS; Naval Bases in New Orleans 
as well as several Reserve Centers in the Gulf Region.
    Similarly, the Marine Corps is transforming its bases from 
singularly managed and resourced entities to ones strategically managed 
in geographic regions. Our bases and stations (except recruit training 
depots) will fall under the direction of five Marine Corps Installation 
Commands with the majority of the installations under the oversight of 
Marine Corps Installation Command--East and Marine Corps Installation 
Command--West. Regionalization will enhance warfighter support, improve 
alignment, enhance the use of regional assets, return Marines to the 
Operating Forces, and reduce costs.
Encroachment mitigation
    We are successfully applying the recent authority to enter into 
agreements with state and local governments and eligible non-government 
organizations to address potential development near our installations 
and ranges that could limit our ability to operate and train. In the 
past 2 years we have acquired restrictive easements from willing 
sellers covering over 3,360 acres in the vicinity of Marine Corps Base 
Camp Lejeune NC, Marine Corps Air Station Beaufort SC, Mountain Warfare 
Training Facility La Posta CA, Naval Air Station Pensacola FL, and 
Outlying Landing Field Whitehouse FL. We have used our Operation and 
Maintenance funds and Department of Defense Readiness and Environmental 
Protection Initiative (REPI) funds. Our partners have used our 
contributions together with their own resources to acquire property 
interests from willing sellers and re-conveyed restrictive easements to 
us.
    We expect that this program will continue to grow. Navy and Marine 
Corps are developing service-wide encroachment management programs to 
guide future priorities. Marine Corps is participating in conservation 
forums across the country with a variety of state and local governments 
and conservation organizations. The fiscal year 2007 President's budget 
includes $8.5 million for Navy and $5 million for Marine Corps 
encroachment protection initiatives, and we expect allocation of a 
share of the fiscal year 2007 $20 million REPI funds
Energy
    Through the end of fiscal year 2005 the Department of Navy reduced 
its energy consumption, compared to a fiscal year 1985 baseline, by 
nearly 30 percent, thus meeting Executive Order 13123 goals.
    Last year the Navy opened a wind/diesel power plant at Naval 
Station Guantanamo Bay, Cuba. The four--950 KW windmills generate 30 
percent of the base's electrical needs. The Navy also awarded a 
geothermal power plant at NAS Fallon, NV that will generate a minimum 
of 30 MW of power. Similar to the Navy's existing 270 MW geothermal 
power plant at Naval Air Warfare Center China Lake, CA these power 
plants generate electricity from the earth's heat without creating 
pollution. The Navy is testing a wave power buoy off Marine Corps Base 
Kaneohe, HI and is finalizing the design of an Ocean Thermal Energy 
Conversion (OTEC) plant off Diego Garcia that will produce the island's 
electrical and potable water requirements using the temperature 
difference between warm surface water and cold, deep ocean water. These 
projects will reduce the Department of Navy's use of foreign oil, 
reduce greenhouse gas production and improve energy security.

                                HOUSING

    Our fiscal year 2007 budget continues progress in improving living 
conditions for Sailors, Marines, and their families. We have programmed 
the necessary funds and expect to have contracts in place by the end of 
fiscal year 2007 to eliminate all of our inadequate family and 
virtually all inadequate unaccompanied housing.
Family Housing
    Our family housing strategy consists of a prioritized triad:
  --Reliance on the Private Sector.--In accordance with longstanding 
        DOD and DON policy, we rely first on the local community to 
        provide housing for our Sailors, Marines, and their families. 
        Approximately three out of four Navy and Marine Corps families 
        receive a Basic Allowance for Housing and own or rent homes in 
        the community.
  --Public/Private Ventures (PPVs).-- With the strong support from this 
        Committee and others, we have successfully used statutory PPV 
        authorities enacted in 1996 to partner with the private sector 
        to help meet our housing needs through the use of private 
        sector capital. These authorities allow us to leverage our own 
        resources and provide better housing faster to our families.
  --Military Construction.--Military construction will continue to be 
        used where PPV authorities don't apply (such as overseas), or 
        where a business case analysis shows that a PPV project is not 
        financially sound.
    As of March 1, we have awarded 19 projects totaling over 38,000 
units. As a result of these projects, over 24,000 homes will be 
replaced or renovated. Additionally, close to 3,000 homes will be 
constructed for Navy and Marine Corps families. Through the use of 
these authorities we have secured about $4 billion in private sector 
investment from $453 million of our funds for the 19 projects. This 
represents a leverage ratio of over nine to one.


    During fiscal year 2006 and 2007, we plan to award ten Navy and 
Marine Corps family housing privatization projects totaling almost 
28,000 homes. By the end of fiscal 2007, the Navy and Marine Corps will 
have privatized 97 percent and 98 percent, respectively, of their U.S. 
housing stock.



    Our fiscal year 2007 family housing budget request includes $305 
million for family housing construction and improvements. This amount 
includes $175 million proposed for use as a Government investment in 
family housing privatization projects planned for fiscal year 2007 
award. It also includes the replacement or revitalization of inadequate 
housing located at locations where privatization is not planned, most 
notably Guam and Japan. Finally, the budget request includes $509 
million for the operation, maintenance, and leasing of Government-owned 
inventory.
Unaccompanied Housing
    Our budget request of $207 million for milli unaccompanied housing 
construction projects continues the emphasis on improving living 
conditions for our unaccompanied Sailors and Marines. There are three 
challenges:
  --Provide Homes Ashore for our Shipboard Sailors.--There are 
        approximately 13,000 E1-E3 unaccompanied Sailors worldwide who 
        live aboard ship even while in homeport. The Navy's goal 
        remains to program funding through fiscal year 2008 to achieve 
        its' ``homeport ashore'' initiative by providing ashore living 
        accommodations for these Sailors. We intend to achieve this 
        goal through a mix of military construction, use of 
        privatization authorities and, for the interim, more intensive 
        use of our unaccompanied housing capacity by assigning two or 
        more Sailors per room. Our fiscal year 2007 budget includes one 
        ``homeport ashore'' construction project for $21 million to 
        complete Naval Station Everett, WA (410 Spaces).
  --Ensure our Barracks Meet Today's Standards for Privacy.--We are 
        building new and modernizing existing barracks to increase 
        privacy for our single Sailors and Marines. The Navy uses the 
        ``1+1'' standard for permanent party barracks. Under this 
        standard, each single junior Sailor has a private sleeping area 
        and shares a bathroom and common area with another member. To 
        promote unit cohesion and team building, the Marine Corps was 
        granted a waiver to adopt a ``2+0'' configuration where two 
        junior Marines share a room with a bath. The Navy will achieve 
        these barracks construction standards by fiscal year 16; the 
        Marine Corps by fiscal year 2012. We have also been granted a 
        waiver to the ``1 + 1'' standard to allow us to build an 
        enlisted unaccompanied housing project in Norfolk to private 
        sector standards. We believe this will provide better housing 
        for unaccompanied Sailors without increasing the average 
        housing cost.
  --Eliminate gang heads.--The Marine Corps has programmed all 
        necessary funding, through fiscal year 2005, to eliminate 
        inadequate unaccompanied housing with gang heads \1\ for 
        permanent party personnel. The Navy will achieve over 99 
        percent of this goal by fiscal year 2007.
---------------------------------------------------------------------------
    \1\ Gang heads remain acceptable for recruits and trainees.
---------------------------------------------------------------------------
Unaccompanied Housing Privatization
    We continue to pursue unaccompanied housing pilot privatization. We 
are in exclusive negotiations with a private partner for our first 
pilot project at San Diego. This project would build 700 apartments for 
unaccompanied E4s and above and privatize 254 existing Government-owned 
unaccompanied housing modules. Although the construction of new units 
does not directly target the Homeport Ashore requirement (unaccompanied 
E1-E3s assigned to sea duty), it will help by freeing up existing rooms 
as other Sailors move out of Government-owned unaccompanied housing and 
move into privatized housing. We expect to award this project this 
spring.
    We have also started procurement for a second pilot project at 
Hampton Roads, Virginia. This project would build 725 apartments at up 
to three different sites and privatize 806 existing unaccompanied 
housing modules. All housing will be targeted to unaccompanied 
shipboard E1-E3 personnel. We recently selected four highly qualified 
teams and invited them to submit detailed technical and financial 
proposals. We expect to award this project in April 2007.
    Last year we were evaluating the Pacific Northwest as a third pilot 
site. We have since concluded that the Pacific Northwest is not viable 
because the requirement is linked with one large ship (unlike San Diego 
and Hampton Roads which are fleet concentration areas), the private 
partner cannot recapitalize the housing over the long term given 
projected cash flows. We will now proceed to use the fiscal year 2005 
appropriated and authorized funds as a MILCON project at Bremerton. We 
are evaluating opportunities at other locations.

                              ENVIRONMENT

Marine Mammals/Sonar R&D investments
    The Navy recognizes the need to protect marine mammals from 
anthropogenic sound in the water and has budgeted $10 million in fiscal 
year 2006 and 2007 for research and development efforts. Funding will 
focus on techniques to track the location of marine mammals, their 
abundance and movement (particularly beaked whales); determining sound 
criteria and thresholds; and developing new mitigation and monitoring 
techniques. The Navy has expanded its research on the effects of mid-
frequency sonar to include effects on fish. Navy's Protective Measures 
Assessment Protocol (PMAP) has become a routine operating procedure 
during all exercises. PMAP measures include surface vessels using 
trained look-outs in marine mammal areas, and submarines monitoring 
passive acoustic detection for vocalizing marine mammals.
Shipboard Programs
    The Navy continues to convert air conditioning and refrigeration 
plants on its surface fleet from ozone depleting CFCs to 
environmentally friendly coolants. We plan to spend a total of $400 
million on this effort, including $22 million in fiscal year 2007. We 
expect to complete the conversion of nearly 900 CFC-12 plants by the 
year 2008, and over 400 CFC-114 plants by the year 2014.
    The Navy has also been installing pollution prevention equipment on 
16 ship classes. We will have spent $35 million to install suites of 
pollution prevention equipment (e.g., aqueous parts washers, cable 
cleaners/lubricators, paint dispensers) on ships upon completion this 
September.
Natural and Cultural Resources
    The Department spends about $30 million per year on natural and 
cultural resources at Navy and Marine Corps installations. Resources 
are invested in preparing, updating, and implementing Integrated 
Natural Resources Management Plans (INRMPs). Protecting threatened and 
endangered species and their habitats is a major aspect of the INRMPS 
at many bases. The National Defense Authorization Act of 2004 included 
a provision that allowed the Secretary of Interior to forgo designation 
of critical habitat on military lands upon a determination that the 
INRMP provided sufficient species and habitat protection. I am pleased 
to report that all final critical habitat designations since 2004 have 
excluded designations on Navy and Marine Corps property.
    Our cultural resources provide a tangible link with our past while 
supporting the mission of today's Navy and Marine Corps warfighters. 
Both Navy and Marine Corps are developing Cultural Resources Management 
Plans similar to INRMP. A major effort is to prepare broad based 
programmatic alternatives to case-by-case consultation similar to the 
highly successful program comments on Capehart-Wherry era family 
housing. DON is also working to expand its efforts to make cultural 
resources management an integral part of our broader asset management 
program.
Alternative Fuel Vehicles
    In fiscal year 2005 the Department of the Navy met or exceeded the 
Alternative Fuel Vehicle (AFV) acquisition mandates from the Energy 
Policy Act and Executive Order 13149. The Department was named winner 
of the National Biodiesel Board's National Energy Security Award and 
the U.S. Marine Corps won a White House Closing the Circle Award for 
meeting Executive Order 13149 requirements 3 years earlier than 
required. Among the AFV related initiatives are increased use of 
Biodiesel (B-20), increased fleet fuel economy, increased procurement 
of hybrid vehicles and increased use of neighborhood vehicles. Ethanol 
(E-85) is becoming a more significant alternate fuel. The Navy has 
approximately 7,000 vehicles capable of operating on E-85. We are also 
investigating the use of hydrogen fuel cell vehicles.
Installation Restoration Program (IRP)
    The Department of the Navy has completed cleanup or has remedies in 
place at 75 percent of our 3,700 contaminated sites. We plan to 
complete the program by the year 2014. The cost-to-complete the 
installation restoration program continues a downward trend with 
efficiencies of $600 million over the past 10 years. Use of new 
technologies, land use controls, remedy optimizations, contract 
efficiencies, and a dedicated professional staff has contributed to 
these efficiencies. Our fiscal year 2007 request of $304 million 
consists of $219 million for IRP, $41 million for program management, 
and $44 million for Munitions response.
Munitions Response Program (MRP)
    This relatively new program provides cleanup actions for Munitions 
and Explosives of Concern (MEC) and Munitions Constituents (MC) at all 
Department of the Navy locations other than operational ranges. We plan 
to complete preliminary assessments at all 213 known sites on 56 active 
installations by 2007. Site inspections (which include sampling) will 
be completed by 2010. We will not have credible cleanup cost estimates 
until these assessments are completed in 2010. We are conducting major 
cleanups at the former range on Vieques, Puerto Rico and at Jackson 
Park Housing Complex in Washington State, in addition to efforts at 
prior BRAC locations.

                 PRIOR BRAC CLEANUP & PROPERTY DISPOSAL

    The BRAC rounds of 1988, 1991, 1993, and 1995 were a major tool in 
reducing our domestic base structure and generating savings. The DON 
has achieved a steady state savings of approximately $2.7 billion per 
year since fiscal year 2002. All that remains is to complete the 
environmental cleanup and property disposal on portions of 17 of the 
original 91 bases.
    Last year we conveyed the last 427 acres at the former Naval 
Complex, Charleston, SC and the last acre at Naval Air Station, Key 
West, FL. Additionally, at the former Hunters Point Naval Shipyard in 
San Francisco, the DON conveyed the first parcel of 75 acres to the San 
Francisco Redevelopment Agency. Of the original 161,000 acres planned 
for disposal from all four prior BRAC rounds, we expect to have less 
than 5 percent (about 8,000 acres, excluding Roosevelt Roads) left to 
dispose by the end of this fiscal year.
Land Sale Revenue
    We have continued our success in using property sales to assist in 
environmental cleanup and property disposal as well as recover value 
for taxpayers. We have used General Services Administration (GSA) on-
site auctions, GSA Internet auctions, and Internet auctions using 
commercial real estate brokers. Through a combination of cost Economic 
Development Conveyances, Negotiated Sales, and Public Sales, the DON 
has received over $1.1 billion in revenues. We have applied these funds 
to finance and accelerate our entire fiscal year 2006 and fiscal year 
2007 environmental cleanup at the remaining prior BRAC locations.
    Last year the DON completed its largest public sale via Internet 
auction consisting of four parcels totaling 3,720 acres at the former 
Marine Corps Air Station, El Toro in Irvine, CA, for a total of $649.5 
million. The Internet auction public sale of 62 acres at the former San 
Pedro housing site in Los Angeles, CA, sold for $88 million. We also 
completed a GSA internet auction for the former Naval Hospital Oakland, 
CA. Known as Oak Knoll, we anticipate closing escrow for $100.5 million 
in early March 2006. These sales have provided the communities with 
taxpayer and community benefits by getting the property onto local tax 
rolls and redeveloped more quickly, with the local community 
controlling that development through traditional land use planning and 
zoning. It benefits DOD and the Federal taxpayer by divesting unneeded 
property sooner and reducing the environmental cleanup time and expense 
incurred by DOD. These sales enabled the buyers to work with the 
homeless assistance organizations to provide the type of services 
needed in that community, either in land and buildings or funds for 
needed programs. In addition, the El Toro sale enabled the community to 
fulfill its vision of creating a public park without using local tax 
dollars.
    We are pursuing disposal of the former Naval Station Roosevelt 
Roads through a mix of public benefit, economic benefit, property 
transfer to Army, as well as property sale planned for late 2007.
Prior BRAC Environmental Cleanup
    The DON has spent over $2.6 billion on environmental cleanup at 
prior BRAC locations through fiscal year 2005. We estimate the 
remaining cost to complete cleanup at about $482 million for fiscal 
year 2008 and beyond, most of which is concentrated at fewer than 
twenty remaining locations and includes long-term maintenance and 
monitoring obligations for remedies already installed and operating at 
many locations. As we have done previously, the DON will use any 
additional land sale revenue beyond that projected in our fiscal year 
2006 budget to further accelerate cleanup at these remaining prior BRAC 
locations, which are primarily former industrial facilities that tend 
to have the most persistent environmental cleanup challenges.
    Significant environmental progress is planned for fiscal year 2006/
2007, with nearly half of the funding planned for three bases. At 
Alameda Naval Air Station, progress will include funding environmental 
planning, design, and construction activities for the majority of 
active sites. Hunters Point Shipyard's progress will include completion 
of the radiological program for all land parcels and completion of all 
Remedial Investigations and Feasibility Studies. Progress at the former 
Moffett Federal Air Field includes completion of all remaining 
environmental construction activities.

                        BRAC 2005 IMPLEMENTATION

    The BRAC 2005 Commission recommendations became legally binding on 
the Department of Defense on 9 November 2005. In contrast to prior BRAC 
commissions, the BRAC 2005 recommendations have fewer closures and more 
realignments, particularly realignments that involve more than one 
military Service or Defense Agency. The Department of Navy has 6 
``fence line'' closures and 81 realignment recommendations involving 
129 bases.
BRAC 2005 Implementation Funds
    I am pleased to report that the Department of the Navy has fully 
financed its BRAC 2005 implementation plans across the FYDP. We have 
put in place the management structure, oversight, and funding to 
accomplish all closure and realignment actions within the 6 year 
statutory time frame.
    We are financing our implementation plans through a combination of 
(1) funds previously set aside by OSD for this purpose and recently 
allocated in all years of the FYDP (i.e., the BRAC wedge); (2) 
identification, capture, and reinvestment into the BRAC account of 
savings (primarily infrastructure and civilian personnel savings) 
generated by closure and realignment actions; (3) investment of $500 
million in Navy funds. Additional savings, notably MILPERS savings and 
realignment of Fleet Readiness Centers, are being used to finance other 
Department of the Navy priorities. Annual savings exceed annual costs 
in fiscal year 2010. The budget reflects only modest savings in fiscal 
year 2007, but it is expected that overall savings will exceed $1 
billion annually after fiscal year 2011.


Preparing to Implement BRAC 2005
    Due to the complexity of the many joint recommendations, the 
Department of Defense is using detailed business plans for each BRAC 
recommendation to ensure consistent, timely execution and all necessary 
coordination across the Components. Each of our business plans, which 
averages 40 pages in length, includes extensive details on costs and 
savings, schedules, and supporting Form DD1391s for each construction 
project. Each business plan must be reviewed and approved by the 
Infrastructure Steering Group \2\ prior to any expenditure of funds for 
a given recommendation. We expect approval of the first Navy business 
plans in the near future. In the meantime, the first BRAC 2005 funds 
are being released by OSD to begin formal planning efforts, beginning 
construction design and prepare contracting documents, and initiate 
National Environmental Policy Act (NEPA) studies for disposal and 
receiver sites.
---------------------------------------------------------------------------
    \2\ The Infrastructure Steering Group is chaired by the Under 
Secretary of Defense for Acquisition and Technology and Logistics, and 
includes the Deputy Under Secretary of Defense and Service Assistant 
Secretaries for Installations and Environmental, and the Service Vice 
Chiefs of Staff.
---------------------------------------------------------------------------
    We prioritized our fiscal 2006 and fiscal year 2007 implementation 
plans to give priority to actions with higher savings, funding all NEPA 
requirements, initiating the necessary military construction planning 
and design, and incrementally funding larger MILCON projects based on 
how much work can be accomplished in each fiscal year. All construction 
projects in fiscal year 2006 use design/build as the acquisition 
methodology and qualify as a NEPA categorical exclusion. Fiscal year 
2007 projects are primarily design build, and require no more than a 
NEPA Environmental Assessment before construction can begin. We are 
working closely with the other Components to establish firm 
requirements, schedules, and the scope and funding for required 
military construction for implementing joint recommendations.
    The table below depicts our fiscal year 2006 and fiscal 2007 plans. 
At several receiver sites, design and construction will begin in 2006 
in conjunction with planning of closure actions at the respective 
closing installations. Realignments of several commands from leased 
space to owned space in the National Capital Region will begin in 
fiscal 2006. Five major realignments will start in fiscal 2007. Other 
smaller closure and realignments begin in fiscal yeaer 2006 and 
continue in fiscal year 2007.

                          [Millions of dollars]
------------------------------------------------------------------------
                                                    Fiscal year
           Significant Action            -------------------------------
                                               2006            2007
------------------------------------------------------------------------
BRAC planning, design and management....              60              59
NEPA environmental planning & cleanup...              17               6
Design/build MILCON & closure efforts:
    Naval Air Station Brunswick, ME.....              23              95
    Naval Support Activity New Orleans,               55             125
     LA.................................
    Naval Station Pascagoula, MS........              17               2
    Naval Station Ingleside, TX.........               5             103
    Closure efforts at Naval Air Station  ..............              36
     Atlanta, GA........................
    Closure efforts at Naval Supply       ..............              23
     Corps School Athens, GA............
Initiate relocations from leased space    ..............              23
 in National Capitol Region.............
Initiate realignments:
    Fleet Readiness Centers at various                 1              36
     locations..........................
    NAVFAC EFD/EFAs, various locations..              14              37
    Naval Station Newport, RI...........  ..............              28
    San Antonio Regional Medical Center,  ..............              49
     TX.................................
    Naval Integrated Weapons & Armaments  ..............              42
     RDAT&E Center......................
Other closure/realignment efforts.......              23              49
                                         -------------------------------
      Total.............................             247             690
------------------------------------------------------------------------
BRAC 2005 Significant Actions.

    We are building on our experience with cleanup and property 
disposal from prior BRAC rounds. A BRAC Program Management Office has 
overall responsibility for coordination of BRAC actions, as well as for 
completing cleanup and disposal of the remaining property from all BRAC 
rounds.
    Much has changed since the last BRAC round in 1995. Environmental 
contamination at remaining bases has largely been characterized, and 
cleanup has been completed or is now well underway. In contrast to 
prior BRAC, the cost to cleanup environmental contamination at BRAC 
2005 locations is about $60 million. Private sector capabilities have 
emerged and matured for ``brownfield'' redevelopment and insurance 
industry products to address environmental liabilities when there is a 
CERCLA early transfer of contaminated property. We expect to take 
advantage of these private sector capabilities.
    The Department will use a mix of public and economic benefit 
conveyances, transfers to other Components or Federal agencies, as well 
as public sale for property disposal. We expect developers with the 
experience and expertise to complete the cleanup during redevelopment. 
Communities get the property onto local tax rolls and redeveloped more 
quickly, and controls development through traditional land use planning 
and zoning.

                    MEETING THE EXECUTION CHALLENGE

    The ambitious programs I have outlined above, encompassing military 
and family housing construction, continuing recovery efforts in the 
Gulf Coast, and BRAC-related construction, represent an execution 
effort of over $3.4 billion over the fiscal year 2006/2007 timeframe. A 
daunting challenge, but one that the Navy is well-positioned to meet. 
The global pre-positioned presence of a highly trained workforce that 
offers the full spectrum of products and services allows us to shift 
execution outside of traditional regional boundaries to balance spikes 
in workload caused by events such as the natural disasters of 2004 and 
2005 and BRAC. The Navy has a wide array of contracting tools and in-
place capacity to efficiently address substantial workload increases. 
We will work to master the challenges with the supply of a competitive 
contractor workforce, and market conditions affecting costs of 
materials and equipment.

                               CONCLUSION

    We cannot meet the threats of tomorrow by simply maintaining 
today's readiness and capabilities of our physical plant. We must 
continue to transform and recapitalize for the future without 
jeopardizing our current readiness and the strides we have made--and 
continue to make--in managing our shore infrastructure. With our 
partners in industry, the acquisition community, and with the 
continuing support of the Congress, the Department of Navy will build 
and maintain installations that are properly sized, balanced--and 
priced for tomorrow.

    Senator Hutchison. Thank you.
    Secretary Anderson.

STATEMENT OF HON. WILLIAM C. ANDERSON, ASSISTANT 
            SECRETARY OF THE AIR FORCE, INSTALLATIONS, 
            ENVIRONMENT, AND LOGISTICS, DEPARTMENT OF 
            THE AIR FORCE
    Mr. Anderson. Madam Chairman and members of the committee: 
I will make my remarks brief here this afternoon.
    The Air Force has three main challenges: winning the long 
war on terror, developing and caring for our airmen, and 
recapitalizing and modernizing our air and space systems. I 
will quickly highlight how we plan to meet these challenges in 
military construction, environmental, and base realignment and 
closure programs.
    Our first challenge is winning the long war on terror. As I 
testify today we have approximately 2,400 deployed Air Force 
civil engineers. About a 1,000 of those are deployed outside 
the wire in direct support of coalition missions. To date the 
Air Force civil engineers have overseen repair of 469 schools, 
the construction of 11 clinics, the rebuilding of three 
airports and numerous military facilities such as barracks and 
dining halls.
    Our second challenge is developing and caring for our 
airmen. Our total force MILCON, family housing, sustainment, 
restoration and modernization programs are paramount to 
supporting operational requirements and maintaining a suitable 
quality of life for our men and women in uniform and their 
families.
    One program that is particularly successful for the troops 
is eliminating inadequate dorms. With your help, the Air Force 
is on track to replace all inadequate dorms and the budget 
request before you will complete the funding of those efforts.
    Another success story is family housing. The Air Force's 
budget request completes funding for stateside housing and 
continues our progress overseas. Combined with our highly 
successful privatization program, we think this is a good news 
story for the airmen and their families.
    Being good stewards of the environment is another way we 
develop and care for our airmen. For example, the Air Force is 
testing, evaluating, purchasing, and using green technologies 
with alternative non-hazardous products in aircraft painting, 
de-icing, and other operational areas to reduce the generation 
of waste and eliminate worker exposure to hazardous substances. 
We are expanding the usage of alternative fuels, like ethanol, 
in our military and Government fleet vehicles. In 2005 the Air 
Force was the Nation's largest purchaser of renewable power 
from wind, solar, geothermal, and other green sources.
    We are diligently implementing an Air Force-wide 
comprehensive safety and health program. By benchmarking 
industry best in class programs and to leverage our own 
experience, the Air Force is reducing the risk of injuries and 
keeping the environment free of contaminants.
    Finally, our military construction and realignment and 
closure programs are vital to optimizing our weapons systems 
capabilities and effects. The latest round of base realignments 
and closures will provide more opportunities to improve our Air 
Force. Our BRAC activities for fiscal years 2006 and 2007 are 
fully funded and we have begun implementation of these actions.
    In conclusion, Madam Chairman, I thank the committee for 
strong and continued support. The readiness of our airmen and 
the capabilities of our weapons systems depend upon the 
infrastructure we support with the Air Force's military 
construction, housing, environmental and safety programs. I 
welcome any questions the committee may have.
    [The statement follows:]

               Prepared Statement of William C. Anderson

    Madam Chairman, Senator Feinstein, and distinguished members of the 
committee, as the Air Force continues to transform, we have three major 
priorities: winning the Global War on Terror, developing and caring for 
our Airmen, and maintaining, modernizing and recapitalizing our 
aircraft and equipment. The Quadrennial Defense Review (QDR) guides and 
supports Air Force transformation and enables us to deliver more 
sovereign options for the defense of the United States of America and 
its global interests. We will fund transformation through 
organizational efficiencies, process efficiencies, and reduction of 
legacy systems, which will ultimately reduce our manpower requirements. 
Our military construction (MILCON) and Base Realignment and Closure 
(BRAC) programs are vital to achieving our vision to develop and care 
for our Airmen, as well as optimizing our weapon systems' capabilities 
and effects. Quality bases, facilities and dwellings are the foundation 
of developing and caring for our Airmen.
    The Air Force fiscal year 2007 MILCON submission represents our 
commitment to these three priorities. A key and essential enabler in 
Air Force transformation, MILCON continues critical weapon system 
beddowns and improves the Quality of Life (QOL) of our Airmen. This 
year's Air Force MILCON budget request is the largest in 15 years, over 
$1.3 billion, with increases across the spectrum of air and space 
operations and throughout our Total Force. Our fiscal year 2007 family 
housing submission will keep us on target to eliminate inadequate 
housing and enables us to exceed our goal to privatize 60 percent of 
our CONUS housing by the end of fiscal year 2007. The risk taken in 
facility recapitalization and facility sustainment allows the Air Force 
to support modernization and transformation. However, even with the 
risks taken we continue to fund our most critical requirements: (1) new 
missions, (2) depot transformation, (3) housing and dormitories, (4) 
fitness centers and (5) child care centers. The facility 
recapitalization rate for fiscal year 2007 is 125 years. OSD's 
Strategic Planning Guidance directs meeting the 67-year recap rate 
metric in fiscal year 2008 and maintaining thereafter, and Air Force 
proposals over the remainder of the Future Years Defense Plan (FYDP) 
have us on track to meet that guidance.
    Sound investment in our installations allows us to take care of our 
people and their families through quality of life and work place 
improvements. We believe the fiscal year 2007 President's Budget (PB) 
proposal will provide the construction bedrock for continued success of 
our mission.
Introduction
    Air Force facilities and housing are key components of our support 
infrastructure. At home, our installations provide a stable training 
environment and a place to equip and reconstitute our force. Both our 
stateside and overseas bases provide force projection platforms to 
support Combatant Commanders. Because of this, the Air Force has 
developed an investment strategy focused on supporting QDR 
transformational decisions, providing quality dorms for Airmen, 
providing quality family housing for our families, implementing BRAC, 
properly sustaining our infrastructure, striving to recapitalize our 
aging infrastructure, and working to build an appropriate installation 
support baseline. Our total force MILCON, family housing, and 
sustainment, restoration, and modernization programs are paramount to 
supporting operational requirements and maintaining a suitable quality 
of life for our men and women in uniform and their families.
    The Air Force fiscal year 2007 PB request of just over $1.3 billion 
for Total Force MILCON reflects our highest construction priorities. It 
balances transformation, QOL improvements, new mission requirements, 
future project designs, and limited funding for emergency requirements. 
This request includes $1.16 billion for active MILCON, $126 million for 
the Air National Guard, and more than $45 million for the Air Force 
Reserve.
    The Air Force's fiscal year 2007 PB request of $1.18 billion for 
the Military Family Housing investment program balances new 
construction, improvements, and planning and design work. Combined with 
our highly successful privatization program, we think this is a good 
news story for Airmen and their families. While we continue to strive 
to eliminate inadequate housing, we cannot allow more housing to fall 
into disrepair. We need your support to keep our housing operations and 
maintenance submission intact.
    In fiscal year 2007, we will bolster our operation and maintenance 
(O&M) investment in our facilities infrastructure. This investment has 
two components: Sustainment (S) and Restoration and Modernization 
(R&M), which we refer to together as our SRM program. Sustainment funds 
are necessary in order to keep ``good facilities good.'' R&M funding is 
used to fix critical facility deficiencies and improve readiness. In 
this request we have dedicated $1.68 billion to Total Force 
sustainment. That is 86 percent of the requirement from OSD's 
Facilities Sustainment Model. Additionally, in fiscal year 2007 the Air 
Force's Total Force R&M funds is only $310 million. This means we must 
defer some R&M requirements, which has a cumulative effect on Air Force 
facilities and infrastructure that we must reverse. In the out years we 
hope to invest more heavily in critical infrastructure maintenance and 
repair through our O&M program in order to achieve the Department of 
Defense goal of a facility recapitalization rate of 67 years by 2008 
and to fully fund facility sustainment by 2008. At the same time, we 
will incorporate the principles contained within the Air Force Smart 
Operations for the 21st Century (AFSO 21) to modernize tools we use to 
manage our infrastructure management function, thereby reducing costs. 
This effort will include a focus on operational efficiency and a 
holistic view of Air Force asset management.
Accommodate Transformation
    Our Airmen are without a doubt the best in the world, but superior 
weapons have also played a key role in recent joint warfighting 
successes in the Global War on Terror. Transformational and advanced 
weapon systems enable our Combatant Commanders to respond quickly in 
support of national security objectives, and the military construction 
budget directly supports many of the transformational QDR decisions. 
The fiscal year 2007 Total Force military construction program consists 
of 29 projects that are essential to transformation, totaling $544 
million. The Global Hawk beddowns in Guam and Europe, and Predator 
beddowns at Creech AFB, Nevada; March ARB, California; Ellington Field, 
Texas; and Hector IAP, North Dakota support QDR decisions to vastly 
increase Unmanned Aerial Vehicle coverage and to boost Intelligence, 
Surveillance and Reconnaissance (ISR) capabilities to identify and 
track moving targets in denied areas. The Combat Search and Rescue 
Group headquarters at Davis-Monthan AFB, Arizona helps to enable our 
Special Operations Forces to perform the most demanding and sensitive 
missions worldwide. The Distributed Common Ground Systems at Langley 
AFB, Virginia; Beale AFB, California; and Osan AB, Korea harness the 
power of information and allow us to conduct integrated, net-centric 
warfare that our enemies cannot match. The C-130J tactical airlift 
beddown at Ramstein AB, Germany improves our Joint Mobility capability 
to operate in irregular warfare environments. Depot Maintenance 
Reengineering and Transformation at Hill AFB, Utah, and Robins AFB, 
Georgia is transforming our industrial base to support warfighter 
requirements more effectively. Integrated Global Presence and Basing 
Strategy projects at Andersen AFB, Guam provide the foundational 
infrastructure for our joint air strike and reconnaissance capabilities 
in the Pacific. F-22A Raptor aircraft beddown at Elmendorf AFB, Alaska; 
Hill AFB; and Tyndall AFB, Florida ensures fifth generation stealth 
capabilities are available when and where they are needed.
    The Global War on Terror has changed the role of Airmen in how we 
provide effects and capabilities to Combatant Commanders. Our Airmen 
now work and live ``outside the wire'', and to ensure our Airmen have 
the right skills and more efficiently wage the war on terrorism we are 
standing up the Common Battlefield Airmen Training Complex. Training 
will include weapons proficiency, land navigation, small units tactics, 
physical conditioning, and further instill the warrior mindset in our 
Pararescuemen, Combat Controllers, Tactical Air Control Party 
personnel, Battlefield Weathermen, and other Battlefield Airmen career 
fields. Additionally, to ensure seamless integration into the joint 
battlefield, we are constructing Tactical Aircraft Control Program 
facilities at Fort Bliss, Texas, and Fort Knox, Kentucky.
    A significant portion of our 2007 MILCON budget goes toward 
expediting our transformation into a fully integrated (joint and 
coalition) planning and operational environment. These facilities 
enable and enhance QDR requirements for improved Joint Command and 
Control capabilities. Strategic Planning facilities at Hurlburt Field, 
Florida for Air Force Special Operations Command, and Andrews AFB, 
Maryland for the National Capital Region are key links to our highly 
networked, virtual environment that enables real-time collaboration and 
rapid production of high quality planning products. At MacDill AFB, 
Florida the Air Force is constructing a consolidated Joint Intelligence 
Center for United States Central Command (USCENTCOM). USCENTCOM's area 
of responsibility is the geographic and ideological heart of the Global 
War on Terror. A war without borders, it spans 27 countries in the 
Central Asian region of the world. The Joint Intelligence Center 
provides the USCENTCOM Commander with the situational awareness and 
long range analysis needed to defeat adversaries within the AOR, 
promote regional stability, support allies, and protect United States 
national interests.
Beddown new Missions
    In addition to the transformational new missions, we continue to 
beddown missions that capitalize on existing capabilities. One of the 
key enablers of the national defense is our strategic airlift 
capability. We are continuing our investment to beddown C-5s at Memphis 
IAP, Tennessee, and Martinsburg, West Virginia. The extensive beddown 
program for the C-17s continues at Elmendorf AFB; Travis AFB and March 
ARB, California; Dover AFB, Delaware; Hickam AFB, Hawaii; Jackson Air 
Guard Station, Mississippi; and Lakehurst Naval Air Station, New 
Jersey. Thanks to your support, the construction funding requirements 
for Charleston AFB, South Carolina, and McChord AFB, Washington are 
complete. The request for fiscal year 2007 includes thirteen C-17 
beddown projects worth over $184 million.
Continue to Invest in Quality of Life Improvements
    The Air Force sees a direct link between readiness and quality of 
life. We strive to provide quality family housing for our families, 
quality ``Dorms-4-Airmen'', functional fitness centers, and safe child 
development centers. When Airmen deploy, time spent worrying whether 
their families are safe and secure is time not spent focusing on the 
mission. Our QOL initiatives are critical to our overall combat 
readiness and to recruiting and retaining our country's best and 
brightest. Our QOL initiatives reflect our commitment to our Airmen.
            Family Housing
    The Air Force Family Housing Master Plan details our housing 
MILCON, O&M, and privatization efforts. It is designed to ensure safe, 
affordable, and adequate housing for our members. To implement the 
plan, our fiscal year 2007 budget request for the family housing 
investment program is $1.9 billion, the largest in Air Force history. 
Department of Defense Strategic Planning Guidance is to eliminate 
inadequate family housing units in the United States by 2007 and 
overseas family housing units by 2009. The fiscal year 2007 budget 
request completes our efforts to meet the goal in the CONUS, and 
continues our progress overseas. In fiscal year 2007 our installations 
in Germany, Japan, and the United Kingdom have housing projects that 
not only support our Airmen directly, but also spur additional private 
investor interest to provide quality housing for years to come. We 
thank you for your assistance in helping keep us on the path to meet 
these goals.
    For fiscal year 2007, the $1.18 billion requested for our housing 
investment program will provide approximately 2,300 new homes at 10 
bases and improve more than 2,200 homes at 13 bases. An additional $755 
million will be used to pay for operations, maintenance, utilities and 
leases to support the family housing program.
            Dormitories
    We are just as committed to providing adequate housing for our 
unaccompanied junior enlisted personnel. We are making great progress 
in our Dormitory Master Plan, a three-phased dormitory investment 
strategy. Phase I, eliminating central latrine dormitories, is complete 
and we are now concentrating on the final two phases of the investment 
strategy. In Phase II, we are building dormitories in a new 
configuration called ``Dorms-4-Airmen,'' a four-person module, to 
eliminate our room shortage. This is a Chief of Staff approved standard 
for future dormitories. This new module design increases privacy by 
offering a private bathroom within the occupant's private living area 
and increases social interaction space in the kitchen and living room. 
Finally, in Phase III, we will replace existing dormitories at the end 
of their useful with the new Dorms-4-Airmen module to improve the QOL 
of our young Airmen.
    The total Air Force requirement for dormitory rooms is 60,200. With 
the fiscal year 2007 proposal, we are on track to replace all 
inadequate permanent party dormitory rooms by fiscal year 2007 and all 
inadequate technical training dormitories by fiscal year 2009. This 
request includes $159 million for nine dormitory projects--creating 
1,426 new rooms for unaccompanied personnel at both stateside and 
overseas bases. We anticipate our requests in fiscal year 2008 and 
fiscal year 2009 to only include technical training dormitories.
            Community Support
     Our MILCON program also supports the Air Force holistic approach 
to wellness. The four pillars of Air Force Wellness are social, 
emotional, physical and spiritual aspects of life. Our ``Dorms-4-
Airmen'' design underpins on our Wingman concept by keeping our dorm 
residents socially and emotionally fit. Our fitness centers are a 
critical component of the Air Force's QOL and mission accomplishment. 
Our expeditionary nature requires that Airmen deploy to all regions of 
the world, and into extreme environments, and they must be physically 
prepared to deal with these challenges. In 2007, we will construct a 
fitness center at Eielson AFB, Alaska. Our focus on QOL improvements 
links directly with the Air Force overall modernization and 
transformation program and will support our Airmen and their families 
as they prepare to meet the challenges of an ever-changing world.
Sustain, Restore, and Modernize our Infrastructure
    The Air Force remains focused on sustaining, restoring, and 
modernizing our infrastructure. As I stated previously, in 2007, we 
have focused sustainment funding on preserving our existing investment 
in facilities and infrastructure and targeted limited R&M funding to 
fix critical facility deficiencies to maintain readiness.
    Our sustainment program is aimed at maximizing the life of our 
infrastructure and preserving our existing investment. Without proper 
sustainment, our infrastructure wears out more rapidly. In addition, 
Commanders in the field use O&M accounts to address facility 
requirements that impact their mission capabilities.
    When facilities require restoration or modernization, we use a 
balanced program of O&M and MILCON funding to make them ``mission 
ready.'' Unfortunately, R&M requirements in past years exceeded 
available O&M funding, causing us to defer much-needed work. It is 
important for us to steadily increase the investment in restoration and 
modernization in order to halt the growth of this backlog, while fully 
funding sustainment to maximize the life of our good infrastructure.
    The Air Force Total Force fiscal year 2007 sustainment funding is 
$1.68 billion and R&M funding is $310 million. This budget carefully 
balances SRM, and MILCON programs to make the most effective use of 
available funding in support of the Air Force mission.
    I am concerned about the potential impact of a change in the 
appropriation acts that separates the SRM Account from the rest of the 
O&M appropriation. This would, in effect, create a fence around SRM. In 
past years, all O&M was funded from the Defense Appropriation. 
Commanders used the flexibility to move money between O&M accounts to 
effectively manage budget shortfalls and unexpected requirements such 
as utility rate increases, natural disasters, infrastructure failures, 
or mission-driven requirements. Without legislation that would permit 
the movement of funds between all O&M accounts, Commanders would face 
serious challenges addressing these emergent requirements. Let me say, 
I share the concern expressed by members of Congress about the use of 
SRM or Base Support accounts as ``bill payers.'' However, for 19 of the 
past 21 years the Air Force has obligated more in SRM than was 
requested in the President's Budget. Air Force Commanders are committed 
to taking care their mission, people, AND facilities. Accordingly, if 
any legislative action is necessary, I believe combining legislative 
language allowing free movement of funds among all O&M accounts, with 
obligation floors for SRM and Base Support is the most effective 
solution. In this way, Commanders will have the ability to best 
allocate resources to meet an increasing set of challenges, including 
support for critical facility repairs. A critical component of the 
Commander's effort will include driving greater efficiencies and higher 
productivity by reforming our business practices under AFSO 21, there 
by driving more value out of every taxpayer dollar we spend.
Continue Demolition of Excess, Obsolete Facilities
    In addition to modernizing and restoring worn out facilities, we 
also demolish excess and obsolete facilities. This ensures funds are 
focused on facilities we need, not on sustaining ones we do not. For 
the past eight years, the Air Force has aggressively demolished or 
disposed of facilities that were unneeded or no longer economically 
viable to maintain. From fiscal year 1998 through fiscal year 2005, we 
demolished 20.3 million square feet of non-housing facilities and 
infrastructure at a cost of $238 million in O&M funding. This is 
equivalent to demolishing more than three average size Air Force 
installations and has allowed us to target our infrastructure funding 
on facilities we need for the long-term mission. For fiscal year 2007 
and beyond, the Air Force will continue to aggressively identify 
opportunities to eliminate excess and obsolete facilities.
Mission Support
    The Air Force MILCON program is carefully shaped to reflect the 
most urgent priorities. We have decentralized the process for existing 
mission projects so that MAJCOM Commanders have more input into which 
construction priorities get executed. We provide them a funding target 
based on their percentage of Air Force Plant Replacement Value, and 
they have flexibility in prioritizing the projects most important to 
their mission. This is appropriate because they are closer to the 
missions and uniquely situated to determine priorities. The 2007 MILCON 
program has 16 mission support projects worth $155.3 million. These 
projects range from the most basic electrical and water distribution 
infrastructure on one end of the spectrum to high tech space test and 
evaluation facilities on the other end of the spectrum.
Planning and Design/Unspecified Minor Construction
    This year's Air Force MILCON request includes $124.6 million for 
planning and design (P&D), of which $13.2 million is for military 
family housing. The request includes $87.5 million for active duty, 
$18.8 million for the Air National Guard, and $5.1 million for the Air 
Force Reserve. These funds will allow us to complete the design work 
for fiscal year 2007 construction programs and to start the designs for 
fiscal year 2008 projects, allowing us to award contracts in the year 
of authorization and appropriation.
    This year's request also includes $25.5 million for the Total Force 
unspecified minor construction program which is our primary means for 
funding small, unforeseen projects that cannot wait for the normal 
military construction process. Because these projects emerge over the 
course of the year, it is not possible to predict the total funding 
requirement. When unspecified minor construction requirements exceed 
our funding request, we augment them by reprogramming available MILCON 
construction funds.
Optimize use of Public and Private Resources
            Housing Privatization
    Air Force Airmen and their families appreciate your staunch 
commitment to their quality of life. We have used privatization 
authorities to accelerate our housing program. To date, we have awarded 
17 privatization projects providing 16,200 privatized homes for our Air 
Force families. That translates to the Air Force leveraging an 
investment of $209 million with private sector funding to provide $2.4 
billion in total development, yielding a leverage of approximately $11 
of private investment for each public tax dollar.
    Since last year, the Air Force completed construction of our fifth 
privatization project, Phase I of the Wright-Patterson AFB, Ohio, 
privatization project, joining the four previously completed projects 
at Dyess AFB, Texas; Elmendorf AFB (Phase I); Lackland AFB (Phase I), 
Texas; and Robins AFB (Phase I), providing a total of 3,856 homes for 
our Air Force families. Additionally, the Air Force has eight projects 
under various stages of construction at Buckley AFB, Colorado; 
Elmendorf AFB (Phase II); Hanscom AFB, Massachusetts; Hickam AFB (Phase 
I); Kirtland AFB, New Mexico; Little Rock AFB, Arkansas; Moody AFB, 
Georgia; and Patrick AFB, Florida. When these eight ongoing projects 
are complete, we will have 12,352 more new homes available for 
families. Recently, the Air Force awarded four more privatization 
projects at Dover AFB, Hill AFB, Offutt AFB, Nebraska, and Scott AFB, 
Illinois, which are mobilizing for construction this Spring.
    Three years ago the Air Force committed to a goal of privatizing 60 
percent of U.S.-based family housing by 2007; we are proud to say we 
will eclipse that mark by an additional 15 percent and will privatize 
75 percent of our (government-owned) housing in the United States and 
its territories. In total, the Air Force will leverage $575 million in 
MILCON dollars, yielding total construction development expenditures on 
and around Air Force installations exceeding $7.9 billion and providing 
over 47,000 quality homes for our Air Force families.
            Utility Privatization
    In addition to privatizing housing, the Air Force is interested in 
privatizing utilities where it makes economic sense and does not 
adversely affect readiness, security, or mission accomplishment. Our 
installations are key to our operational capabilities. Our network of 
bases provides necessary infrastructure for deploying, employing, and 
sustaining air and space operations and re-deploying and reconstituting 
the force afterwards. Our bases are also the training platforms from 
which skilled Airmen learn their trades and prepare for deployment. 
Reliable utility services are essential to operations at every Air 
Force base.
    To date, the Air Force has conveyed 16 utility systems: 10 under 
OSD's utilities privatization program (10 U.S.C. 2688) and 6 under 
previous efforts. Some 275 systems are currently in the solicitation 
process. By the time the program is complete, we anticipate as many as 
100 of about 500 systems could be privatized. During the course of this 
process, we expect that many competitive solicitations will end up as 
sole source procurements from local utility companies.
Base Realignment And Closure 2005
    The Secretary of Defense transmitted his recommended closures and 
realignments, to include those recommendations developed by and 
affecting the Department of the Air Force, to the Defense Base Closure 
and Realignment Commission and to the Congress on May 13, 2005, and 
published them in the Federal Register on May 16, 2005, pursuant to 
Public Law 101-510, as amended. The Air Force recommendations 
reaffirmed the Department of Defense's commitment to defend the 
homeland, to establish a capabilities-based defense strategy, and to 
challenge the military departments to transform themselves to better 
meet new threats in a changed security environment. Consistent with the 
goals outlined by the Secretary of Defense, the Department of the Air 
Force established four BRAC goals to support right-sizing of its force 
and to enhance its capabilities:
  --Maximize warfighting capability efficiently,
  --Transform the Total Air Force by realigning infrastructure to meet 
        future defense strategy,
  --Maximize operational capability by eliminating excess physical 
        capacity, and
  --Capitalize on opportunities for joint activity.
    These goals were formulated with a Total Force perspective--active 
duty, Air Force Reserve and Air National Guard--to optimize operational 
capability in response to a projected declining force structure given a 
20-year view. In turn, these facilitated ongoing transformation within 
the Air Force to meet the challenges and opportunities of the 21st 
Century, and restructure important support functions that capitalize on 
advances in technology and business practices. Of the 222 
recommendations submitted by the Secretary of Defense, the BRAC 
Commission accepted, without change, about 65 percent. In all, the 
Commission revised 34 percent of the recommendations regarding the Air 
Reserve Component, and 37 percent of the Joint Cross-Service Group 
recommendations that affected Air Force installations. While the 
Commission's final decisions fell short of the Air Force's overall 
goals for BRAC--particularly in eliminating excess physical capacity--
they did, however, help us take a major step towards reshaping our 
Total Force structure. For example, as a result of BRAC, Air Reserve 
Component flying squadrons are increased to a more effective 
operational size, such as from 15 aircraft per fighter squadron to 18 
per squadron after BRAC, and from 8 aircraft per mobility squadron to 
12 after BRAC. This increases the percentage of Reserve Component 
squadrons that are optimally-sized from the current 4 percent to 59 
percent. Additionally, the Air Force will cease flying operations at 23 
locations in response to a declining fighter and mobility force, and 
the Air Force will realize new operational synergies through Joint 
recommendations that pair Air Force and Army forces at locations such 
as Eglin AFB, Florida and Shaw AFB, South Carolina. As the Air Force 
continues to transform, BRAC is but one tool we will use to align our 
force to future defense strategy.
Brac Implementation
    The Air Force has begun to develop an implementation schedule for 
its BRAC 2005 recommendations, and is working in close partnership with 
the Air National Guard, the Air Force Reserve, and our active duty 
major commands to further develop and refine this schedule. In the 
previous four rounds of BRAC, the Commission recommended 22 major 
closure and 17 major realignment actions of Air Force installations. In 
comparison, the 2005 BRAC Commission recommended 5 major closures and 
12 major realignments of Air Force installations. Additionally, there 
were numerous other smaller realignment actions at Air Force 
installations, many of which were transformational in nature. Given the 
transformational nature of this BRAC round, these types of 
recommendations, particularly those that consolidate or co-locate joint 
activities, or those that establish joint operations, pose new 
implementation challenges for the Air Force. To implement these joint 
recommendations, and to best realize their full intent and operational 
payoff, we are working hand-in-hand with our sister Services, the 
affected defense agencies, and the Office of the Secretary of Defense. 
As directed by the Deputy Under Secretary of Defense (Installations and 
Environment), we are developing 64 BRAC Business Plans to effect those 
actions for which the Air Force was designated as the lead military 
department for implementation. These Business Plans serve as a high-
level foundation to outline required actions, the timing of these 
actions, and the associated costs and savings associated with 
implementing each recommendation, and will ensure our BRAC 2005 
recommendations are implemented efficiently and effectively.
    The Department of Defense recently delivered its budget 
justifications reports describing the specific programs, projects, and 
activities for the $1.46 billion appropriated in fiscal year 2006 to 
begin implementing its BRAC actions. This figure includes $231 million 
for Air Force BRAC 2005 activities during fiscal year 2006, which will 
begin the P&D phases and requisite National Environmental Policy Act 
(NEPA) environmental studies that precede the construction and 
renovation of facilities needed to relocate functions, missions, and 
weapons systems.
    Our fiscal year 2007 BRAC MILCON program includes a robust 76 
projects totaling $508.8 million, including P&D and the Air Force share 
of Joint Cross-Service Group projects.
    With respect to the BRAC Commission's language on Cannon AFB, New 
Mexico, the Air Force is leading the Department of Defense's review on 
potential reuse of the installation. This action is consistent with the 
Commission's recommendation that, after disestablishing the host 
fighter wing, the Air Force ``shall establish an enclave at Cannon Air 
Force Base that shall remain open until December 31, 2009 during which 
time the Secretary of Defense shall seek other newly-identified 
missions with all military services for possible assignment to Cannon 
Air Force Base. If the Secretary does not find a mission for Cannon Air 
Force Base by December 31, 2009, Cannon Air Force Base and the enclave 
shall be closed.'' The Air Force has aggressively pursued the 
Commission's direction to seek potential re-use, and expects to provide 
the Secretary of Defense with its findings and recommendations this 
summer.
    As the Air Force begins to gauge the impact of other processes 
external to BRAC, such as the results of the QDR and the Air Force's 
Total Force Integration implementation plan, it will continue to refine 
its facility requirements needed to implement BRAC actions as a direct 
result of these and other transformational influences. While it is yet 
unknown what impact the projected end strength reductions might have, 
or the exact facility requirements that are needed for emerging Total 
Force missions, be assured the Air Force will continue to adjust its 
infrastructure footprint to best align its infrastructure as 
efficiently for the future in full compliance with all statutory 
obligations.
    Downsizing infrastructure during BRAC was a difficult task, as all 
Air Force bases are outstanding installations that stand as a credit to 
our Nation and to the exceptional communities that support them. 
However, we had to make hard infrastructure decisions to posture 
ourselves for new security challenges, and to preserve limited 
resources for readiness and modernization. As such, the Air Force 
recognizes it has an obligation to assist its partner communities 
affected by BRAC 2005. In previous rounds of BRAC, the Air Force 
established an excellent record of closing bases as quickly as 
possible. This aggressive approach provided the quickest savings to the 
Air Force and assisted local communities in their efforts to begin 
economic revitalization. The Air Force will continue to maximize 
savings at closure installations and work closely with local 
communities to facilitate a prompt transition and the best reuse 
opportunities. The Defense Economic Adjustment Program will continue to 
assist communities to plan for the civilian redevelopment of available 
real property, and implement local adjustment actions to assist 
impacted workers, businesses, and other affected community interests. 
The Air Force also recognizes the importance of ensuring that those 
communities whose Air Force installations gain new missions under BRAC 
have the capacity to support these new missions with adequate planning, 
housing, education, infrastructure, and community services. The Air 
Force is working with these communities to plan and carry out 
adjustment strategies that will enhance their ability to support both 
our Airmen and other uniformed men and women at the receiving 
installations.
Environmental Cleanup And Property Transfer
    Environmental clean up and transfer of BRAC real property is often 
technically challenging and has involved extended timeframes to 
complete. At the end of fiscal year 2005, the Air Force has deeded 
approximately 75 percent of 87,000 acres of BRAC property from previous 
BRAC rounds. Our real property disposal efforts have led to the 
creation of over 54,000 reuse jobs in the affected communities. To 
complete the clean up and transfer of the remaining property, the Air 
Force is attempting to leverage private sector experience in developing 
former industrial property similar to Air Force facilities. 
Privatization and guaranteed fixed price contracting are two promising 
examples of this type of process innovation. Our objectives remain 
clear: (1) providing reuse opportunities that best meet the needs of 
the Air Force and local communities, (2) moving the process along 
smartly in each situation to get property back into commerce as soon as 
practical and (3) providing transparency in the process.
    As we transfer BRAC real property for civic and private reuse, the 
Air Force has a continuing responsibility for environmental clean up 
from past industrial activities. The Air Force takes our responsibility 
to protect human health and the environment seriously, and, since 1991, 
we have spent more than $2 billion on environmental clean up at our 
BRAC installations. For fiscal year 2007, the Air Force is requesting 
$116 million for clean up activities.
    At our remaining non-BRAC facilities, the Air Force is reshaping 
our infrastructure to meet the demands of the 21st century. The Air 
Force will utilize new tools to optimize our resources and obtain value 
from our excess capacity. We are developing enhanced use leasing as a 
means of returning value from underused Air Force property and as a 
flexible alternative to property disposal or demolition.
Conclusion
    In conclusion, Madam Chairman, I thank the committee for its strong 
support of our military construction, housing and transformational 
efforts. The near and long term readiness of our Airmen depends upon 
this infrastructure. We will continue to be good stewards of our 
installations' assets and the environment and will continue to work 
hard to ensure Air Force infrastructure is properly distributed to 
optimize military readiness as well as meet our Nation's defense needs. 
At the same time we will continue to modernize our infrastructure 
management processes, within the overall Air Force transformation 
process, to ensure we are good stewards of the taxpayer's dollars. I 
would be pleased to take your questions.

    Senator Hutchison. Thank you very much.
    I want to start, Mr. Eastin, with the question that was 
brought up by Senator Feinstein regarding Vicenza, Italy. The 
Army is proposing to invest almost $500 million over the next 2 
years to consolidate the 173d Airborne Brigade, including $223 
million for this next fiscal year. I am told that the 173d 
deploys out of Aviano, which is 3 hours away, and that a large 
portion of the Vicenza consolidation would be housed at Dal 
Molin, which is a small piece of land that has no force 
protection.
    My question is, have you thought this through?
    Mr. Eastin. We have thought it through greatly. We have 
looked at various other places to accomplish this. Right now 
the 173d of course is in three places. It is part at Ederle, 
part at Bamberg, and part at Schweinfurt in Germany. Ever since 
Hannibal, I do not think it has been particularly good to have 
part of your force on one side of the Alps and the other part 
on the other. So the intention is to bring it all in one place, 
that place being south of the Alps, which operationally I am 
told--I do not propose to be the combatant commander in this 
case, but I am told that it significantly eases the ability to 
deploy from having to get only one clearance for airspace from 
one country rather than several, which would happen up in 
Germany.
    Senator Hutchison. Why was Aviano not considered as the 
place for consolidation, since the airfield is there?
    Mr. Eastin. You would think that, but the government of 
Italy has offered up the site at Dal Molin and there is enough 
land there to accomplish the mission with keeping two of the 
battalions over at Ederle. The Aviano site would require the 
purchase of more land from, I might add, probably less than 
willing sellers. I do not know what their eminent domain 
activity is in Italy. I suspect it is a little broader than 
ours is here.
    We have also looked at Sigonella. We have the same problem 
with land there. We have looked at Amendola; the same problem 
with land there. Just it is a very land-intense operation and 
it would require the purchase of more land in the other places, 
and with the additional expense entailed.
    So while it may not be intuitive to deploy from Aviano, it 
is but a couple or 3 hours away on a rather super highway and 
can easily be done, and for training purposes they can train in 
Ederle and at Dal Molin and then when they need aircraft, go to 
Aviano.
    Senator Hutchison. We will certainly want to keep looking 
at that. Your $500 million to consolidate at Vicenza--for 
another couple of hundred million you might be able to 
consolidate everything where people could live, have force 
protection, and the airfield. It sounds like you have made the 
decision, but it is something I hope you will continue to 
monitor.
    Mr. Anderson, Spangdahlem. As I mentioned earlier, the Air 
Force is requesting another $39 million for more housing at 
Spangdahlem and $70 million at Ramstein. Are you looking at the 
housing market in these locations and the options that would be 
the most efficient for housing our people, particularly at 
Spangdahlem, where it just seems like an awfully high price 
with no effort so far from the German government.
    Mr. Anderson. Yes, Ma'am, we are. I actually, knowing of 
course that this was a looming issue, last winter I went over 
there myself to take a firsthand look and talk with local 
leaders, local German leaders, and our base commanders. I was 
actually hoping to link up with you on your trip and I 
understand that for other reasons you could not join us in 
Spangdahlem.
    Senator Hutchison. Yes, we had votes late that night.
    Mr. Anderson. I was hoping to walk it with you and we could 
talk as we went.
    But anyway, the Air Force has been working very closely 
with Carl Peter Bruch, who is the state secretary of the German 
state in that area, looking at various options. There are 
obviously, as you know, numerous different options: build-to-
lease, true privatization, MILCON. Each of the two locations 
are very different, Ramstein being much more suburban-urban, 
with Spangdahlem being a very rural location. They both have 
two very different issues. Ramstein, because of the build-up of 
the military in that area because of the Rhein-Main closure and 
movement, the fact that it is not only U.S. military in that 
area but some of our coalition partners, allies are also using 
the base and in need of housing, and the housing that is in 
most need, enlisted family housing, is identical to the type of 
housing stock that the young German family needs, which is also 
apparently their biggest need.
    The local community, the State, is working with us to look 
at options for either privatization or build-to-lease. They 
believe that they can potentially deal with part of our need. 
We already have 2,000 housing units in stock that we use 
already. They believe they can take care of part of our need, 
but not all of it. The MILCON request would in essence take 
care of the difference.
    Spangdahlem, in a rural area, we need 860, I believe it is 
863--I may be off a few--housing units per our estimations. The 
community believes that it can absorb about 360 of those in 
that rural community along with some other housing that they 
are building for local German nationals, and plans are moving 
ahead to work with the German government to make that happen. 
The remainder of the housing would have to be covered, we 
believe, on base through MILCON. But the German government is 
stepping up and trying to help us through this. It is not an 
easy equation for them, and I realize it is not an easy 
equation for you either.
    Senator Hutchison. Well, I appreciate that you did that. I 
wish I could have been there as well. And I know it is a rural 
area, which makes it more difficult. But if the German 
government is in fact being encouraged, that is a good sign, 
and I hope that you will continue to pursue the most efficient 
situation.
    Mr. Anderson. We will, Ma'am.
    Senator Hutchison. Mr. Penn, I wanted to ask you about the 
area around Naval Air Station Kingsville. There is apparently a 
need to expand training ranges at Kingsville and there is some 
acreage for sale which maybe the National Guard of Texas is 
looking at buying. But the Department of the Navy might also be 
looking at that.
    That base is I think well positioned to grow in the future, 
particularly if there is encroachment on other training bases 
around the country that are still in flux. My question is, to 
what extent is the Department of Navy looking at that before it 
might go--and let me say, I do not know who owns the property. 
I do not have any idea, except that the community is very 
supportive of expanding the training capabilities of Naval Air 
Station Kingsville. So I wondered if Navy is looking seriously 
at doing that before it goes somewhere else.
    Mr. Penn. Yes, Ma'am, we are. In fact, I visited Kingsville 
the end of last year and the Navy--it may end up being a 
bidding war between the Navy and my friend from the Army here. 
But the ECUs, we are looking at for expansion of ECUs. As you 
mentioned earlier, the encroachment is--Kingsville, when I was 
going through flight training Kingsville was--nothing was 
around it. But now within a mile or so there are houses and 
developments springing up.
    Senator Hutchison. Well, as you know, it is a unique area 
where you can have live fire training. There is a lot of 
potential for it. It would be good for a training base for 
reserve, but it also has such, I think, a higher level of use 
for Navy for the potential expansion of the training air.
    Mr. Penn. They have unencumbered air space, which is 
something we need.
    Senator Hutchison. Well, I hope that you are looking at 
that, because I think from the standpoint of the strength of 
the Navy base it would be better to have that be Navy-owned 
than if it were turned into a Guard base and then it might end 
up being the whole thing a Guard base. So not that that is bad, 
but it is not the highest use when air space that is 
uncongested is so rare for the Navy. So I want to make sure 
that that is on your radar screen.
    Mr. Eastin, Red River Army Depot. Red River, as everyone 
knows, was taken off the closure list by the BRAC last year and 
we are going to add one military construction project to Red 
River that was not on the President's request. But I want to 
ask you if you are now in the Army looking at really upgrading 
Red River so that it can continue with the great work force it 
has to do the best possible job on the tanks and trucks that it 
has the unique capability to repair and upgrade?
    Mr. Eastin. As you know, Madam Chairman, Red River was 
initially thought of as being part of the BRAC process. That 
has been taken off the table. It is now an active Army 
installation and we intend to support it fully and support its 
mission.
    Senator Hutchison. Thank you.
    That is all the questions I have. Senator Allard.
    Senator Allard. Thank you, Madam Chairman.
    I just would like to follow up on some of my comments I 
made earlier. Again, I could not be more pleased with the 
presence of Fort Carson in Colorado and the people in Colorado 
Springs and the way they cooperate. I had an opportunity to get 
down there and personally visit with all the men and women that 
have served us so ably in Iraq, and they are just wonderful, 
courageous people. I do not think we really recognize the great 
service they are doing for this country enough. They have 
served in some of the toughest areas in Iraq and Afghanistan 
and, as I mentioned earlier, have a reenlistment rate, and I 
want to do everything I can to make sure they get the adequate 
training they need and to make sure that we can make life as 
appealing as we possibly can in the bases that we have in 
Colorado Springs.
    As you gathered from my earlier comments, I am supportive 
of the expansion of the training facilities there in Fort 
Carson. Kind of the hangup on all this is eminent domain. It 
seems to me that with all the acres that are around the current 
training site that there is going to be plenty of options for 
the Army and probably they do not need to use eminent domain. I 
have been assured that that is not your intention.
    So my colleague Senator Salazar is holding a public meeting 
down in Pueblo and they will be talking about the expansion. I 
think you are going to have a representative there. I wonder if 
you can share with us some of your thoughts about Pinon Canyon.
    Mr. Eastin. First, it is DOD policy, as well as that of the 
Army, not to discuss land acquisition until decisions have been 
made. Somehow or other the cat got out of the bag here and I 
think the cat has left the building already. The Pinon Canyon 
area is very important to the Army. It supplies a vast and open 
space to do training with, as you said, modern weapons that 
shoot accurately at a greater distance. We have a proposal in 
the works--I have not seen it yet--as to acquiring land in the 
Pinon Canyon area. We have some 250,000 acres there now. I 
think what I have seen about this, it will probably add 
somewhere about slightly north of 400,000 more acres.
    Senator Allard. Out of 1 million, 1 million acres.
    Mr. Eastin. It is nice to have an area where you have 1 
million lying around somewhere.
    Senator Allard. Yes.
    Mr. Eastin. As you know, back in 1982 to 1987 we acquired 
the Pinon Canyon area. Half of those acquisitions were done by 
open purchases and another roughly half were done through 
condemnations. Of those condemnations, there are several ways 
to condemn things. You can argue over nickels and dimes and 
finally settle the issue rather than arguing in a major way by 
condemning it. Other times, property owners have come to us and 
said, for tax purposes please condemn this land from us.
    Senator Allard. So you will do condemnation just because 
you have a willing seller and a willing buyer, but you will do 
it to provide some tax benefits for the seller.
    Mr. Eastin. And in the current exercise we are going 
through in Pinon Canyon some of that was actually started by a 
couple landowners who wanted to sell to us.
    Senator Allard. Yes.
    Mr. Eastin. Clearly the preferred way is to handle this 
through a willing seller and a willing buyer and we will do 
that. I do not think to take off the table the possibility of 
condemnation as a way to handle some recalcitrant--we call them 
``doughnut holes.'' We acquire friendly all the land around the 
outside and one guy is left in the middle, and you have to have 
air rights to shoot over his property or something. It is hard 
to train that way.
    But on to the issue of fair market value, basically even in 
a condemnation action you would be getting fair market value as 
determined by one or more appraisals. But I want to just 
emphasize to you that our firm intention is to buy this from 
people who want to sell it to us, not some other way.
    Senator Allard. Well, your comments are encouraging and, 
like I say, we have so much land there in order to meet your 
needs, and if you have a plan over 20 years or 10 years I 
cannot help but think at some point in time you will reach an 
environment where you can have a willing seller, a willing 
buyer. There is nothing pressuring--down in Pinion Canyon, 
there is nothing really pressuring. Nobody is out there--there 
are no urban areas pressing on it or anything like that and it 
is a relatively undeveloped area, just ranches out in that 
area. I think with time, with patience, you can probably 
acquire those without eminent domain.
    Of course, I had not thought about the possibility that an 
owner may request that you do an eminent domain for tax 
purposes, and I think we will take a second look at our piece 
of legislation to make sure we do not take that opportunity 
away.
    Mr. Eastin. We do appreciate that, according to a survey 
that someone in my office had done, there were 2,000 people in 
the million acres.
    Senator Allard. That includes the heavily populated towns 
we have there, too.
    Secretary Anderson, about the Air Force, I want to talk a 
little bit about the academy there. I just finished a board of 
visitors meeting there and they presented to us a plan to 
recapitalize the facilities at the Air Force Academy. Most of 
the buildings there are over 50 years old. They were built all 
at once and they are over 50 years old, so now they need to 
begin to think to cycle them through over time.
    Some of them were not built there in a way to endure our 
temperature changes, for example, so we have problems with 
cracking cement in some areas and not holding up like expected. 
Many of the buildings right now are incurring some pretty high 
operational costs there at the academy. So they have begun to 
talk about some kind of recapitalization plan there.
    Do you have any idea when the Air Force might look at these 
facilities at the academy in a serious way and look at the 
possibility of putting together a plan there or working with 
the academy and putting together a plan?
    Mr. Anderson. Senator, having walked the academy and looked 
at the buildings like you did, I understand what you are 
talking about and I agree with some of the issues you discuss. 
As you rightly mentioned, the academy is beginning to take a 
look at the strategy for recapitalization. It has not yet risen 
to my level for review. I do not offhand know the time frame. 
We would be happy to get back with you on that in a written 
response if you would like.
    But I do understand that that process has begun and yes, 
the civil engineering organization within the Air Force and my 
office will be looking at that as soon as it is available.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Allard. I would appreciate a written response as to 
kind of what you are thinking about as far as long-term 
planning to make sure that we are thinking--I think it is time 
for us to begin to consider those buildings that are most at 
risk and those that are least at risk and put them on a 
priority list and begin to see, look at the dollars they might 
incur to keep it up. I think we want to keep the academy in 
good shape if we possibly can.
    Thank you for your responsiveness, both of you. I 
appreciate it.
    Thank you, Madam Chairman.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                 Question Submitted to Philip W. Grone

           Question Submitted by Senator Kay Bailey Hutchison

                             BUSINESS PLAN

    Question. Mr. Grone, I understand Department of Defense is 
requiring the Services and defense agencies to develop business plans 
for each of the approved BRAC recommendations. Among other things, 
these plans develop updated costs and savings for each recommendation 
and an implementation schedule for each recommendation.
    When do you expect to have all the business plans approved?
    Answer. The Department is aggressively developing, reviewing and 
approving the Business Plans supporting the Base Realignment and 
Closure (BRAC) recommendations. The Department anticipates these plans 
will be approved on a time schedule which allows them to inform the 
program review process this summer in advance of developing the fiscal 
year 2008 President's Budget.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                        BRAC PROPERTY APPRAISALS

    Question. Since the Defense Base Closure and Realignment Act of 
1990, as amended, does not require appraisals prior to the conveyance 
of pre-2005 properties, why is the Department requesting such 
appraisals for pre-2005 properties?
    Answer. In anticipation of the 2005 BRAC round, the Department of 
Defense revised its regulation at 32 CFR Part 174 and subsequently 
issued the Base Redevelopment and Realignment Manual (BRRM) March 1, 
2006 (the BRRM replaces and cancels the Base Reuse Implementation 
Manual (BRIM), December 1, 1997). These two new issuances provide 
revised and updated procedures to be followed by the Military 
Departments in the disposition of BRAC property. It is not the intent 
nor is it the expectation of the Department that actions from past BRAC 
rounds which have been largely completed should be reopened to comply 
with the new procedures. In some instances, e.g., the requirement to 
seek to obtain fair market value for Economic Development Conveyances, 
the statutory changes and their regulatory implementation only apply to 
the 2005 BRAC round. To the extent an action from a prior round is 
still largely open and an appraisal could be accomplished without 
impairing a mostly complete action, it would be perfectly appropriate 
to do such an appraisal. But this will have to be determined on a case-
by-case basis depending on the status of the disposal action.
    Question. Please provide the Committee with a BRAC 2005 FYDP for 
the fiscal year 2007 through fiscal year 2011.
    Answer. The BRAC 2005 FYDP for the fiscal year 2007 through fiscal 
year 2011 period is as follows:
  --fiscal year 2007 ($5,626.223 million);
  --fiscal year 2008 ($5,696.754 million);
  --fiscal year 2009 ($2,996.036 million);
  --fiscal year 2010 ($1,563.785 million); and
  --fiscal year 2011 ($921.615 million).
    This distribution of resources over the program and related 
information was included in the budget justification materials provided 
to Congress in support of the President's fiscal year 2007 budget 
request, specifically the ``DOD Base Realignment and Closure 2005 
Commission Executive Summary Fiscal Year 2007 Budget Estimates Program 
Year 2007.''

                            GLOBAL REBASING

    Question. Mr. Grone, would you update the committee on the status 
of the Pentagon's global rebasing plan? I understand that the 
Government of Japan has reached agreement with the United States to 
cover 60 percent of the cost of moving approximately 8,000 Marines from 
Okinawa to Guam instead of the 75 percent that the U.S. originally 
counted on, leaving the U.S. share of the relocation cost at about $4.2 
billion.
    Answer. On May 1, 2006, the U.S.-Japan Security Consultative 
Committee (SCC), consisting of the Secretaries of Defense and State and 
their Government of Japan counterparts, released the ``U.S.-Japan 
Roadmap for Realignment Implementation'' document detailing the 
schedules and timelines for implementing the realignment initiatives in 
the October 29, 2005 SCC document, ``U.S.-Japan Alliance: 
Transformation and Realignment for the Future''. One of the several 
initiatives contained therein concerns the move of approximately 8,000 
Marines and their approximately 9,000 dependents from Okinawa to Guam. 
The implementation plan for this initiative provides that the United 
States will fund approximately $4.18 billion out of an estimated 
development cost of $10.27 billion, or about 40 percent. The total U.S. 
cost to develop the facilities and maintain the forces on Guam will be 
somewhat higher when we factor in O&M costs associated with the move, 
the cost of closing down facilities in Okinawa, the procurement costs 
to equip new facilities on Guam, and the costs for leasing real estate 
on Guam.
    The total package of realignments of United States forces in Japan 
involves several other initiatives for which Japan will pay nearly all 
the facilities development costs and that will result in a more secure 
and capable forward presence for our forces. These initiatives include 
a new plan to relocate the capabilities of Marine Corps Air Station 
Futenma out of urbanized Ginowan city to the rural areas near Camp 
Schwab that is politically and technically feasible where previous 
plans were not. These initiatives also include agreement on a plan to 
relocate the jet aircraft from Carrier Air Wing Five out of the 
urbanized Atsugi area to Marine Corps Air Station Iwakuni, which is in 
a much less developed area of Japan. Although the Japanese Government 
has not provided an official estimate of the total costs it will bear 
for the entire package of realignments in Japan and on Guam, we 
understand that the Government of Japan's preliminary estimates are in 
the range of $15-$20 billion.
    Question. Given the increasing pressure on the defense budget how 
does the Pentagon plan to pay its share of the cost of that move? Is 
the funding built into the current FYDP?
    Answer. The fiscal year 2007 President's Budget contains $15 
million for planning activities and initial environmental study actions 
relating to the move of 8,000 Marines and their dependents from Okinawa 
to Guam. In addition, the fiscal year 2007 President's Budget contains 
funding for force posture adjustments on Guam that are not directly 
associated with the U.S.-Japan Alliance Transformation and Realignment 
effort, such as additional submarines, Global Hawk, tankers, and 
rotational fighters and bombers. Funding for the development costs for 
relocating the Marines from Okinawa to Guam is not yet reflected in the 
FYDP. The department continues to define the requirements and refine 
the development cost projections. We plan to examine and analyze 
funding issues during the fiscal year 2008-2013 Program Budget Review 
this year.

                          ENERGY CONSERVATION

    Question. Mr. Grone, we are all aware of the current crisis at the 
gas pumps. This committee has had a long-standing concern about the 
dependence on foreign oil by the Defense Department, as it relates both 
to cost and to national security, and has actively encouraged DOD to 
pursue the use of alternative energy at military installations.
    Last year, the Defense Department submitted a report, as requested 
by this committee, on the potential of increasing the use of 
alternative energy at U.S. military installations. What steps has the 
Defense Department has taken, as a result of that study, to increase 
reliance on alternative energy sources, particularly wind and 
geothermal power, at U.S. military bases?
    Answer. In March 2005, DOD completed an $8.5 million renewable 
energy assessment at all military installations. As indicated in our 
fiscal year 2005 annual energy management report, 8.8 percent of DOD's 
electricity portfolio is now composed of renewable energy. We have 
additionally published a stretch goal of 25 percent by 2025 that we are 
working steadily toward. Senate Report 109-105, accompanying the 
Military Construction Appropriations Act for fiscal year 2006, 
requested the Secretary of Defense report on the steps the Department 
has taken to execute the implementation plan contained in the 
Department's March 2005 Renewable Energy Assessment. On April 4, 2006, 
DOD forwarded an update to the congressional defense committees. Rather 
than replicate that report in this response, a complete copy of that 
report, which will answer your question in greater detail, is available 
at http://www.acq.osd.mil/ie/irm/Energy/Energy.htm. However, I would 
like to take the opportunity to highlight a few key points. Since our 
assessment, we have methodically increased the amount of our Energy 
Conservation Investment Program (ECIP) budget that we are devoting to 
renewable energy generation projects from about $5 million in fiscal 
year 2003 to about $19 million in the fiscal year 2007 President's 
Budget. Of the $19 million in fiscal year 2007, $2.6 million in 
hydrogen fuel cell projects is included.
    Question. Water conservation is another very important issue in 
many States, including my state of California. Would you provide this 
committee for the record with your recommendations as to how the 
Defense Department can take advantage of new technologies to improve 
water conservation at military installations?
    Answer. Important to sustaining Department of Defense (DOD) 
operations is our commitment to the protection of our natural 
resources. Water is an essential natural resource that supports the 
installation mission, and water conservation is key for protecting that 
resource. DOD strives to increase water conservation awareness and 
reduce water use, particularly where scarce water supplies may impact 
mission accomplishment. Reducing use of potable water can decrease 
water pollution, increase energy savings, and create more efficient use 
of water resources. DOD is committed to the protection and sustainment 
of our water resources. From fiscal year 2000 to fiscal year 2004, DOD 
installations decreased portable water consumption by 15.6 percent. In 
2005, DOD updated its energy management policy in DOD Instruction 
4170.11, ``Installation Energy Management.'' This Instruction is based 
on the Energy Policy Acts of 1992 and 2005, and Executive Order 13123, 
``Greening of the Government Through Efficient Energy Management.'' It 
requires DOD Components to ``maximize energy and water conservation 
efforts'' on existing installations and, as part of DOD's sustainable 
building design requirement, in new building construction and major 
renovation projects. Under DOD's water conservation effort, 
installations develop water management plans, conduct water audits, and 
implement cost-effective water reduction and conservation practices. 
After implementing basic water conservation measures, installations 
focus on water reuse and reclamation projects. Typical projects are on-
site recycling for vehicle wash facilities and cooling towers, and 
reclaimed water for irrigation, landscaping, and dust control. DOD 
facilities will continue to utilize life-cycle cost analysis to make 
decisions about investments in new products, services, technologies, 
and construction, that will lower DOD costs and reduce energy and water 
consumption.

                             BUSINESS PLAN

    Question. How do the implementation schedules proposed in the 
business plans compare with those originally proposed by the 
Department?
    Answer. The Department is fully committed to implementing all BRAC 
2005 recommendations in accordance with the statutory 6-year period. 
The Cost of Base Realignment Actions (COBRA) model used to analyze 
these recommendations typically front loaded the implementation 
schedule to initiate actions in the first few years in order to 
adequately compare basing options. BRAC implementation for some actions 
is being delayed compared to the schedule implied by COBRA of the 
previous rounds, primarily due to the complexity and large number of 
joint recommendations.
                                 ______
                                 

                 Questions Submitted to Keith E. Eastin

            Questions Submitted by Senator Dianne Feinstein

                                 KOREA

    Question. Last year the Committee was told by the Services that 
costs had increased and that there would be no savings, yet, we find 
this year that the opposite is true.
    Can each of you validate these costs and provide the Committee with 
a more realistic estimate of the amount needed for these facilities?
    Answer. The fiscal year 2007 Korea barracks cost estimates have 
been adjusted to take advantage of the favorable bid climate existing 
in Korea for the past several years. Unit costs were adjusted from $138 
per square foot (SF) to $79 per SF by taking into account actual bid 
data over the last 3 years. This permits the Army to buy down the 
barracks requirements at Camp Humphreys earlier for approximately 710 
soldiers.
    This table compares barracks projects for Korea over the past 4 
years and includes scope and unit costs. There were no barracks 
projects in fiscal year 2005 in Korea.

                                                 BASIS FOR ESTIMATING COST OF BARRACKS PROJECTS IN KOREA
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Unit cost at award
                                                        Programmed scope   Project amount ($   Project award ($     Programmed Unit        unit cost
           Fiscal year                  Location           (barracks)          millions)           millions)      cost (barracks) ($/   (barracks) ($/
                                                         (square feet)                                               square foot)        square foot)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003............................  Camp Carroll.......            107,940               20.0                11.5              142.77               98.38
2003............................  Camp Henry.........             53,970               10.2                 7.7              142.80              132.12
2003............................  Camp Humphreys.....             94,163               36.0                28.2              146.32              135.25
2004............................  Camp Humphreys.....             53,970               25.0                15.6              142.92               99.44
2004............................  Camp Humphreys.....            134,032               40.0                30.3              143.21              102.47
2006............................  Camp Humphreys.....            134,032               25.0                13.1              137.59               88.13
2006............................  Camp Humphreys.....            189,768               42.6                25.6              137.59              104.91
2006............................  Camp Humphreys.....            134,032               37.5                23.1              137.58               87.34
2007............................  Camp Humphreys.....            268,064               42.0                 TBD               79.00                 TBD
2007............................  Camp Humphreys.....            268,064               35.0                 TBD               79.00                 TBD
--------------------------------------------------------------------------------------------------------------------------------------------------------

                         HOUSING PRIVATIZATION

    Question. The GAO also found deficiencies with the management of 
Army and Air Force housing privatization projects, including lower than 
anticipated occupancy rates.
    Would you comment on what you are doing to improve housing 
requirement analyses and oversight?
    Answer. The Army largely was pleased with the results of the GAO 
review on housing privatization. While noting some areas where 
improvements were needed, GAO recognized the Army's ``robust and 
comprehensive'' oversight, and did not find any oversight concerns in 
the Army projects it reviewed. The lower than expected occupancy at 
projects noted by GAO does not pose a challenge to the effectiveness or 
long-term viability of those projects. The Army has in place a rigorous 
portfolio and asset management process to carefully monitor each 
project's compliance with the development schedule, as well as the 
financial condition and credit-worthiness of the project. GAO expressed 
concerns that lower than expected occupancy at the Fort Meade project 
had the potential to create a financial risk in the long term. The Army 
already was engaged with the development partner to re-size that 
project in light of the revised housing requirement due to changes in 
local market conditions. That effort continues, and the Army is 
confident in the long-term viability of the project. The GAO also 
recommended the Under Secretary of Defense for Installation and 
Environment expedite issuance of revised guidance to improve the 
reliability of housing requirements assessments. The Army will work 
with the Under Secretary's office to improve the housing requirements 
analysis process where practical.
                                 ______
                                 

                    Questions Submitted to B.J. Penn

            Questions Submitted by Senator Dianne Feinstein

                   ENVIRONMENTAL CLEANUP ACCELERATION

    Question. I want to commend the Navy on its efficient use of 
proceeds from the sales of previously BRAC'd properties toward 
environmental remediation. It is my understanding that about $1 billion 
in Navy cleanup remains and that proceeds from these sales will fully 
cover any remaining costs the Navy will have regarding environmental 
cleanup, is that correct?
    Answer. Thank you for recognizing our efforts. The Navy BRAC 
environmental program has been using proceeds from land sales to fund 
all environmental studies and cleanup at prior BRAC locations. While we 
continue striving to keep the prior-BRAC program self sustaining, 
revenue that the Department has received to date from completed sales 
is insufficient to pay for the projected cost to complete of all 
environmental cleanup and property disposal at prior BRAC locations. 
Future sales, notably the former Naval Station Roosevelt Roads PR, may 
provide additional funds, however additional appropriated funds may 
also be required in the future.
    Question. Because the Navy essentially has its own funding for 
cleanup, is there any reason why it cannot accelerate cleanup actions 
across the country?
    Answer. The Navy has already accelerated cleanup actions across the 
country, executing a program on the order of $300 million/year. The 
speed of the cleanup is regulated by many factors including technical 
staffing expertise, contract capacity, regulatory oversight, CERCLA 
process rate-limiting steps and public participation timeframes, to 
name a few. The Navy has found that consistent execution of a program 
of this size exercises the limits of many of these factors. We do not 
believe it would be prudent to further accelerate cleanup across the 
country. We are, however, prepared to invest additional BRAC funds to 
support efforts for early property transfers, should such an 
opportunity arise.

                         POINT LOMA, CALIFORNIA

    Question. Are you aware of the situation at Point Loma, and does 
the Navy need any funding this year or additional authorities to 
protect the land surrounding the tank farm?
    Answer. Yes, we are aware of the fuel plume at Naval Base Point 
Loma. The Navy and Defense Energy Support Center (DESC) have been 
working together to address this issue, prevent any further migration, 
and clean the site. The Navy does not need any additional funds or 
authorities.
    Question. Do you agree with the DLA's assessment that the tank 
replacement project could not be executed in fiscal year 2007?
    Answer. The Navy agrees with the DLA's assessment. The DLA fiscal 
year 2008-10 MILCON Project is a 3-phased project for $125 million to 
replace all existing bulk storage infrastructure at the Defense Fuel 
Support Point, Pt. Loma with modern tanks and equipment. It is at the 
35 percent design stage. Due to the magnitude, scope, current design 
phase and the National Environmental Policy Act (NEPA) environmental 
impact/statement requirements, the Navy agrees with DLA that 
acceleration of the fiscal year 2008 MILCON is not feasible and would 
likely compromise both the design and Federal environmental protection 
requirements.

                         HOUSING PRIVATIZATION

    Question. The Government Accountability Office's recent report on 
military family housing privatization management included strong 
criticism of the Navy's oversight of its program. For example, GAO 
noted that although the Navy established a portfolio management group 
in 2004 which was supposed to prepare consolidated portfolio summary 
reports, no report had been submitted as of January 2006. GAO also 
reported that inaccurate project status information was reported to OSD 
for five of eight Navy and Marine Corps projects that the agency 
reviewed. This included data on projects at San Diego and Camp 
Pendleton.
    What is the Navy doing to improve oversight of its housing 
privatization program and ensure that DOD and Congress have accurate 
information on the performance of the Navy's housing privatization 
projects?
    Answer. As GAO indicates in their report, the Navy had begun a 
comprehensive review of potential enhancements to portfolio management 
prior to initiation of the GAO review. Navy and Marine Corps 
representatives have met with their counterparts in the Army and Air 
Force to review their portfolio management approaches and are working 
to incorporate best industry practices. In recognition of the 
Government's minority role in privatization projects, the Navy is 
striving to achieve a balance between the appropriate level of 
Government oversight while maintaining limited Governmental 
involvement.
    We recognize the need to improve the portfolio management system to 
ensure accurate reporting. The Navy is committed to working with OSD 
and the other Services to improve the accuracy and timeliness of 
privatization evaluation reports and, where necessary, establish clear 
definitions for use in reporting.
    Question. The Navy has undertaken a pilot program to privatize 
bachelor enlisted housing at three locations, including San Diego. What 
is the Navy doing to ensure that these projects are being adequately 
monitored and do not experience the same management shortfalls that 
have affected the Navy's family housing privations program?
    Answer. The Navy has begun a comprehensive review of potential 
enhancements to the management of the privatized housing portfolio. 
This includes portfolio summary reports and briefings for key Navy and 
Marine Corps leadership. The process, including enhancements, will be 
applicable to both privatized family and unaccompanied housing.

                        BRAC PROPERTY APPRAISALS

    Question. Secretary Penn, since the Defense Base Closure and 
Realignment Act of 1990, as amended, does not require appraisals prior 
to the conveyance of pre-2005 properties, why is the Navy delaying the 
negotiation and conveyance of NAS Alameda and NS Treasure Island until 
such appraisals are completed?
    Answer. The Navy is dedicated to the disposal of all BRAC 
properties under its jurisdiction and at no time has delayed 
negotiations nor conveyance of properties based upon the completion of 
appraisals.
    The appraisals are required by current DOD regulations (32 CFR  
174.9) implementing the Economic Development Conveyance (EDC) process.
    In the case of NAS Alameda, negotiations had been renewed with the 
Alameda Reuse and Redevelopment Authority in March 2004 to reflect 
changes in its redevelopment plan within the context of an EDC. Both 
parties determined that the current Memorandum of Agreement for an EDC 
would need to be amended to reflect the changes and provide adequate 
consideration for the transfer. During these negotiations, the DOD 
implementing regulations were revised and the Navy recognized that a 
formal appraisal would be required to convey the property. An estimate 
of fair market value had already been determined and the Navy has been 
working with OSD to ensure that the estimate can be applied to meet the 
new appraisal requirement.
    In the case of Treasure Island, similar to Alameda, the 
redevelopment plan has continued to evolve and the same changes in the 
implementing regulations requiring an appraisal apply. The Navy is 
awaiting supplemental information from the Local Reuse Authority (LRA) 
in support of an EDC Application. The Navy is prepared to evaluate the 
application as soon as the information has been submitted by the LRA. 
In the interim, the Navy is continuing its remediation efforts (50 
percent of the property is currently environmentally suitable for 
transfer) and is moving forward with an appraisal.
                                 ______
                                 

               Questions Submitted to William C. Anderson

          Questions Submitted by Senator Kay Bailey Hutchison

                             BRAC PROJECTS

    Question. Mr. Anderson, the final 2005 BRAC recommendations 
included the realignment of March (California), Hector (North Dakota), 
and Ellington (Texas) Air National Guard bases. The BRAC Commission 
noted that the Air Force could assign a new mission to these bases, to 
include unmanned aerial vehicles. The Air National Guard fiscal year 
2007 military construction budget request includes $17.5 million for 
projects to bed down Predators at these bases. While I support these 
projects, and am very pleased to see the Predator coming to Ellington 
Field, I don't understand why these projects are requested as military 
construction and not BRAC projects.
    Can you explain this to me?
    Answer. Regarding the Air National Guard units at March Air Reserve 
Base, California, Hector Field, North Dakota, and Ellington Field, the 
BRAC Commission recommendation states these units may assume a mission 
relevant to the security interests of their respective states and 
consistent with the Air Force's Total Force Integration effort to 
include, but not limited to, the unmanned aerial vehicle (UAV) mission. 
For these Predator UAV beddowns as subsequently identified by the Air 
Force, the acquisition program funds the full life-cycle costs of the 
weapon system, to include construction costs. Therefore, these costs 
are not paid for by BRAC. Costs directly related to BRAC actions are 
being clearly tracked and executed to ensure compliance in accordance 
with BRAC statute.
    Question. Does this not obscure the cost of BRAC?
    Answer. No, in the case of Predator, the acquisition program funds 
the full life-cycle costs of the weapon system, including construction 
cost. Therefore, these costs are not paid for by BRAC. Costs directly 
related to BRAC actions are being clearly tracked and executed to 
ensure compliance in accordance with BRAC statute.

                                 KOREA

    Question. Last year the Committee was told by the Services that 
costs had increased and that there would be no savings, yet, we find 
this year that the opposite is true.
     Can each of you validate these costs and provide the Committee 
with a more realistic estimate of the amount needed for these 
facilities?
    Answer. The significant savings are due to a temporary, highly 
competitive bid climate in Korea expected to subside by the end of 
fiscal year 2006.
    Due to the delayed decisions on the U.S.-Korean Land Partnership 
Plan and the Department of Defense (DOD) announcement to move U.S. 
Soldiers south of the Han River, many major U.S. military construction, 
Non-Appropriated Fund (NAF), and Host Nation Fund Construction (HNFC) 
projects were cancelled or delayed. Korean contractors were hard hit by 
the loss of tens of millions of dollars in business. Therefore, Korean 
contractors have been submitting very competitive proposals for the few 
large fiscal year 2004, fiscal year 2005 and early fiscal year 2006 
military construction projects. This is especially true for dormitories 
where we have standardized our dormitory designs and contractors have 
become very familiar with and efficient in their construction.
    With the reduction in U.S. military construction, we expected 
Korean contractors would shift their resources to the local economy. 
This did not happen because U.S. military type construction is a niche 
industry, in which successful contractors recruit, train, and retain 
personnel literate in English and U.S. building codes and standards. 
The temporary ``buyers'' construction market is reflected in two fiscal 
year 2006 dormitory projects receiving 24 and 21 bids, respectively. 
Typically, only three to five bids are received. Thus, contractors are 
providing competitive bids until the major flood of Army relocation 
construction starts in late fiscal year 2006. In fiscal year 2006, it 
is expected land promised by Korea to the United States will be ready 
for construction. At Kunsan Air Base alone, by September 2006, over 
$450 million of HNFC facility projects will be ready to advertise to 
support relocating two Army Aviation Battalions. This contracted 
construction amount is expected to grow to over $780 million by 
December 2006. Also, relocation of Yongsan Garrison to south of Seoul 
is scheduled at the same time at a total cost of approximately $3 
billion. Korean contractors expect a building boom and the cost of 
military construction projects will increase due to less bid 
competition and a tightened labor and construction supply market. 
Despite the projections above, the fiscal year 2007 dormitory project 
at Kunsan Air Base was programmed to match bid data from the two fiscal 
year 2006 dormitories. We analyzed the ``per room'' cost for each 
dormitory and programmed the fiscal year 2007 dorm to be in line with 
those figures. The fiscal year 2007 Kunsan dormitories project cost was 
based on the best available information. The existing construction 
climate, plus the anticipated construction climate in fiscal year 2007 
and beyond, makes it a challenge to program projects.

                         HOUSING PRIVATIZATION

    Question. The GAO also found deficiencies with the management of 
Army and Air Force housing privatization projects, including lower than 
anticipated occupancy rates.
     Would you comment on what you are doing to improve housing 
requirement analyses and oversight?
    Answer. The Government Accountability Office (GAO) Report on 
Military Housing, Management Issues Require Attention as the 
Privatization Program Matures, states ``we found that the Army and the 
Air Force have robust, well-developed portfolio oversight programs to 
help top management monitor implementation of their privatization 
programs. Both of these services collected and analyzed detailed 
performance information on each project.'' The report further states 
``the Army and the Air Force also prepared quarterly portfolio summary 
reports, which monitored project execution, analyzed trends, 
highlighted current and potential performance issues, and documented 
recent and planned actions to address any project concerns.''
    Several projects in the Air Force portfolio have occupancy levels 
less than originally projected. As the GAO report indicates, this is 
due to several factors, one being accurate determination of housing 
requirements.
    Most of our privatization Housing Requirement and Market Analysis 
(HRMA) documents were published in 2003. We are now updating the HRMAs 
at bases scheduled for privatization just prior to solicitation. The 
new housing requirement will be included in the request for proposals 
(RFP). This will ensure the developer bids on the most current 
anticipated housing requirement for each privatization effort.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                             MC CLELLAN AFB

    Question. The nationwide need for BRAC environmental cleanup 
funding is great. I have worked very hard to increase the level of BRAC 
funding to ensure that, despite other pressures on the Federal budget, 
cleanup schedules do not fall behind. It is imperative that we keep the 
promises made to these local communities when their bases were closed. 
With respect to McClellan, I am troubled that the funds intended for 
McClellan are going elsewhere and in result this is putting McClellan 
at a clear disadvantage. For example, in fiscal year 2006 $37.4 million 
was required for ongoing cleanup efforts at McClellan. However, the Air 
Force Real Property Agency, and the Air Force, have stated that they 
expect to use only $22.7 million of these required funds.
    Where is the remaining $14.7 million being spent?
    Answer. Based on previous inquiries from the committee staff, we 
believe your reference to $37.4 million is a transposition error and 
should read $34.7 million. We framed our response based upon our $34.7 
million reference.
    McClellan received $31.9 million of the $34.7 million requirement. 
The fiscal year 2006 requirement was funded across multiple years. We 
had the opportunity to forward fund $9.2 million of the fiscal year 
2006 activity, funded through fiscal year 2005 and prior year funds, 
and we did so to accelerate the project. We then funded an additional 
$22.7 million with fiscal year 2006 appropriations, for a total of 
$31.9 million. As on all major Air Force projects, we continually look 
for cost savings opportunities. As relates to the fiscal year 2006 
activities at McClellan, our environmental engineering team was able to 
generate $2.6 million in savings opportunities to date. We anticipate 
an additional $200,000 in contract savings as well, bringing the total 
to $34.7 million. These savings represent permanent reductions on cost 
of the overall project, directly benefiting the taxpayer.
    Question. Can you please provide the Committee with a timetable and 
full accounting of past and projected BRAC funding for this site 
through the completion of the remediation process.
    Answer. Thank you, Ma'am, for your continued commitment to BRAC 
clean up funding. We appreciate the long-term view and continued 
emphasis on our program.

                          [Millions of dollars]
------------------------------------------------------------------------
                       Fiscal year                            Amount
------------------------------------------------------------------------
2001....................................................            25.7
2002....................................................            39.1
2003....................................................            20.1
2004....................................................            26.3
2005....................................................            37.1
2006....................................................            22.7
2007....................................................            25.1
2008....................................................            33.5
2009....................................................            52.1
2010....................................................            71.4
2011....................................................            72.2
------------------------------------------------------------------------
Fiscal year 2001-fiscal year 2005 obligated amounts by execution year
  for McClellan AFB.

    Source: DFAS, as of March 31, 2006.
    The Air Force is currently on target to obligate $22.7 million for 
McClellan in fiscal year 2006 and $25.1 million in fiscal year 2007 as 
noted in the fiscal year 2007 President's Budget request.
    The current Air Force estimates for fiscal year 2008-11 and the 
remaining cost for completion (fiscal year 2012 to fiscal year 2034) 
estimate of $415.7 million were recently published in the Defense 
Environmental Programs Annual Report to Congress fiscal year 2005 
(page. J-1-50). These estimates are likely to change as the Air Force 
is pursuing initiatives that are expected to impact these estimates and 
the funding distribution over time. The Air Force is currently in the 
annual cost preparation and validation cycle, which will result in 
revised numbers to reflect these initiatives. The initiatives are:
  --62-Acre Pilot Privatization Project.--McClellan has been working 
        with the County of Sacramento and regulatory agencies to 
        execute environmental cleanup of 62 acres using a Firm Fixed 
        Price Privatization agreement. Agreement in principle has been 
        reached and efforts are underway to complete documentation to 
        execute the agreement by the end of calendar year 2006. The Air 
        Force prefers privatization, because it reduces and controls 
        cost, speeds property transfer, and links the cleanup with 
        property development activities. This pilot project will serve 
        as the template for future privatization discussions for the 
        remainder of the base.
  --Focused Strategic Sites Record of Decision.--A Feasibility Study 
        and Proposed Plan are in preparation for the 11 highest cost 
        sites on the former McClellan AFB. These sites represent 
        approximately 38 percent of the McClellan cleanup cost. Costs 
        vary depending on cleanup alternatives, but the Feasibility 
        Study shows that environmentally protective remedies are 
        available at costs less then currently projected. The Record of 
        Decision is scheduled for
  --Integrated Air Force Real Property Agency BRAC Master Plan.--The 
        Air Force is in the final stage of developing revised cleanup 
        and property disposal plans that will restructure cleanup 
        program execution. The plans will alter traditional execution 
        approaches, and identify streamlined methods to accomplish the 
        work. The preferred alternative for most bases is cleanup by 
        privatization, or multi-base Guaranteed Fixed Price Remediation 
        (GFPR) contracts. The Air Force has seen success at sites such 
        as the Davis Transmitter site where cost and time to clean up 
        were significantly reduced through GFPR and introducing new 
        technologies. These plans are scheduled for completion and 
        agency approval during summer 2006.

                         CONCLUSION OF HEARINGS

    Senator Hutchison. That concludes our questions. I thank 
all of you for making very good presentations and we look 
forward to working with you through the year. The meeting is 
recessed.
    [Whereupon, at 3:46 p.m., Tuesday, May 9, the hearings were 
concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]


       LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                              ----------                              
                                                                   Page
Allard, Senator Wayne, U.S. Senator From Colorado, Statements of. 5, 83
Anderson, Hon. William C., Assistant Secretary of the Air Force, 
  Installations, Environment, and Logistics, Department of the 
  Air Force, Department of Defense...............................   109
    Prepared Statement of........................................   110
    Questions Submitted to.......................................   129

Cooper, Daniel L., Under Secretary for Benefits, Department of 
  Veterans Affairs...............................................     1
Craig, Senator Larry, U.S. Senator From Idaho, Prepared Statement 
  of.............................................................    32

Eastin, Hon. Keith E., Assistant Secretary of the Army, 
  Installations and Equipment, Department of the Army, Department 
  of Defense.....................................................    87
    Prepared Statement of........................................    87
    Questions Submitted to.......................................   125

Feinstein, Senator Dianne, U.S. Senator From California:
    Questions Submitted by.......................51, 122, 125, 127, 130
    Statements of................................................ 2, 58

Grone, Philip W., Deputy Under Secretary of Defense 
  (Installations and Environment), Department of Defense.........    57
    Prepared Statement of........................................    62
    Question Submitted to........................................   122
    Statement of.................................................    61

Henke, Robert J., Assistant Secretary for Management, Department 
  of Veterans Affairs............................................     1
Hutchison, Senator Kay Bailey, U.S. Senator From Texas:
    Opening Statement of.........................................    57
    Questions Submitted by.................................48, 122, 129
    Statement of.................................................     1

Johnson, Senator Tim, U.S. Senator From South Dakota:
    Prepared Statement of........................................     4
    Statement of.................................................     4
Jonas, Hon. Tina W., Under Secretary of Defense (Comptroller), 
  Department of Defense..........................................    57
    Prepared Statement of........................................    60
    Statement of.................................................    59

Landrieu, Senator Mary L., U.S. Senator From Louisiana:
    Prepared Statement of........................................     8
    Questions Submitted by.......................................    52

McClain, Tim S., General Counsel, Department of Veterans Affairs.     1
McConnell, Senator Mitch, U.S. Senator From Kentucky:
    Prepared Statement of........................................     4
    Questions Submitted by.......................................    50
Murray, Senator Patty, U.S. Senator From Washington, Statement of     6
Nicholson, Hon. R. James, Secretary, Department of Veterans 
  Affairs........................................................     1
    Prepared Statement of........................................    12
    Statement of.................................................     9

Penn, Hon. B.J., Assistant Secretary of the Navy, Installations 
  and Environment, Department of the Navy, Department of Defense.    95
    Prepared Statement of........................................    96
    Questions Submitted to.......................................   127
Perlin, Jonathan B., Under Secretary for Health, Department of 
  Veterans Affairs...............................................     1

Tuerk, William F., Under Secretary for Memorial Affairs, 
  Department of Veterans Affairs.................................     1


                             SUBJECT INDEX

                              ----------                              

                         DEPARTMENT OF DEFENSE

                                                                   Page
Army Family Housing:
    Construction (AFHC)..........................................    93
    Operations (AFHO)............................................    93
Additional Committee Questions...................................   122
Army Modular Force...............................................    89
BRAC 2005:
    Budget.......................................................    90
    Implementation...............................................   106
        Strategy.................................................    89
Base Realignment and Closure (BRAC)..............................60, 88
    Projects.....................................................   129
    Property Appraisals........................................122, 128
Business Plan..................................................122, 125
Environment......................................................   104
Energy Conservation..............................................   124
Environmental Cleanup Acceleration...............................   127
Facilities Management............................................   100
Global Rebasing..................................................   123
Homeowners Assistance Fund, Defense..............................    94
Housing..........................................................   101
    Privatization.........................................128, 127, 130
Hurricane Recovery Efforts.......................................    96
Infrastructure Quality...........................................    88
Integrated Global Presence and Basing Strategy (IGPBS)...........    89
Korea..........................................................125, 129
Leveraging Resources.............................................    91
Military Construction............................................91, 98
    Army.........................................................    91
        National Guard...........................................    92
        Reserve..................................................    93
McClellan AFB....................................................   130
Meeting the Execution Challenge..................................   108
Military Construction and Family Housing Overview................    60
Operation and Maintenance........................................    94
Prior BRAC Cleanup & Property Disposal...........................   105
Point Loma, California...........................................   127
Prior BRAC.......................................................    90
Stationing.......................................................    88
Strategic Priorities.............................................    60
The Navy's Investment in Facilities..............................    97
The Way Ahead....................................................    90
Transforming Installations While the Army is at War..............    87

                     DEPARTMENT OF VETERANS AFFAIRS

Additional Committee Questions...................................    48
Bellingham, Washington...........................................    44
Capital (Construction and Grants to States)......................    19
Claims Processing................................................    37
General Operating Expenses.......................................    17
Grants for State Extended Care...................................    32
Gulf War Research Data...........................................    45
Information Technology Services..................................    19
Information Technology Systems Consolidation.....................    35
Medical:
    And Prosthetic Research......................................    20
    Care.........................................................    13
    Research.....................................................    16
    Services Reprogramming.......................................    41
Mental Health....................................................    30
    Funding......................................................    42
National Cemetery Administration.................................18, 24
New Orleans Replacement Hospital.................................    30
OIF/OEF Veterans.................................................33, 42
Post-Traumatic Stress Syndrome...................................    21
Proposed Legislation on Fees and Copayments......................    21
Quarterly Reporting to Congress..................................    34
Rio Grande Valley, Texas.........................................    36
Rocky Mountain Region Colorado...................................    23
Standardizing Diabetes Monitoring Equipment......................    46
Tribal Mental Health.............................................    44
VA:
    Budget.......................................................    38
    Healthcare...................................................    26
    Model........................................................    26
Veterans Integrated Service Network 20...........................    47

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