[Senate Hearing 109-255]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-255
 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2006

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

                                HEARINGS

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   on

                               H.R. 2528

  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, 2006, AND FOR OTHER PURPOSES

                               __________

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


                            C O N T E N T S

                              ----------                              

                         Tuesday, March 8, 2005

                                                                   Page

Department of Defense............................................     1
    Department of the Navy.......................................    69

                        Tuesday, March 15, 2005

Department of Veterans Affairs: Office of the Secretary..........    89

                       Wednesday, March 16, 2005

Department of Defense:
    Department of the Army.......................................   139
    Department of the Air Force..................................   165

                         Tuesday, June 28, 2005

Overseas Basing Commission.......................................   183
Department of Defense............................................   205


   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2006

                              ----------                              


                         TUESDAY, MARCH 8, 2005

                               U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:35 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Allard, Feinstein, and 
Landrieu.

                         DEPARTMENT OF DEFENSE

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


           opening statement of senator kay bailey hutchison


    Senator Hutchison. I will call the Military Construction 
Subcommittee meeting to order and say that I am very pleased 
this is our first hearing of the year. I am very happy that I 
am able to chair this subcommittee once again. It is a 
subcommittee I have really enjoyed, and I also very much enjoy 
my partnership with my Democratic colleague. We have been 
chairman and ranking member together in order, reverse order, 
and order again, and we have always worked very well together. 
And I am very happy that we have this team again. We have been 
able to have the experience now to know some of the issues, and 
I think it is going to be a very good year.
    I will just say for the record too that I think Senator 
Feinstein and I have had some major impact since we have been 
chair and ranking member of this subcommittee in two areas. 
Senator Feinstein particularly has been attuned to 
environmental cleanup that has been so important for closed 
bases and making sure that that is done correctly.
    I think together our efforts on the Overseas Basing 
Commission and really focusing on getting a timely assessment 
of foreign bases and problems in foreign deployments before we 
address our own BRAC, which we are now in the beginning stages 
of addressing, are beginning to pay off.
    I am pleased that the Department of Defense did start 
looking at foreign bases and training constraints and 
operational constraints and made the announcement last year 
that they are, indeed, going to have a global realignment. I 
think it is going in the right direction. I think the 
Department of Defense did look at this and is making some very 
wise decisions for the long term for not only the best training 
and the best way to operate, but also better quality of life 
for our military and its families. So I am very pleased with 
that and glad that we are all here once again.
    This year's military construction budget request is $12.1 
billion, up 27 percent from last year's request. There is a 
wedge of $1.9 billion intended to cover the initial costs of 
the 2005 round of base realignment and closure, and I think 
that is going to be something we are going to want to have some 
specificity about as we go down the road.
    I am pleased that for the third consecutive year the 
administration's request for Reserve Component funding is up 
significantly from last year's request. Reserve Component 
facilities have long been underfunded through the years, and 
this Department has made good on its commitment to improve that 
situation. We all know the huge load the Guard and Reserve are 
sharing in this war on terrorism, and I think bringing their 
facilities up to a higher standard is not only the right thing 
to do but well deserved.
    I am also pleased to receive what I believe is a more 
focused request for construction at overseas bases. In the past 
few years, we have had a dialogue with the Department regarding 
these overseas bases, and I think we are now coming to a very 
good point where Congress is going to be able to evaluate the 
overseas facilities through our own Overseas Basing Commission, 
and I think we are going in the right direction.
    Related to overseas construction is the NATO Security 
Investment Program. The request for this program is up 25 
percent over last year. I do support NSIP, but I am concerned 
that the program is increasingly funding non-infrastructure 
expenses in favor of high technology electronics and software 
systems. NATO is now considering what could be a significant 
expenditure for a battle management command and control system 
for missile defense. I certainly support missile defense, but I 
think we are getting farther away from the intent of the 
Security Investment Program, which is to fund common 
infrastructure projects, and we need to assure that the United 
States gets more than a one-for-one return on the investments 
it is making in the program. So I intend to look carefully at 
this program and make sure that we are doing what we intended 
to do.
    A major initiative this year is the 2005 round of Base 
Realignment and Closure. That commission is in the process of 
being appointed. Sixteen percent of this budget request is for 
beginning to implement that 2005 BRAC if Congress agrees with 
the BRAC recommendations made later this year. While we all 
know and hope that BRAC will save in the future, we also know 
that it does not save in the short term, that you have the 
costs of closing bases, and we are now looking at major 
restructuring of the Army and the Marine Corps; bringing 70,000 
troops home from bases abroad; and repositioning remaining 
forces overseas into new facilities. So we know this is going 
to cost money and we certainly want to have a close look at the 
recommendations that will be coming from the Department to 
prepare for this kind of a realignment.
    I also want to comment on the housing privatization 
program, for which the Department is requesting $216 million 
this year. I am a strong supporter of the privatization 
program. I have seen the results. They are terrific. But I also 
think we need to make sure that we are making good decisions on 
these privatization projects and that we are monitoring the way 
the money is spent. In a few instances the privatization has 
not gone the way it was intended, and we need to make sure that 
where we do appropriate this money, it is being spent on 
quality construction that is doing the job we are asking be 
done.
    I certainly will have a number of questions, but I would 
like at this time to turn the microphone over to Senator 
Feinstein, my able ranking member who has been a great partner 
through the years on this subcommittee.


                 STATEMENT OF SENATOR DIANNE FEINSTEIN


    Senator Feinstein. Thank you very much, Madam Chairman, and 
I think you know that it has also been a pleasure for me to 
work with you, and I look forward to the year. I also look 
forward to the year because there is much more money to deal 
with and some new challenges in this. So I am delighted.
    I do not want to repeat what you said but there are a few 
things that kind of come through to me. I just want to point 
them out.
    The fact that the Army is down 16.5 percent over the 
requested amount, or 24.6 percent below the enacted amount of 
last year's request, I would like to ask about that.
    I am delighted to see that the BRAC environmental cleanup 
is nearly $132 million, 33.5 percent up from last year's 
request. I think that is very good news.
    The Navy's request this year includes $143 million, plus an 
estimated $133 million derived from land sales at El Toro and 
Oakland, totaling $276 million. My understanding is the Navy 
has planned to spend at least $172 million of that in 
California. I am very grateful for that. We had 29 bases closed 
in the last round, and just getting the environmental cleanup 
done has been a huge problem.
    It is also my understanding that the military family 
housing request has increased by $70 million and that the 
initiative of DOD to privatize over 75,000 housing units are 
designed to reach its goal by 2007. I think that is good news 
as well.
    You and I have worked together on overseas basing. That 
total is $782 million: $238 million for Germany, $28 million 
for Italy, $215 million for Korea, $125 million to Guam, and 
$109 million to the UK. So that is 25 percent over last year's 
request, and I think we need to take a look at it as well.
    Let me just forewarn the people. I have been very concerned 
about, in your State and my State and about 26 other States, 
the advent of perchlorate. Perchlorate comes from rocket fuel. 
It is really all a military responsibility. This was their 
subcontractors. It has leached into groundwater. It has 
contaminated drinking water wells. And so my question will be 
whether some of this environmental cleanup money can be used 
for perchlorate cleanup, and we will get to that.
    I do not want to take any more time. We will get on with it 
and say welcome to the witnesses.
    Senator Hutchison. I would like to now call on our newest 
member of the subcommittee. We welcome him, and we are very 
pleased that he is a new member of the full committee. I am 
pleased that he is now on our subcommittee as well. Senator 
Allard from Colorado.


                   STATEMENT OF SENATOR WAYNE ALLARD


    Senator Allard. Well, thank you, Madam Chairman. I do not 
have much of an opening statement. I look forward to working 
with you and Senator Feinstein from California. I know that you 
vacation from time to time in Colorado.
    Senator Hutchison. We both do actually.
    Senator Allard. I really appreciate that.
    I just look forward to the opportunity to serve here.
    You have seen me now in front of a number committees, Ms. 
Jonas. You never know when I might pop up, but I have a 
different set of questions for you this time around. So you 
will perhaps appreciate that. So I look forward to hearing your 
testimony.
    Thank you, Madam Chairman.


                   SUMMARY STATEMENT OF TINA W. JONAS


    Senator Hutchison. Now we welcome the Under Secretary of 
Defense who is the Comptroller and Chief Financial Officer of 
the Department of Defense, Secretary Tina Jonas. Welcome.
    Ms. Jonas. Thank you, Madam Chairman.
    I am going to just quickly summarize a few things. I have 
got a written statement for the record and request that it be 
placed in the record. I appreciate the opportunity to be here, 
and Senator Feinstein, I appreciate the opportunity to work 
with you and with the rest of the members of the committee.
    I would specifically like to thank this committee for its 
strong support of our men and women in uniform. We look forward 
to continuing to work with you to ensure that our armed forces 
have everything they need to carry out their difficult and 
dangerous missions.
    The President's budget request for the Department of 
Defense for 2006 is $419.3 billion. This is a $19.2 billion 
increase over the 2005 enacted level, and this will sustain the 
President's pledges to defeat global terrorism, restructure 
America's armed forces and global defense posture, as well as 
take care of our forces and develop advanced warfighting 
capabilities.
    Of special importance to this committee, the President's 
budget shows his clear commitment to our military people and 
their families, with emphasis on quality facilities and family 
housing and on restructuring our military basing. I will not go 
over the specifics. As you have pointed out, Madam Chairman, 
$12.1 billion is the request for military construction and 
family housing requirements. I would like to reemphasize our 
commitment to funding the elimination of all inadequate housing 
in the continental United States by 2007 and the elimination of 
all overseas inadequate housing by 2009.

                           PREPARED STATEMENT

    I know that you will have plenty of questions. You are well 
aware of the issues regarding the restructuring overseas in our 
BRAC process, so I will not belabor that.
    I would just like to say thank you for the opportunity to 
be here and I look forward to addressing your questions.
    [The statement follows:]

                  Prepared Statement of Tina W. Jonas

    Madam Chairwoman, members of the committee, I am honored to be here 
to discuss military construction and other quality of life components 
of President Bush's fiscal year 2006 defense budget request.
    First, I want to thank this committee for its strong support for 
our men and women in uniform. We look forward to continuing to work 
with you to ensure that our armed forces have everything they need to 
carry out their difficult and dangerous missions.
    The President's budget request for the Department of Defense (DOD) 
for fiscal year 2006 is $419.3 billion in discretionary budget 
authority, a $19.2 billion increase (4.8 percent) over the fiscal year 
2005 enacted level. Combined with fiscal year 2005 supplemental 
appropriations, this request includes sufficient funding to sustain the 
President's pledges to defeat global terrorism, restructure America's 
armed forces and global defense posture, develop and field advanced 
warfighting capabilities, and take good care of our forces.
    Of special importance to this committee, the President's budget 
shows his clear commitment to our military's quality of life--with 
emphasis on military compensation and health care, quality facilities 
and family housing, and restructuring our military basing.

                 MILITARY COMPENSATION AND HEALTH CARE

    The fiscal year 2006 budget maintains the President's commitment to 
take good care of our military people and their families. It reflects 
our conviction that people are the Nation's most important defense 
asset. The budget includes a 3.1 percent increase in military base pay 
and provides significant funding to ensure high quality health care for 
our military families. The fiscal year 2006 budget provides about $20 
billion for the Defense Health Program and $7 billion for the military 
personnel who support the health care program. The budget sustains our 
commitment to no out-of-pocket costs for military members living in 
private housing.

                     FACILITIES AND FAMILY HOUSING

    The President's request for Military Construction and Family 
Housing appropriations totals $12.1 billion in discretionary budget 
authority and funds the Department's most pressing military 
construction and family housing requirements. The request will improve 
our military's working and living conditions through strong sustainment 
and modernization for existing facilities and replacement of facilities 
that are no longer economical to repair.
    Family Housing.--The fiscal year 2006 budget keeps the Department 
on track to fund by fiscal year 2007 the elimination of all inadequate 
military family housing units in the United States, and to fund by 
fiscal year 2009 the elimination of all inadequate units worldwide. To 
reach the fiscal year 2009 goal, the Army will complete funding the 
elimination of inadequate housing at its overseas bases in 2008, and 
the Air Force will complete funding its overseas eliminations by 2009. 
The Department's privatization program is key to its progress in 
eliminating inadequate housing. It enables the Department to leverage 
its funding and get more military families into top quality 
accommodations much sooner than would otherwise be possible.

                       RESTRUCTURING U.S. BASING

    Two closely related initiatives will substantially affect our 
military's quality of life in the years ahead: the 2005 Base 
Realignment and Closure (BRAC) Commission and President Bush's 
restructuring of America's global defense posture.
    BRAC 2005.--The work of the 2005 BRAC Commission will be critical 
to streamlining DOD facilities and saving billions of dollars that 
would be better spent on our military people and capabilities, not 
excess facilities. The President's budget includes funding for 
implementation of BRAC 2005 decisions, beginning with $1.9 billion in 
fiscal year 2006.
    Global Posture.--Closely linked to the BRAC process is the 
President's global posture restructuring, which will ensure that United 
States forces and equipment are located where they can best respond to 
likely requirements in today's security environment. It will return 
70,000 military personnel and 100,000 family members to the United 
States, and relocate forces and equipment that must remain overseas. As 
the 2005 BRAC Commission considers how to streamline and restructure 
the Department's installations, it will have the benefit of our global 
posture restructuring plan.
    Congressional support of both these initiatives is critical.

              FISCAL YEAR 2005 SUPPLEMENTAL APPROPRIATIONS

    Before closing, I want to thank this committee for beginning work 
quickly on the President's fiscal year 2005 supplemental appropriations 
request of $74.9 billion for the Department of Defense. Rapid and full 
approval of the request is crucial to fulfilling our military's 
requirements for the rest of this fiscal year.
    Of critical importance, this supplemental provides significant 
resources to address wear and tear on our military equipment, to create 
a larger and more combat capable Army and Marine Corps, and to train 
and equip Iraqi and Afghan security forces to empower them to take the 
fight to the extremists and to help them take control of their future.
    The President's supplemental request includes $5.3 billion for 
restructuring the Army and Marine Corps because acceleration of this 
effort is urgent and vital to the war on terror. In fiscal year 2005 
and fiscal year 2006, the Department proposes to fund Army 
restructuring through supplemental appropriations, which will 
accelerate the restructuring of the ground forces moving into the 
combat theater and reset those forces rotating out of theater. This 
effort will expand the operating combat force of the Army--making our 
forces more effective and reducing the demand and strain on our 
military units and troops. About $.3 billion of the request is for 
military construction to support this force restructuring, and again 
that is an immediate and critical requirement for our forces in the war 
on terror.
    The supplemental also includes $1.0 billion for military 
construction in the U.S. Central Command (CENTCOM) area of 
responsibility. This will fund urgently needed facilities and improve 
the living and working conditions for U.S. troops in the theater. The 
request includes $303 million for force protection for key facilities; 
$253 million to improve airfields and their operations and safety; $155 
million to improve the movement, handling, and storage of munitions and 
fuel; $146 million for temporary troop billeting; and $59 million for 
troop medical facilities. The vast majority of these CENTCOM projects 
are designed to temporary standards and do not reflect a United States 
commitment to permanent basing in the area.

                                CLOSING

    In closing, I thank you for this opportunity to describe the 
President's commitment to military quality of life in his fiscal year 
2006 budget. The request will enhance the well being of our service 
members and their families, strongly support current requirements and 
missions, and support the needed streamlining and recapitalization of 
DOD facilities. I urge your support for the President's fiscal year 
2006 budget and his fiscal year 2005 supplemental appropriations 
request. Thank you.

    Senator Hutchison. Well, thank you so much, Madam 
Secretary.
    Now we have Mr. Philip Grone, the Deputy Under Secretary of 
Defense for Installations and Environment. Welcome to the 
committee.

                  SUMMARY STATEMENT OF PHILIP W. GRONE

    Mr. Grone. Thank you, Madam Chairman.
    Madam Chairman, Senator Feinstein, and distinguished 
members of the Subcommittee on Military Construction and 
Veterans Affairs, I am pleased to appear before you this 
afternoon to discuss the President's budget request for the 
Department of Defense for fiscal year 2006.
    Madam Chairman, I have prepared a written statement and, 
with the committee, request that it be placed into the record.
    Senator Hutchison. Without objection.
    Mr. Grone. At the outset, I want to associate myself with 
the statement made by my colleague the Under Secretary of 
Defense (Comptroller). The President's budget request for the 
Department of Defense continues the efforts of the 
administration to place our military infrastructure on a sound 
management foundation.
    The business area comprising the Department's support of 
military installation and the stewardship of natural resources 
includes programs totaling over $46 million in the budget for 
the coming year. The Department's management responsibilities 
extend to an infrastructure with 510,000 buildings and 
structures and a plant replacement value of $650 billion and 
stewardship responsibilities for roughly 29 million acres, or 
46,000 square miles of land, which is roughly the size of 
Connecticut and my native Kentucky combined.
    Military construction and military family housing and funds 
necessary to support Base Realignment and Closure, which the 
subcommittee will consider, are a portion, but a vitally 
important portion, of our management approach. The President's 
management agenda contains three key elements for which my 
office has primary responsibility, including the privatization 
of military housing and real property asset management, the 
last of which is the focus of Presidential Executive Order 
13327, issued on February 4th last year.
    On those areas of focus for which the subcommittee is 
concerned, we have made significant progress with the 
assistance of Congress. The military housing privatization 
initiative, as the chairman indicated, is achieving results. As 
of the beginning of this month, leveraging the power of the 
market and the expertise of industry, we have awarded 43 
projects privatizing 87,000 units, contributing $767 million in 
appropriated funds. To achieve the scope of these 43 projects, 
the taxpayer would need to provide $11 billion in military 
family housing construction, and over the life cycle, these 
privatized projects will save the taxpayer 10 to 15 percent, 
even when taking into account the allowances paid to our 
military personnel. Ten of those projects have reached the end 
of their initial development phase and tenant response is very 
positive. By the end of fiscal year 2007, we expect 185,000 
units of housing, 84 percent of the inventory, to be 
privatized.
    The Department's efforts to more properly sustain and 
recapitalize our facilities inventory are also demonstrating 
results. Four years ago, the recapitalization rate stood at 192 
years. The President's budget request supports a 
recapitalization rate of 110 years, and we remain committed to 
our goal to achieve a 67-year recapitalization rate in fiscal 
year 2008.
    Facilities sustainment is budgeted this year at 92 percent 
of the requirement. In both cases, we have built the program 
around private sector best practices and commercial benchmarks 
wherever they can be applied, and we continue to refine our 
models and guidance to keep them current with those practices 
and benchmarks.
    We also continue our effort to strengthen the Nation's 
defense through the Global Posture Review and BRAC. Abroad, we 
will reconfigure our basing and presence abroad to meet the 
challenges of the 21st century as opposed to the static defense 
of the Cold War. At home, we will rationalize our 
infrastructure to further transformation and to improve 
military effectiveness and business efficiency.

                           PREPARED STATEMENT

    Our most recent defense installations strategic plan issued 
last year, entitled Combat Power Begins at Home, reflects our 
focus on improving the management of our installation assets 
and to ensure their ability to contribute to military 
readiness. All of our efforts are designed to enhance the 
military value of our installations and to provide a solid 
foundation for the training, operation, deployment, and 
employment of the armed forces, as well as to improve the 
quality of life for military personnel and their families.
    While much remains to be done, we have accomplished a great 
deal. With the support of this subcommittee, we will continue 
to do so.
    Thank you, Madam Chairman.
    [The statement follows:]

                 Prepared Statement of Philip W. Grone

    Madam Chairwoman and distinguished members of this Subcommittee, I 
appreciate the opportunity to appear before you today to address the 
President's Budget request for fiscal year 2006 and the plan of the 
Department of Defense to improve its infrastructure and facilities.
    The Department of Defense recognizes the long-term challenges 
associated with its infrastructure strategy. The Department has 
developed a strategy and several tools to address these challenges. The 
President's Management Agenda recently added the stewardship of Federal 
real property as a new initiative. The Department is a full participant 
in the Federal Real Property Council established by Executive Order 
13327.
    Working in full cooperation with the military services and other 
Defense components, the Department set out in 1997 to build a 
corporate-wide inventory of assets. The idea was and remains that the 
Department's funding requirements for installations is a function of 
the assets currently on hand and planned for the future. Hence, an 
accurate inventory and a forecast of those assets are fundamental to 
determining and assessing budget requirements. The Department is 
continuing to improve its inventory process and is working extensively 
in the interagency process to support a more useful Federal inventory 
that can be used for management purposes.
    In 1998, the Department set out on a 6-year program to eliminate 80 
million square feet of obsolete and excess facilities. Six years later, 
we concluded that effort by exceeding our target--removing a total of 
86 million square feet. As part of a continuing effort to dispose of 
unneeded facilities, the Department recently completed a new survey of 
demolition requirements.
    In 2001, the Department issued its first ever Defense Facilities 
Strategic Plan. In September 2004, we issued a comprehensive, 
capabilities-based, and performance-oriented Defense Installations 
Strategic Plan. Our new plan begins to integrate more fully 
environmental management systems, safety, and occupational health into 
a comprehensive approach to asset management. 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.

Global Posture Realignment
    While the Department addresses better business practices, we also 
are working to realign our infrastructure to deal effectively with 
military transformation and 21st Century threats. The Defense posture 
of the past 50 years reflects the Cold War strategy, with U.S. forces 
forward deployed primarily to fight near where they were based. Today's 
environment requires more agile, fast and lean forces able to project 
power into theaters that may be distant from where they are based. This 
agility requires not only a shift in military forces, capabilities and 
equipment, but also a new basing strategy.
    Last fall, the Department completed a 2-year comprehensive review 
of its global posture and basing strategy, which will result in the 
most profound restructuring of U.S. military forces overseas since the 
end of the Korean War. This review was conducted with extensive 
participation by the Combatant Commanders, the Joint Chiefs of Staff, 
and our interagency partners. We provided the Congress with a copy of 
the report in September 2004.
    The new posture will enable the Department to respond more quickly 
to worldwide commitments and make better use of our capabilities by 
thinking of our forces globally. In terms of ``footprint'', we will 
tailor our forces to suit local conditions while strategically pre-
positioning equipment and support. We anticipate realigning or closing 
a number of large permanent bases in favor of small and scalable 
installations better suited for deployments to trouble spots. This will 
also reduce friction with host nations. For example, removal of the 
U.S. Air Expeditionary Wing from Prince Sultan Air Base should help 
improve our relations with Saudi Arabia, and relocating U.S. forces out 
of densely-populated Seoul, Korea, to hubs further south will resolve 
problems with the Korean public while bolstering our military 
capabilities on the peninsula.
    Senior officials of this Department and the Department of State 
have already begun the process of consulting with our friends and 
allies around the world to incorporate their input into our plan. We 
recognize that our allies are sensitive to changes in our overseas 
posture, and we will continue to consult with them as we make final 
decisions and begin executing the strategy. We will continue to consult 
with Members of Congress on our plan and will seek your support as we 
implement these far-reaching and enduring changes to strengthen 
America's global defense posture.
    Since some overseas personnel will return to the United States, 
global posture changes will influence BRAC recommendations that will be 
announced in May 2005. 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 process.

BRAC 2005
    The domestic BRAC round and the global posture review are key 
elements that support transformation. A well supported, capabilities-
based force structure should have infrastructure that is best sized and 
placed to support emerging mission requirements and national security 
needs. DOD must configure its infrastructure to maximize both 
warfighting capability and efficiency. Through BRAC and the global 
posture changes the Department will support the warfighter more 
effectively and efficiently. The Secretary will provide his 
recommendations for domestic closures and realignments to the 
Commission and Congress by May 16th as required by the BRAC 2005 
statute.
    From a domestic perspective, the Department recognizes it has an 
obligation to assist communities impacted by BRAC 2005. The Defense 
Economic Adjustment Program will include assistance for 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 will work to partner 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, we also recognize the importance of cooperatively 
planning to ensure our mission can effectively be stood up and 
supported.

                        MANAGING INFRASTRUCTURE

    The Department currently manages nearly 517,000 buildings and 
structures with a plant replacement value of over $650 billion, and 
over 46,000 square miles of real estate. We have developed models and 
metrics to predict funding needs and have established goals and 
performance measurements that place the management of Defense 
infrastructure on a more objective, business-oriented basis.

Infrastructure Investment Strategy
    Managing our facilities assets is an integral part of comprehensive 
asset management. The quality of our infrastructure directly affects 
training and readiness.
    Facilities sustainment, using primarily operations and maintenance-
like \1\ appropriations, funds the maintenance and repair activities 
necessary to keep an inventory in good working order. It includes 
regularly scheduled maintenance and major repairs or replacement of 
facility components that are expected to occur periodically throughout 
the life cycle of facilities. Sustainment prevents deterioration and 
preserves performance over the life of a facility.
---------------------------------------------------------------------------
    \1\ Includes O&M as well as related military personnel, host 
nation, and working capital funds.
---------------------------------------------------------------------------
    To forecast funding requirements for sustainment, we developed the 
Facilities Sustainment Model (FSM). FSM uses standard benchmarks drawn 
from the private and public sectors for sustainment costs by facility 
type and has been used to develop the Service budgets since fiscal year 
2002 and for several Defense Agencies beginning in fiscal year 2004.
    Full funding of sustainment is the foundation of our long-term 
facilities strategy, and we have made significant progress in achieving 
this goal. The Department increased funding for facilities sustainment 
consistently from fiscal years 2002 through 2005, sustaining facilities 
at an average of 93 percent of benchmarks. In the fiscal year 2006 
budget request, the Department shows a slight decrease in the 
department-wide rate to 92 percent. The budget request, however, is an 
improvement upon the plan for the fiscal year 2006 contained in the 
fiscal year 2005 FYDP, which funded facility sustainment at 90 percent. 
Our priorities have not changed and with the support of the Congress 
our goal remains to reach full sustainment by fiscal year 2008.
    Restoration and modernization, collectively termed 
recapitalization, provide resources for improving facilities and are 
funded 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.
    Recapitalization is the second step in our strategy. Similar 
private sector industries replace their facilities every 50 years, on 
average. With the types of facilities in the Defense Department, 
engineering experts estimate that our facilities should have a 
replacement cycle of about 67 years on average. In fiscal year 2001, 
the Department's recapitalization rate stood at 192 years. This budget 
request supports a recapitalization rate of 110 years, and we remain 
committed to achieving our 67 year recapitalization goal in fiscal year 
2008.

                SUSTAINMENT AND RECAPITALIZATION REQUEST
               [President's Budget in Millions of Dollars]
------------------------------------------------------------------------
                                            Fiscal year     Fiscal year
                                           2005  request   2006  request
------------------------------------------------------------------------
Sustainment (O&M-like \2\)..............           6,515           6,529
Restoration and Modernization (O&M-like)           1,321           1,008
Restoration and Modernization (MilCon)..           3,161            3474
                                         -------------------------------
      Total SRM.........................          10,997          11,011
------------------------------------------------------------------------
\2\ Includes O&M as well as related military personnel and host nation.

    As a key component of our facility program, the Military 
Construction appropriation is a significant contributor to the 
Department's comprehensive approach to asset management practices. The 
fiscal year 2006 Department of Defense Military Construction and Family 
Housing appropriation request totals $12.05 billion. This budget 
request will enable the Department to transform in response to 
warfighter requirements, to enhance mission readiness, and to take care 
of our people. We do this, in part, by restoring and modernizing our 
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
                                               2005         Fiscal year
                                           appropriation   2006  request
------------------------------------------------------------------------
Military Construction...................           4,745           5,284
NATO Security Investment Program........             166             207
Base Realignment and Closure............             246           2,258
Family Housing Construction/Improvements           1,622           2,020
Family Housing Operations & Maintenance.           2,547           2,220
Chemical Demilitarization...............            81.9  ..............
Homeowners Assistance...................  ..............  ..............
Family Housing Improvement Fund.........             2.5             2.5
Energy Conservation Investment Program..              50              60
                                         -------------------------------
      Total.............................           9,460          12,052
------------------------------------------------------------------------

Improving Quality of Life
    At the outset of this Administration, the President and Secretary 
Rumsfeld identified elimination of inadequate family housing as a 
central priority for the Department and set an aggressive target of 
2007 to meet that goal. Greatly expanded use of the privatization 
authorities granted under the fiscal year 1996 Military Housing 
Privatization Initiative has enabled achievement of that target at 
United States based installations where those authorities apply. 
Sustaining the quality of life for our military families is crucial to 
recruitment, retention, readiness and morale. The fiscal year 2006 
budget funds elimination of all inadequate domestic family housing by 
2007, and eliminates remaining inadequate houses overseas by 2009.
    DOD policy relies on the ``community first'' (private sector) to 
provide quality housing. Only when the private market demonstrates that 
it cannot supply sufficient levels of quality housing does the 
Department provide housing to our military families using privatization 
as its primary option followed by government-owned and leased housing. 
For example, we address our housing needs overseas through military 
construction and leasing in the absence of privatization authority.
    To ensure the Department is making the best investment decisions in 
determining the appropriate level of housing, the government provides a 
single and consistent methodology for calculating the requirement which 
was introduced in January 2003 and is being extensively utilized by the 
Services. Currently, 73 percent of military families reside in 
privately owned housing, including 11 percent in privatized military 
housing and 27 percent in government-owned housing areas.
    The Department has skillfully used privatization to more quickly 
eliminate inadequate housing and to provide additional housing where 
shortfalls existed. As of February 2005, the Department has awarded 43 
projects. This includes over 87,000 military family housing units, 
which is a 58 percent increase since January 2004. DOD policy requires 
that privatization yield at least three times the amount of housing as 
traditional military construction for the same amount of appropriated 
dollars. The 43 awarded projects have permitted the Department, in 
partnership with the private sector, to provide housing for about $767 
million in military construction investment. The same level of 
construction activity would otherwise have required over $11 billion if 
the traditional military construction approach was utilized. This 
reflects an average ratio of over 14 to 1, well exceeding program 
expectations.
    The Department's privatization plans in the fiscal year 2006 budget 
will privatize 84 percent of its domestic family housing inventory, or 
roughly 185,000 units privatized by the end of fiscal year 2007. By the 
end of fiscal year 2006, we will have privatized 172,400 housing units.
    For fiscal year 2006, the Department requests $4.243 billion in new 
budget authority for family housing construction and operations and 
maintenance:
  --$1.9 billion to construct 3,447 new/replacement units and improve 
        3,584 existing units.
  --$2.2 billion to operate and maintain approximately 123,452 
        government-owned family housing units, and lease another 26,281 
        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 2006 construction account requests a total of $281 million in 
funding for privatization. Of this amount, approximately $182 million 
is anticipated to be transferred to the Family Housing Improvement Fund 
during fiscal year 2006 along with $428 million in previously 
appropriated construction funds. This $610 million will be used to 
finance the privatization of approximately 34,964 units.

Utilities Privatization and Energy Management
    The Department seeks to reduce its energy consumption and 
associated costs, while improving utility system reliability and 
safety. The Department has developed a comprehensive energy strategy 
and issued new policy guidance that 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 our deteriorated and outdated utilities 
infrastructure where economically feasible. The comprehensive energy 
strategy supports the use of meters to manage energy usage at locations 
where the monitoring justifies the cost of installing, maintaining and 
reading the meter. Metering in itself does not save energy, however, 
use of meters can be beneficial to determine accurate billing, perform 
diagnostic maintenance, and enhance energy management by establishing 
baselines, developing demand profiles, ensuring accurate measurement 
for reporting, and providing feedback to users.
    DOD, as the largest single energy consumer in the Nation, consumes 
over $2.8 billion of energy per year. Conserving energy and investing 
in energy reduction measures makes good business sense and frees up 
resources for sustaining our facilities and for higher DOD priority 
readiness and modernization. Recent dramatic fluctuations in the costs 
of energy significantly impact already constrained operating budgets, 
providing even greater incentives to conserve and seek ways to lower 
energy costs. These include investments in cost-effective renewable 
energy sources or energy efficient construction designs, and 
aggregating bargaining power among regions and Services to get better 
energy deals.
    Conserving energy in today's high-priced market will save the 
Department money that can be better invested in readiness, facilities 
sustainment, and quality of life. Our efforts to conserve energy are 
paying off; in fiscal year 2004, military installations reduced 
consumption by 1.1 percent despite an 8.8 percent increase in the cost 
of energy commodities from fiscal year 2003. With a 26.8 percent 
reduction in standard building energy consumption in fiscal year 2004 
from a 1985 baseline, the Department has deviated slightly from the 
track required to achieve the 2005 and 2010 facility energy reduction 
goals stipulated by E.O. 13123. This is mostly attributable to the 
lapse of Energy Savings Performance Contract (ESPC) authority which 
typically accounts for more than half of all facility energy savings. 
However, with ESPC authority reauthorized in the fiscal year 2005 
National Defense Authorization Act, DOD has launched an aggressive 
awareness campaign and plan to get back on track to meet fiscal year 
2010 reduction goals.
    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 and $18 million in fiscal year 2005 and fiscal year 2006, 
respectively.
    The Department has a balanced program for energy conservation--
installing energy savings measures using appropriated funding and 
private-sector investment--combined with using the principles of 
sustainable design to reduce the resources used in our new 
construction. Energy conservation projects make business sense, 
historically obtaining about $4 in life-cycle savings for every dollar 
invested. The fiscal year 2006 budget contains $60 million for the ECIP 
program to implement energy saving measures in our existing facilities.
    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. Request for 
Proposal (RfP) templates were clarified to improve industry's ability 
to obtain private sector financing and manage risks. Of 2,601 utility 
systems serving the DOD, 463 systems have been privatized and 733 were 
already owned by other entities. Over 950 systems are currently under 
solicitation as each Service and the Defense Logistic Agency continue 
aggressive efforts to reach privatization decisions on all systems.

Installations Support
    The Installations Support function consists of two major programs: 
Installation Services (formerly referred to as ``base operations 
support'') and Facilities Operations (formerly referred to as ``real 
property services''). The current budget request of $22.5 billion 
includes $16.8 billion for Installations Services and $5.7 billion for 
Facilities Operations in fiscal year 2006. The Defense Installations 
Strategic Plan articulates the need to define common standards and 
performance metrics for managing Installations Support. The Department 
has initiated an effort to define and model each sub-function of 
Facilities Operations (utilities, leases, custodial services, snow 
plowing and the like) by fully utilizing commercial benchmarks. For the 
more diverse tasks within Installation Services, the Department has 
established a cross-Departmental working group to examine definitions 
and budget structures.

Range Sustainment
    In concert with the President's August 2004 Executive Order 
``Facilitation of Cooperative Conservation'' the Department has 
developed a program of Compatible Land Use Partnering that promotes the 
twin imperatives of military test and training readiness and sound 
conservation stewardship through collaboration with multiple 
stakeholders. The Executive Order defines ``cooperative conservation'' 
as actions that relate to use, enhancement, and enjoyment of natural 
resources, protection of the environment, or both, and that involve 
collaborative activity among Federal, State, local, and Tribal 
governments, private for-profit and nonprofit institutions and other 
nongovernmental entities and individuals. The Department's Range 
Sustainment Program is fully consistent with the President's goals in 
this area. Section 2811 of the 2003 National Defense Authorization Act 
authorizes the Services to take a proactive role in developing programs 
to protect our installations and ranges from urban sprawl by working 
with States and non-governmental organizations to promote compatible 
land use through cooperative conservation efforts. This authority has 
enabled DOD to initiate the Readiness and Environmental Protection 
Initiative (REPI)--a multi-year program to sustain test and training 
space for our troops while simultaneously assisting in the protection 
of valuable habitat and open space. This program provides a lasting 
solution and a long-term framework for developing new policies, 
partnerships, and tools to assist communities and other interested 
stakeholders in executing compatible land use partnerships around our 
test and training ranges and installations, as well as work with our 
other Federal landowners on cooperative conservation projects. In the 
coming years, military readiness will still require substantial 
resources, air, land and water areas where military forces can test and 
train as they would fight. It is imperative that we be able to posture 
our test and training infrastructure for transformational and 
sustainable operations.
    The Department appreciates greatly the $12.5 million in fiscal year 
2005 funding provided by Congress to fund the REPI program, and the 
military Services are already executing critical projects in many 
States. A recent agreement to address encroachment at Fort Carson, 
Colorado, and to enhance regional environmental conservation is one 
example of this win-win approach. Other projects are under 
consideration in Hawaii, at MCB Camp LeJuene, North Carolina, and in 
California and Florida. In fiscal year 2004, the Services implemented 
successful partnerships with State and Non-Governmental Organizations 
(NGOs) at locations such as NAS Pensacola (Navy and Escambia County), 
Camp Blanding (National Guard Bureau and State of Florida). These 
multi-faceted conservation partnerships will ensure the long-term 
sustainability of test and training centers supporting the military 
mission. Thus, the Administration has requested $20 million for the 
REPI program for fiscal year 2006 and we are in the process of refining 
the Service priorities for those funds. I have requested that the 
Services prepare and submit requirements associated with fiscal year 
2007 and out-years to support a long-term funding strategy for the REPI 
program. These compatible land use partnering efforts will become even 
more critical to our ability to protect and preserve our test and 
training missions as we enter our post-BRAC transformational 
environment. We look forward to participation in the White House 
Cooperative Conservation Conference later this year to find ever more 
innovative ways to work with others to help secure critical test and 
training ranges. I look forward to working with Congress to ensure our 
ability to fulfill the important programming requirements for these new 
efforts.

Safety and Occupational Health
    The Department is aggressively supporting the SECDEF's priority to 
reduce mishaps in DOD by implementing SOH management systems and by 
making it a priority in our Defense Installations Strategic Plan. Our 
programs focus on continuous incremental improvement in Safety and 
Health, but we're also involved in implementing significant changes in 
safety through our partnership with the Under Secretary of Defense for 
Personnel and Readiness, who chartered the Defense Safety Oversight 
Committee (DSOC). Together, we are leading DOD's efforts to cut mishaps 
in half by the end of fiscal year 2005. The DSOC, composed of senior 
leaders throughout the Department, is finding ways to decrease the 
detrimental effect on our readiness caused by mishaps. We are focusing 
on acquisition; base operating support; training; and deployment 
operations. For acquisition and training, the Army and Marine Corps is 
responding to deaths from HMMWV rollovers by acquiring improved seat 
belt systems for tactical vehicles and by training deployed soldiers 
and marines to improve their driving skills. For deployment health 
protection, we began a program for the factory treatment of Army and 
Marine Corps combat uniforms with permethrin. This will provide 
protection against mosquitoes, and the diseases that they transmit, for 
the life of the uniform. Factory treatment ensures that all uniforms 
are treated and deployment-ready and that soldiers are not exposed to 
concentrated pesticides.

                        ENVIRONMENTAL MANAGEMENT

    The Department continues to be a leader in every aspect of 
environmental management. We are proud of our environmental program at 
our military installations and are committed to pursuing a 
comprehensive environmental program.

Environmental Management Systems
    To make our operations more efficient and sustainable across the 
Department, we are continuing our aggressive efforts to implement 
environmental management systems (EMS) based on the ``plan-do-check-
act'' framework of the international standard for EMS (ISO 14001). We 
are embedding environmental management as a systematic process, fully 
integrated with mission planning and sustainment. This transformation 
is essential for the continued success of our operations at home and 
abroad. Implementing EMS will help preserve range and operational 
capabilities by:
  --creating a long-term, comprehensive program to sustain training and 
        testing capability while maintaining healthy ecosystems;
  --conducting environmental range assessments to ensure that we 
        protect human health and the environment; and,
  --funding and implementing the INRMPs for our ranges.
    In addition, EMS will help maintain and preserve our historic 
properties, archaeological resources, Native American, and other 
cultural assets for the benefit of future generations. Today, DOD has a 
large inventory of historic properties: 75 National Historic Landmarks, 
and nearly 600 places on the National Register of historic places, 
encompassing more than 19,000 individual properties, including 
buildings, structures, objects, and sites located at over 200 
installations. Over the next two decades, tens of thousands more 
buildings will reach an age requiring evaluation of their historical 
significance.

              ENVIRONMENTAL PROGRAM--SUMMARY OF REQUEST \3\
      [President's Budget in Millions of Dollars--Budget Authority]
------------------------------------------------------------------------
                                            Fiscal year
                                             2005  as       Fiscal year
                                           appropriated    2006  request
------------------------------------------------------------------------
Environmental Restoration...............           1,352           1,370
BRAC Environmental \4\..................             328             449
Compliance..............................           1,666           1,561
Pollution Prevention....................             142             143
Conservation............................             175             205
Technology..............................             274             206
International \5\.......................               3               3
                                         -------------------------------
      TOTAL.............................           3,937           3,934
------------------------------------------------------------------------
\3\ Includes operations and maintenance, procurement, RDT&E, and
  military construction funding.
\4\ Funding levels reflect total requirement.
\5\ International is included in Pollution Prevention and Compliance.

    In fiscal year 2006, the budget request includes $3.9 billion for 
environmental programs. This includes $1.4 billion for cleanup, $0.4 
billion for BRAC environmental, $1.6 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 the cleanup of property contaminated 
by hazardous substances, pollutants, and military munitions. We have 
achieved remedy in place or restoration complete at 15,950 out of 
19,710 sites on active installations. At the end of fiscal year 2004, 
4,046 out of the 4,832 BRAC sites requiring hazardous waste remediation 
have a cleanup remedy constructed and in place, 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) achieved remedy in place or response complete at 1,539 out of 
the 2,647 sites.

Managing Compliance and Preventing Pollution
    The Department is committed to going beyond mere compliance. But 
compliance with existing laws and regulations is the base line for our 
program and we continue to plan and fund for this requirement. Our 
ability to meet these compliance driven goals continues to improve. In 
a letter to the editor of USA today, acting EPA Assistant Administrator 
Skinner publicly complemented the Department by stating, ``The 
Department of Defense (DOD) has been a leader in pollution prevention 
and implementing environmental-management systems that serve as models 
for other facilities.'' Pollution prevention techniques continue to 
save the Department needed funds as well as reduce pollution. The 
Department continues to demonstrate pesticide use risk reduction on 
installations and was recognized by the EPA as Pesticide Environmental 
Steward Program Champion, for the third year in a row.

Emerging Contaminants
    In January 2005 the National Academy of Sciences (NAS) released a 
review of the science used to determine the public health risks from 
perchlorate, a chemical with important national defense applications 
due to its use in missile and rocket propellants, munitions, 
pyrotechnics, and flares which was funded jointly by DOD, DOE, EPA, and 
NASA. Even before the start of the NAS study, Federal agencies were 
working hard to understand and address potential risks of perchlorate. 
The NAS report yielded an independent assessment of the available 
science. Now Federal agencies will be able to take actions based on 
sound science to address the issue of perchlorate in our Nation's 
drinking water supply.
    We continue to develop more comprehensive strategies to enable us 
to protect public health while sustaining our assets and better 
managing our liabilities. In 2004, in advance of any legally 
promulgated standard for perchlorate, the Department issued a policy to 
sample for perchlorate that has enabled the Department to better 
characterize the nature and extent of perchlorate plumes associated 
with its facilities. Over the last year, a joint effort between the 
Department and the State of California yielded a sampling 
prioritization protocol to ensure that active and former DOD sites with 
the greatest potential to cause a perchlorate-based health threat were 
investigated first. All current and formerly used DOD sites have now 
been jointly assigned a priority for sampling according to that 
protocol.
    The Department is moving ahead with efforts directed toward 
removing perchlorate from the environment. In advance of any 
requirement, DOD proactively initiated remediation demonstration 
projects at several sites in California, Texas, and Massachusetts. We 
have taken corrective measures to ensure proper disposal and added 
additional wastewater treatment to manufacturing facilities using 
perchlorate. We continue to fund remediation technology research and, 
this year, we launched a $9.5 million wellhead treatment demonstration 
effort with several Southern California communities. The Army's effort 
to find substitutes for some of its training uses of perchlorate is 
also yielding positive results.
    We are using these comprehensive approaches as a model to more 
proactively and cooperatively address other emerging contaminants such 
as trichloroethylene (TCE) and Royal Demolition eXplosive (RDX). The 
Department continues to engage with other agencies in a sustained 
collaborative effort to address emerging contaminants by creating 
mutually satisfactory sustainable solutions. Last fall, DOD began 
working with the Environmental Council of States to define 
opportunities for States, DOD, DOE, and EPA to address emerging 
contaminants more effectively in the future.

                        BUSINESS TRANSFORMATION

Business Management Process Transformation
    The Business Management Modernization Program (BMMP) was 
established 3 years ago and has made significant progress in 
establishing key foundational elements necessary to enable broad 
business transformation across the Department. In April 2003, the DUSD 
(I&E) was designated as the Domain Owner for the Installations and 
Environment Domain of BMMP. Because the foundation is now laid, the 
program is redefining itself to focus on facilitating rapid delivery of 
DOD Enterprise capabilities.
    The I&E Domain has achieved significant accomplishments over the 
past year. We developed a real property unique identification concept 
that will enable greater visibility of real property assets and 
associated financial resources. Our efforts focused on reengineering 
the business process for real property inventory, resulting in standard 
data elements and data definitions for physical, legal and financial 
attributes of real property. Our efforts also produced, for the first 
time in DOD, an end-to-end process of real property management that 
articulates the interfaces with real property asset accountability and 
financial records. Our focus on data (data strategies, elements and 
definitions) will facilitate rapid implementation of the real property 
inventory capability upon deciding on our systems implementation 
strategy. Additionally, we developed a process model for environmental 
liabilities recognition, valuation, and reporting that contributes to 
our overall auditability. During this past year, we also established 
the Defense Installation Spatial Data Infrastructure project to 
implement DOD-wide policies and resource oversight for geospatial 
information resources that support the Installations and Environment 
business mission area.
    During this fiscal year, we will conduct an analysis of system 
alternatives and prepare a transition plan to determine the best 
implementation strategy for the real property inventory reengineering 
effort. We will continue to make improvements across the Department in 
managing hazardous material by developing an enterprise-wide procedure 
for hazardous materials management. We will define I&E geospatial 
information needs and continue to minimize redundant acquisition of I&E 
geodata resources. Lastly, we are aggressively working to put into 
operation a DOD registry for physical locations. This registry will 
identify all DOD sites with a unique identifier and will be associated 
with firm boundary information. The registry will be available across 
the DOD enterprise and to potential users include the warfighting 
community and business mission areas. The site registry will allow for 
personnel and weapons system information systems to be linked to DOD's 
sites.

Competitive Sourcing
    Competition is a driving force within the American economy, causing 
organizations to improve quality, reduce cost, and provide rapid 
delivery of better products and services. The President's Management 
Agenda identifies Competitive Sourcing as one of the five primary 
Federal initiatives. The Department of Defense has long been the 
Federal leader in using public-private competition under the process 
defined by OMB Circular A-76 to decide the least costly and most 
efficient source for commercial functions. It is essential that we 
continue to utilize the process, where it makes good military and 
business sense, to improve support to the warfighter and increase 
readiness. Many important base support functions fall into this 
category. The fiscal year 2006 budget supports continued use of the 
improved process described in the recent revision to OMB Circular A-76 
competitions for functions involving approximately 100,000 full time 
equivalents (FTE). This will allow achievement of the Department's 
targets in the President's Management Agenda.

                               CONCLUSION

    The Department is transforming its installations and business 
practices through an asset management strategy, and we are now seeing 
the results of that transformation. We are achieving the President's 
goal to provide quality housing for our service members and their 
families, and we have made positive progress toward our goal to prevent 
deterioration and obsolescence and to restore the lost readiness of our 
facilities. We also are transforming our environmental management to 
become outcome oriented, focusing on results. We are responding 
vigorously to existing encroachment concerns and are putting a long-
term installation and range sustainment strategy into effect.
    The Base Realignment and Closure effort leading to the delivery of 
the Secretary's recommendations to the independent Base Closure 
Commission in May 2005 is a key means to transform our infrastructure 
to be more flexible to quickly and efficiently respond the challenges 
of the future. Together with the Global Defense Posture Review, BRAC 
2005 will make a profound contribution to transforming the Department 
by rationalizing our infrastructure with Defense strategy.
    In short, we have achieved significant accomplishments over the 
past few years, and we are well on our way to achieving our goals 
across the Installations and Environment Community. In closing, Madam 
Chairwoman, 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, Mr. Secretary.
    I will start with a few questions. I am going to try to 
give everyone a chance to do round one, and then I will likely 
come back with round two.

                   MORE SPECIFICITY FOR BRAC FUNDING

    First of all, Mr. Grone, the budget request includes $1.9 
billion for the 2005 BRAC round. There are $392 million for 
costs associated with the Global Presence and Basing Strategy, 
but the rest is not earmarked at all. I wondered if you would 
tell us how the Department intends to determine the uses for 
this money. What do you plan for this, and will we have a 
mechanism by which you will come to Congress with more 
specificity for almost $2 billion?
    Mr. Grone. Madam Chairman, that is an excellent and quite 
appropriate question. As we were budgeting for base realignment 
and closure activities at the Department for the coming fiscal 
year, of course, the first year of implementation is always a 
bit of a challenge. We do not know at the time we build the 
budget what the recommendations of the Secretary will be, nor 
do we know, obviously, what the recommendations of the 
commission and the disposition of those recommendations by 
Congress will be.
    We took a good, hard look at lessons learned from the past, 
as we were building the budget. In 1993, the Department had 
requested funds which, if inflated appropriately, would amount 
to approximately $1.5 billion. We took a look at the 1995 
round, applied the appropriate inflators to that, and the 
request was about $1 billion.
    Having said that, the General Accounting Office on numerous 
occasions, in commenting on the 1995 round, indicated to the 
Secretary and to the Congress that the Department's 
recommendations in that year were smaller than it had projected 
at the start and that their analysis, the GAO's analysis, at 
the time found that the services' concerns over closing costs 
played a role in limiting the number of options that were 
actually recommended to the commission and ultimately enacted 
into law.
    So when we took a look at the lessons of the past, as well 
as considering the costs associated with the initial phase of 
realigning forces to the United States from abroad, we came to 
the conclusion that that level of funding, approximately $1.9 
billion, was an appropriate level for the first year.
    As to the process, in 1995, as with prior rounds of BRAC, 
the Department's budget justification included simply a 
reference that we had requested a certain level of funding. 
Once the Congress disposes of the commission's recommendations, 
we will provide a report to the Congress that details the first 
year implementation funding associated with the amount 
appropriated by Congress, and subsequently for fiscal year 2007 
and beyond, we will include a complete breakdown of how we 
expect to expend those funds, as we would with any other budget 
justification. So we certainly will not begin to expend funds 
until we provide such a report for the committee's review, but 
we believe that that initial tranche of funds is an appropriate 
level to get us started.
    We do not have a target for the number of bases we expect 
to close, nor do we have a target for the expected amount of 
savings. But we have taken a good, hard look at lessons learned 
from the past, and we want to put ourselves in the position to 
begin to expeditiously implement BRAC recommendations and we do 
not, obviously, want to be short of the resources necessary to 
make that happen.
    Senator Hutchison. Thank you. We will look forward to 
having something that assures that we will have some 
specificity as you get to the point. I understand, obviously, 
we do not know what bases are being closed and what the needs 
are at this time.

                PROCEEDS FROM SALES OF CLOSED FACILITIES

    Speaking of lessons of the past, after nearly a decade of 
debate over the future of the former El Toro Marine Corps Air 
Station property, which was closed in the 1993 BRAC, the Navy 
has sold the property to a developer for a reported almost $650 
million. We are told that the Navy probably will sell much of 
the property at the now-closed Roosevelt Roads Naval Air 
Station in Puerto Rico.
    Is this something you expect the Navy and other services to 
do following the 2005 BRAC round? If so, will it offset some of 
the costs of base closing? How will that money be allocated? 
And is this sort of a new mode of operation that is different 
from trying to work with community redevelopment corporations 
and giving property back to the community to the best extent 
possible? Just in general, the overview of is this a harbinger 
of the future.
    Mr. Grone. It is an indicator of, in many ways, where we 
would like to be after the 2005 round. And at the outset I want 
to emphasize that in both the case of El Toro and in the case 
of Roosevelt Roads, should the Navy proceed with sale--and Mr. 
Penn who will follow us in the next panel can elaborate on this 
point. But in both cases, those decisions and those 
redevelopment packages are reflective of what we have taken to 
refer to as the mixed tool kit. In both instances, there are 
public purpose conveyances. There are economic development 
conveyances, as well as parcels for public sale. Both resulted 
from extensive consultation with local governments concerned, 
and that is the way in which we see a good deal of the future.
    Our approach, taking good lessons learned from the past, we 
probably significantly as a Department over-estimated our 
ability to sell in the early stages of the first BRAC rounds. 
Later on, given a whole history, which I will not belabor, we 
probably took that pendulum too far over to the right. Where we 
want to be--and we have had extensive conversation with 
redevelopment authorities, local governments, State 
governments, the National Association of Installation 
Developers, and others, and we expect we will continue to have 
dialogue with the Hill on these points as well.
    Where we would like to be is to put ourselves in the 
position where we proceed from a series of four or five key 
principles. One is if we choose to close a base, we need to 
look at ways to accelerate the movement of that mission. Doing 
so will enable the second principle, which is to put the 
property into effective economic reuse as expeditiously as we 
can. As we do that, our approach will be a highly tailored, 
locally tailored effort, working with State and local 
governments and redevelopment authorities, to put that mixed 
tool kit parcel into place and, where it is appropriate, to 
sell.
    As we sell property and we take revenue in, of course, that 
will offset some of the cost, particularly over the long term, 
of our environmental remediation and caretaker cost activities. 
So it is not insignificant in that regard. But we recognize 
that our ability to do that is entirely dependent upon our 
ability to work in cooperation and in partnership with local 
government. We cannot sell and maximize value on our own. We 
must work together, and that is a foundation of our policy as 
we are developing it in the middle of our policy review going 
forward.
    Senator Hutchison. Thank you very much.
    I will now turn to my ranking member, Senator Feinstein, 
and I do have a couple of other questions, but I would like to 
spread the opportunity.

                   CHEMICAL WEAPONS DEMILITARIZATION

    Senator Feinstein. Well, thank you very much, Madam 
Chairman. I will try and be brief.
    Let me ask my first question because Senator Allard is here 
hailing from Colorado, and that is about chemical weapons 
demilitarization. There is no funding for the chem demil 
construction in your 2006 MILCON request, and I think there has 
been a great deal of discussion of how Defense intends to 
proceed with the destruction of munitions stockpiled at the 
Blue Grass, Kentucky and the Pueblo, Colorado facilities. In 
2005, we appropriated a total of $81.8 million for construction 
of the Kentucky and Colorado facilities. In 2004, $104 million 
was appropriated for construction. And this is all on top of 
nearly $100 million that was appropriated for these facilities 
in prior years. So that is almost $300 million that has already 
been appropriated.
    You are not requesting any chemical demil funds. I would 
like to know why not. I would like, if I might, to know whether 
the Department intends to proceed with construction of the 
Kentucky and Colorado facilities, and if these facilities are 
delayed or ultimately canceled, how will that affect DOD's 
ability to comply with the deadlines for chemical stockpile 
destruction imposed by the Chemical Weapons Convention?
    And are you considering the feasibility of shipping these 
weapons from these facilities across State lines, and what is 
the status of the funding? How much has been spent and how much 
of it remains unobligated? I have got them written down. So if 
you forget one, I will get you on another.
    Ms. Jonas. Senator, let me start out and then I will let 
Mr. Grone talk to some of the specifics on the MILCON piece.
    Senator Allard was present at a Senate Budget Committee 
where the Deputy Secretary of Defense committed to working with 
the Congress on the issue. We understand that there are 
concerns here and working some alternatives to deal with the 
situation as it is. Mike Wynne, who is the acting Under 
Secretary for AT&L, of course, is the principal in charge of 
this program. I would be happy to make sure that we get for you 
for the record all the answers to those questions. I am not 
sure I have them all.
    [The information follows:]

    The Department has released funding previously withheld in fiscal 
year 2005 to commence the redesign and construction of the destruction 
facilities managed by the Assembled Chemical Weapons Alternatives 
(ACWA) program. The ACWA program has completed sufficient analysis of 
methods that balance cost, schedule and performance objectives to make 
a determination as to which is the most prudent design approach to 
maximize the opportunity to meet the extended 100 percent Chemical 
Weapons Convention destruction deadline of April 29, 2012. The fiscal 
year 2005 funds and those funds requested for fiscal year 2006 should 
be sufficient to manage the ACWA program through the end of fiscal year 
2006.

    Ms. Jonas. My understanding is that--and I do not have the 
specific numbers on the obligations, but on the prior year 
obligations, a good portion of those funds have been obligated. 
There are some that have not been, and Mike Wynne is looking at 
a spend plan on that to try to deal with the situation.
    But I would say that the Deputy Secretary of Defense 
committed to working with the Congress on potential 
alternatives regarding those two sites.
    Senator Feinstein. Well, you really have not answered the 
questions. But what you are saying is we are working on it. 
$285.5 million has been appropriated by this committee.
    Ms. Jonas. Right.
    Senator Feinstein. What I am asking for, I guess, if you 
are not going to use it at these sites, tell us now. Tell us 
what you are going to do with the money.
    Ms. Jonas. Certainly.
    Senator Feinstein. This has been going on for what? This is 
the third year now.
    Ms. Jonas. Senator, I would be happy to get with Mike Wynne 
and get back with you and your staff to give you the exact 
information that you are requesting. My understanding is there 
is some money that Mike has got on a withhold because he is 
concerned about a spend plan and some cost overruns on that. 
But I would be happy to work with you on that.
    Senator Feinstein. Can you tell us if you are going to go 
ahead with these two sites? Yes or no?
    Mr. Grone. Senator, where I think are now--and I would like 
to elaborate on a couple of the points that my colleague has 
made.
    So far through the program, we have met all our required 
milestones to date, to speak to the point on demilitarization. 
We have destroyed 35 percent of the stockpile. The next 
milestone requires destruction of 45 percent of the stockpile 
by December 2007, and as we sit here today, that deadline is 
achievable.
    As the subcommittee is aware, we have seen significant cost 
growth in the chemical demilitarization program overall.
    Senator Feinstein. I do not want to take up your time. I am 
asking about two sites: Pueblo, Colorado and Kentucky.
    Mr. Grone. The acting Under Secretary has asked for a 
number of alternatives to be looked at. Once that spend plan 
and those alternatives are assessed, we would be in a better 
position to answer the question. All options are on the table. 
None are off the table. And in order to fulfill our 
responsibilities as a Department to ensure that we have a cost 
effective, safe, treaty-compliant program, we need to look at 
all the options given the cost growth that we have had in the 
program, and that is what we are trying to do.
    Senator Feinstein. Well, let me just ask this. You 
basically have not answered the question. You may not be able 
to. I appreciate that. But for 3 years we have appropriated 
money. It seems to me we ought to know whether this money is 
going to be used for that. It is a lot of money. And if it is 
not, whether it is unobligated and it can be used for other 
things.
    Ms. Jonas. Senator, I would be happy to get with you in the 
next couple of days. I will work with Mike Wynne to make sure 
that we get an answer to that question. But my understanding 
was that he was looking at a spend plan on it and that is why 
the withhold took place.
    [The information follows:]

    Yes, we are going to go ahead with these two sites. The Department 
has now released all prior years and fiscal year 2005 appropriated 
funds for Blue Grass and Pueblo.

    Senator Feinstein. Okay, but the bottom line is you are 
uncertain whether you are going to go ahead or not go ahead. 
Right?
    Ms. Jonas. I need to talk with Mike Wynne about where they 
are with respect to his spend plan. I will not make any 
assumptions right now, but I will be glad to get back to you in 
short order.
    Senator Feinstein. When you get back to us, if you could 
bring the information, exactly how much has been spent and for 
what it has been spent, and also what the alternatives are that 
you are considering.
    Ms. Jonas. Absolutely.
    Senator Feinstein. I appreciate that.
    I will reserve my questions so others have a chance.
    Senator Hutchison. We will have a second round.
    Senator Allard.
    Senator Allard. Madam Chairman, thank you very much, and I 
want to thank Senator Feinstein for pursuing that line of 
questioning. It is exactly the same line of questioning that I 
put before you, Ms. Jonas, in previous hearings. I have asked 
the same line of questions at the Subcommittee on Defense, 
asked the same line of questions at the Budget Committee when 
we had our hearing there, and we have the same line of 
questions here. I think they are very important questions that 
we are asking.
    We are not going to be in compliance with the Chemical 
Convention Treaty which has been ratified by the Senate. We had 
testimony from the Secretary of State, Condoleezza Rice, saying 
that if we do not comply with the treaty, it just makes her job 
that much more difficult. So this is an important issue to the 
country, not just Kentucky and Colorado.
    Mr. Grone--did I pronounce your name right? Grone?
    Senator Hutchison. Grone.
    Senator Allard. I am sorry.
    Mr. Grone. That is quite all right.
    Senator Allard. Mr. Grone, I apologize.
    But the point I want to make is that you say all options 
are on the table and the study that you are making includes all 
options. Now, we have in Federal law a provision that says that 
you will not ship interstate chemical weapons or material from 
these chemical weapons stockpiles without permission from the 
Governor or a declared emergency by the President. And none of 
those conditions exist in either Kentucky or Colorado or the 
neighboring States.
    We have already had three studies in Colorado at the Pueblo 
site. Now, why in the world, after we have had three studies, 
are we having another study? We are spending $150,000 on that, 
which could easily be used to begin to put in some of the 
infrastructure ahead of time. To me it seems like an absolute 
waste of taxpayer dollars.
    Now, if you have problems with cost overruns, then I think 
we ought to address that issue. But I do not see why you are 
spending taxpayer dollars on a study on an activity that is 
illegal. You are not going to ignore the law, are you?
    Mr. Grone. No, sir.
    Senator Allard. So I do think this does require serious 
consideration. The Pentagon has simply just not treated this as 
seriously I think as they should, and I hope they do.
    Ms. Jonas. Senator, I would just add that it was the Deputy 
Secretary that committed to work with you and other Senators on 
this very matter.
    Senator Allard. That is correct.
    Ms. Jonas. And I know he is hard at work at that. It is 
very much on his plate, and I know he has held several meetings 
on it already. So we would be happy to get back to this 
committee on plans for the future.
    Senator Allard. I for one would be very interested in 
getting the information that was requested by Senator 
Feinstein, and she would probably be interested in getting the 
information that you might provide to my office too.

                BUFFER AREA AROUND FORT CARSON, COLORADO

    I am going to go on to something that is probably a little 
easier subject. One of the things that we are looking at Fort 
Carson--we have introduced legislation for this--is a buffer 
area around the base. National bases all around the country are 
having urban encroachment occurring on them. I think we have 
probably all experienced this in our States. As a result of 
that, it is difficult for them to carry out their mission.
    We have a unique situation in the State of Colorado in that 
we have a large amount of open space around Fort Carson that is 
owned by very few landowners. This provision, which was just 
passed by Congress last year, has not been applied to any base. 
So Fort Carson I think is going to be our first test as far as 
this is concerned.
    I would like to get some of your views on this. We are in 
the process now of negotiating with the local property owners 
and it is strongly supported by the local community, strongly 
supported by the commanders at the base. From what I can tell, 
everybody in the Pentagon is enthusiastic about it. I would 
just like to have maybe some comments that you might have on 
this approach and what concerns you may have, if any.
    Mr. Grone. Well, Senator, I appreciate the opportunity to 
comment on it because the general initiative is managed by my 
office.
    We had requested funds last year. Several years ago we had 
sought authority from the Congress to begin this type of 
important buffer initiative which Congress graciously enacted. 
We would have the ability with this to improve the long-term 
stewardship and management of encroachment around many of our 
installations.
    We had requested $20 million in funds last year from the 
Congress, and through the budget process, we ended up with 
$12.5 million for fiscal year 2005. We followed up that request 
with an additional request which will be pending in the Defense 
Subcommittee for $20 million in fiscal year 2006.
    The issues at Fort Carson are a high priority issue. For us 
it is a priority for the Army. We are working now on how to 
begin to implement a good deal of the program there. We do have 
some initial experience with these kind of initiatives. A lot 
of what we are doing now was rooted in some local initiatives 
in and around Fort Bragg, North Carolina, and pursuant to the 
authority provided by Congress 3 years ago, we have conducted 
two agreements in the State of Florida, one around Camp 
Blanding to benefit the Florida National Guard, and the other 
around NAS Pensacola, Eglin Air Force Base, between the Navy 
and Escambia County.
    So we are looking at locations all across the country not 
just to use the defense-wide fund, the $20 million we have 
requested this year, but also the services have the ability to 
tap their own O&M funds for this if they have a willing seller 
and if it is something that needs to be critically executed in 
that fiscal year. So we are looking very hard at it.
    It is a very, very positive initiative. It rests on a 
serious of cooperations and cooperative relationships between 
us, the State, and nongovernmental entities. It holds out the 
long-term prospect of being a very key part of our ability to 
guard against encroachment at our installations. We certainly 
support those efforts.
    Senator Allard. I thank you for your response and look 
forward to working with you on that.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you.
    Senator Landrieu has joined us. Welcome.

                 STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Madam Chair. I just want to 
say how glad I am to be again joining you on this committee. 
There was some question as to our organization. I am happy that 
our committee not only survived but picked up the oversight of 
veterans and look forward to working with all of you in that 
regard.
    I also have a statement for the record, and I apologize for 
being late. So I will just submit it. But I would like to just 
refer to part of that opening statement and then get to my 
questions.
    I wanted to mention in the opening the success that we have 
had--and to thank our panel--in Louisiana for our public/
private venture program, as we refer to it, PPV. Many of our 
States have experienced similar successes. But, Madam Chair, 
that success that was experienced at our naval air station, now 
the joint reserve base in Belle Chasse, is very worth noting.
    Because of the basic radical transformation in an extremely 
positive way of the housing there and the establishment of a 
brand new school, which was done, as I understand, because I 
helped to do it, in quite a unique way, a new partnership 
between the State, the local school board, and the Federal 
Government, at minimal expense to the Federal Government, 
frankly at minimal additional expense, based on the way that it 
was done, we now have just an excellent school operating right 
here next to this base with 600 children and plans for a 
second, brand new housing, morale lifted, families together.
    It leads me, as we begin this cycle, to really think about 
the quality of life and retention related to keeping families 
together and happy. We might recruit a soldier, but we retain 
families. And part of our committee structure is underlining 
and supporting the notion that whether you are the soldier or 
the spouse or the child, the whole family is really serving, 
and the obligation that we have to that entire family for their 
housing, their security on base and off of base.
    So I wanted to cite that in my opening and submit the rest 
of my statement.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Madame Chairman: Thank you for calling this hearing to review the 
President's budget for Defense-Wide and Navy and Marine Corps Military 
Construction. We use very clinical terms in the present setting like 
``BAH'' (Basic Allowance for Housing), and ``BEQ's'' (Basic Enlisted 
Quarters) of MHA's (Military Housing Areas). While every field needs 
its acronyms, I wonder if we don't sterilize the items we are 
referencing. One of the core missions of this portion of our defense 
budget is to provide homes for our soldiers. Not housing but homes.
    When you think of it in those terms, questions about quality of 
life flow more naturally. If this base is a home for our sailors 
returning from a year or more at sea, or leaving their families behind 
as they deploy to the far corners of the earth, what kind of place is 
it? Do these homes give comfort to our troops when they are deployed or 
do they generate more worry? Has the government helped create a 
community, or have we simply ``housed'' our military families like we 
do equipment.
    These are the questions that we must ask ourselves as we give 
closer scrutiny to the President's request for Defense-wide, Navy and 
Marine Corps military construction. Madame. Chairman, I'd like to 
mention one area that has been a notable success, and that is the 
execution of the Public, Private Venture program, or PPV, by the 
Department of the Navy. I know, because our former Naval Air Station, 
and now Joint Reserve Base, in Belle Chasse, Louisiana has been through 
this process. At minimal cost to the government, dilapidated housing 
stock was completely replaced with new on-base accommodations. They are 
clean, comfortable and worthy of the commitment that our men and women 
make to their government. It has also had a notable impact on the 
number of geographic bachelors serving at Belle Chasse. So-called 
geographic bachelors are servicemen and women who leave their families 
behind at their previous service station because they do not want to 
move them to new locations.
    There are a variety of reasons for geographic bachelors lack of 
base housing, poor public schools, and lack of economic opportunity for 
non-military spouses. What we do know is that the proliferation of 
geographic bachelors contributes to high military divorce rates. 
Compound that fact with the current operations tempo for all the 
branches of service, and you begin to understand why military families 
are under stress. In light of this strain, we must make every effort to 
eliminate geographic bachelors in order to support our troops and 
military families. The PPV program has been a valuable tool in this 
mission.
    The other excellent aspect of PPV for our State is that the project 
request was made in such a way that local Louisiana companies could 
compete for the work. To me, that is a win, win, win situation. Our 
servicemen and women get homes much faster than they would have under 
the status quo, the Navy and the DOD get high quality homes at a 
fraction of the cost of building it themselves, and the local economy 
benefits as jobs are created in the surrounding community. What is 
more, unlike other projects, you actually have an accountable developer 
who is tied to the local community, and therefore, whose reputation 
will suffer if the work is not up to par.
    In too many construction projects undertaken by the DOD, the RFP's 
are designed so that only the usual suspects can participate. They are 
so enormous in scope, and carry such high requirements for previous 
experience that only a handful of companies in the country can compete, 
much less local firms. I do not believe that this approach is good for 
the bases, good for the contracts, or good for the taxpayer's dollar. 
When it comes to craftsmanship, schedules and oversight, bigger is not 
always better.
    Finally, let me say a word about Base Realignment and Closure. 
There are two items that concern me about this process. The first is 
that I am unconvinced that there has been sufficient communication 
between the DOD and its sister agencies about the BRAC process. In 
particular, I am concerned about a lack of consultation with the 
Department of Homeland Security. Many military facilities and certainly 
some in my State, have a dual function. Belle Chasse is not just an 
airfield for the Navy, Marine Corps and Air Force. It also plays host 
to aviation assets of the Customs Service. It does not appear that 
there has been any systematic attempt to consider the needs of other 
Federal agencies in the BRAC process. Nor does there appear to be any 
coherent way for the full Federal Government to participate in 
realignment. Are there Federal agencies that would benefit from 
integrating functions and facilities with a defense installation? 
Absolutely. Would the Department benefit from tenants, and shared 
overhead? Certainly. Yet, there is no way in this BRAC process to 
identify and quantify these prospects or savings.
    Secondarily, and this returns to the issue of quality of life, as 
we consider relocating our troops in Europe to locations that may be 
closer to perceived fault lines, it is important that we again consider 
the impact of our global footprint on military families. It may be 
possible to save some transportation costs by forward deploying our 
troops into countries where they will not bring their spouses and 
families. But contributing to the unaccompanied spouse phenomenon is 
not in the long-term interests of the military. As my friend Max 
Cleland was fond of saying, we recruit a soldier, but we retain a 
family. So if we expect to dig ourselves out of the recruitment and 
retention holes in which we currently find ourselves, it is vitally 
important that we keep an eye on the future. If we force our soldiers 
to choose between their families and their uniform, we must expect that 
they are going to leave their uniforms behind in many instances.
    Madame Chairman, Senator Feinstein, thank you both for your 
leadership on these issues. I look forward to the testimony of our 
witnesses.

      TAKING INTO ACCOUNT OTHER FEDERAL AGENCIES IN BRAC ANALYSIS

    Senator Landrieu. These are my two questions, again getting 
back to this separation, Mr. Secretary. As you know, one of 
them is about separation. This is about BRAC.
    As you know, we are going through the BRAC process. We are 
all engaged in that. Because of the conversations I have had 
with folks in my State, my question is, is there a process, 
formal or informal, that you engage in with other non-military 
but Federal tenants related to decisions related to BRAC? In 
other words, is that taken into consideration, other Federal 
tenants in or around military bases? And if that is taken into 
consideration, how do you? And if not, why are we not taking 
that into consideration?
    Mr. Grone. Senator, the way I can answer the question best, 
maybe not completely, but the best way I can answer it at the 
present time is that the statutory authority for a 2005 round 
of base closure and realignment requires us to take into 
account the effect of our actions on other Federal agencies.
    Senator Landrieu. Requires you to do so.
    Mr. Grone. Requires us to take into account our actions on 
other Federal agencies, and we are doing that. I would prefer 
not to detail how that is being done, as it is part of the 
internal deliberations over the BRAC process, but we do have a 
statutory mandate to take into account the effect of the 
Secretary's recommendations on other Federal agencies, and we 
will certainly comply with the statutory requirement.
    Senator Landrieu. I appreciate that, and I will discuss 
that with you further because there is some concern about that 
process basically related to the Belle Chasse area because 
there are other Federal agencies that have plans for the future 
already firmly in place. That would have some bearing on the 
outcome of that. But I will follow up.

                   KEEPING MILITARY FAMILIES TOGETHER

    The other is on the issue of families. Secretary Rumsfeld 
announced he wants to reshape our military global footprint. 
This committee is in the process of working with him to do 
that. As you know, we had a lot of bachelors basically based in 
Okinawa and Korea. Whether they were real or military 
bachelors, it is because their families could not join them.
    Now, as we reshape that base, what is our philosophy or 
plan for keeping families together, given the rise of divorce 
rates sometimes with our military families, our values to keep 
families together, keep families happy, keep them encouraged, 
keep the morale up because deployments are high? Could you just 
give us a comment about your views about reshaping this 
footprint relative to keeping spouses and children serving 
together where possible?
    Ms. Jonas. I will let Phil talk to the bachelors quarters.
    I will say I am the wife of a retired marine, and I am 
quite familiar with the separation and understand the 
importance to families of support.
    There are some initiatives in our overall budget and in the 
supplemental also for recruiting and retention bonuses. We do 
have a family support center that we have begun. I would be 
glad to provide for you all those types of things for the 
record that we are doing to make sure that the families get the 
support they need. This Military One Source is a center that is 
available 24/7 to military families to answer a plethora of 
questions apparently from where can I find a plumber to can you 
help me with my health care. So there are many initiatives like 
that.
    [The information follows:]

    The following bonuses, authorized in Chapter 5 of title 37, United 
States Code, were included in the Department of Defense fiscal year 
2006 budget request.
    (NOTE: Programs marked with an asterisk (*) are for members on 
active duty; all others are for Reserve Component personnel on other 
than active duty.)
Enlistment/Accession
  --*Enlistment Bonus
  --*Accession Bonuses for Nuclear Officers, Dental Officers, Pharmacy 
        Officers, and Registered Nurses
  --Selected Reserves Non-Prior Service Enlistment Bonus
  --Prior Service Enlistment Bonus
  --Accession or Affiliation Bonus for New Reserve Component Officers
Retention
  --*Selective Reenlistment Bonus
  --*Critical Skills Retention Bonus
  --*Special pay for retention of Aviators, Nuclear Officers, Special 
        Warfare Officers, Surface Warfare Officers, Officers in the 
        Health Professions (Medical and Dental Officers, Optometrists, 
        Certified Registered Nurse Anesthetists), and Pharmacy Officers
  --Reenlistment Bonus for Selected Reserves
  --Special pay for retention of Critically Short Wartime Health 
        Specialists in Selected Reserves
Other
  --*Incentive Bonus for Conversion of Military Occupational Specialty 
        to Ease Personnel Shortages
  --Affiliation Bonus for Service in Selected Reserves
  --IRR Enlistment, Reenlistment or Extension Bonus

    Senator Landrieu. Well, I am generally familiar with those. 
I guess I was not specific. If I could, Madam Chair, have just 
a minute.
    I am generally familiar with the variety of services that 
are offered, but specifically when it comes to the part of our 
budget, which is partly housing and building housing and a new 
footprint, are we building the family housing units, whether 
renovating the current ones that we are in like one of the 
examples I just gave, or as we develop this new footprint, is 
our goal to build them in such a way that families can 
basically not deploy, of course, to the front line together, 
but if they are building in the Mideast or Europe or back here 
where they can be housed at least together and serve from a 
base together? Is that part of our philosophy or are we doing 
something different?
    Mr. Grone. Senator, let me attempt to answer the question 
in this way. Currently roughly two-thirds of our military 
families live in the private economy. As we develop our on-base 
housing for privatization options, those are being renovated 
and new construction constructed to appropriate commercial 
private sector standards. So they provide and will provide our 
families with more housing options, better quality housing 
options, whether they choose to live off base, on base in a 
concentrated military community, or elsewhere.
    We are also looking at barracks privatization as one of our 
options to continue to advance this program forward to be able 
to begin to deal with quality of life concerns of the 
unaccompanied.
    The senior enlisted recently testified before your 
colleagues in the House. Ms. Jonas and I were before Chairman 
Walsh not too long ago, and the question arose with regard to 
child care specifically as an example where the senior enlisted 
have expressed concern. The Congress and the leadership of the 
Department have always responded, and I think responded 
appropriately and well, when the senior enlisted have raised 
issues and we have begun a process, internal to the Department, 
to look at ways in which we can improve child care options for 
our people. We do not have a program yet to bring forward with 
a revised set of priorities or policies, but we are taking a 
hard look at it.
    So whether it is the family support centers that my 
colleague referenced or housing privatization, child care, we 
are doing the things that we think we can to improve the 
ability of the military community to be supported and supported 
appropriately.

                       ARMY MILITARY CONSTRUCTION

    Senator Landrieu. Thank you so much.
    Senator Hutchison. Secretary Jonas, I notice that--and 
Senator Feinstein mentioned this--the Army MILCON request is 
down 16 percent from last year. Air Force is up 61 percent. I 
realize that every service has its own spending plans and you 
cannot tie them together necessarily.
    However, it seems that the Army is facing the most severe 
facility demands. They are bearing the biggest brunt of the war 
on terror, and they are also going to be the primary forces 
moving back from overseas. Yet, the restationing of the Global 
Posture Review is going to come out of the Army's own MILCON, 
meaning that you are going to be asking them to take $2.5 
billion out of their own FYDP. This is a concern to me, and I 
wonder if it is a concern to you and if the Department has 
really looked at this carefully.
    Ms. Jonas. Well, let me begin. I certainly understand your 
concerns.
    With all services, as you know, they build their budgets 
and we work very carefully and closely with them. The Army made 
a choice--and Mr. Grone may want to discuss this a little bit--
to realign some of their resources. As you may know, there are 
many things going on within the Army. I will mention the Army's 
modularity program and restructuring of their forces. If you 
are not familiar with it, let me just explain.
    General Schoomaker is trying to increase the operational 
size of his Army and adjusting his brigades so that where you 
might have had for a division with three brigade combat teams, 
you now would have four. So our supplemental request is asking 
for funds to outfit that fourth unit. The importance of that, 
of course, is to take the strain off the force. If you have 
four units instead of three, you do not have to call up the 
Guard or Reserve units to go. So that is an important part of 
this mix there.
    I am not intimately familiar with the BRAC process. I have 
been outside of that process. But that is consistent with the 
global posture things that they are doing. This was the Army's 
best judgment as to how to realign its resources.
    I understand your concerns. Maybe Phil can further speak to 
their specific judgments there, but I understand your concerns, 
Senator.
    Mr. Grone. Senator, I would just add one point to that. 
While the Army did accept a little bit more risk with this 
budget request, in terms of comparing one budget request to the 
other, comparing it to the appropriate level, the Army's 
recapitalization rate, for example, is just about right on the 
corporate profile at 111 years. So they are not, with this 
budget request, too far out of phase with the overall general 
direction of the Department.
    And certainly within the context of BRAC, as we rebase 
forces from abroad, as we realign missions domestically, a good 
deal of construction activity will accompany that through the 
BRAC account. Historically roughly one-third, or 30 percent, of 
the $22 billion we spent in prior BRAC activity was for 
military construction and military family housing purposes. We 
do not know precisely how much yet and we do not know what the 
phasing of it will be and how much of it would be Army in the 
first year of implementation, but there will be money that will 
be coming back to the Army in terms of the Army's ability to 
reset the force through basing as a result of BRAC.
    So certainly there are things we would like to continue to 
accelerate for the Army, but the Army's program, given all the 
other demands on the Army, is reasonably well balanced.
    Senator Hutchison. Let me just say I am familiar with what 
General Schoomaker is doing, but I think the Department has a 
responsibility to look at the allocations that it is giving to 
each of its services. I believe the Army is doing the most 
restructuring. It is bearing the greatest part of the war that 
we are fighting now. The Marines are as well, but that is a 
smaller unit. And to say that they are going through this 
upheaval with four brigades instead of three means, it seems to 
me, that they are going to need more, not less.
    I have visited every kind of base. I have visited Air 
Force, Navy, Army, and Marine. I think basically the Army is 
behind and getting further behind. I do not think that is the 
right trend when we are asking them to do so much. I have never 
talked to General Schoomaker about this. He has never raised it 
with me, but when I step back and look at all the other things 
he is doing and then look at this program, it does not seem 
balanced to me.
    So I would just ask you to look at that again very 
carefully. I know that you probably give each of the services a 
top line and this is what they have to spend, and he has chosen 
wisely on his first priority to spend it on the 
reconfiguration. But I do not think that means he does not also 
very much need more in this area.
    I have been out to Fort Bliss and Fort Hood, and we are 
putting more troops particularly into Fort Bliss where they are 
going to have to do a lot of temporary housing for the troops 
that are going in. They have plenty of space at Fort Bliss. It 
is a great place to add, and it can take another 5 or 10 
brigades. But I just think we need to be planning for all of 
that and making sure we are looking at what this influx back 
from Europe is doing, plus the reconfiguration, plus the added 
troops they are putting in combat to relieve guard and reserve.
    All the things that are being done are very efficient from 
an operational standpoint when it is done, but it just seems to 
me that you also are going to need to take care of the housing 
and schools and the things that are going to be necessary to 
augment those changes. This does not, on its face, show that.
    Any comments?
    Ms. Jonas. We appreciate your comments. We will certainly 
work with the Army on that. I would just note the supplemental 
request does ask for some funds associated with the restructure 
in the MILCON area.
    Senator Hutchison. Yes. It may be that we have to do some 
things in a supplemental, which I am prepared to do.

                       MARINE CORPS RESTRUCTURING

    Just one last point and then I will go to the others. On 
that same point, the Marine Corps is, in the supplemental, 
asking for $77 million for restructuring from its force 
structure review, but that does not look like it is enough. You 
are probably going to have to have some temporary housing for 
the marines from everything that we can tell. So is $77 million 
enough to do what you are going to need to do with the marines 
arriving this summer at their new locations? I think they are 
coming in this summer.
    Ms. Jonas. Of course, we are working with them. At the time 
we put the supplemental together, the $75 million was where we 
were. Of course, requirements always change and I understand 
that they had some additional requirements for explosive 
ordnance disposal and other things. We will continue to work 
with the Marine Corps. We do a lot also during the year and the 
year of execution to understand where people are at and where 
the services are at with respect to their requirements.
    Senator Hutchison. Be sure you do this before we pass the 
supplemental. If there need to be adjustments, we certainly 
want to do it now and not to have to have another supplemental. 
As you know, it is very difficult to get these and to manage 
them.
    Ms. Jonas. Absolutely. But we will have a mid-year 
execution review here shortly, so we should have a good idea of 
where we are.
    Senator Hutchison. Thank you.
    Senator Feinstein.
    Senator Feinstein. Yes. Thank you very much.

                     FISCAL YEAR 2006 BRAC FUNDING

    Mr. Grone, the MILCON budget request includes a $1.88 
billion wedge to implement the 2005 BRAC round, of which $314 
million is earmarked for the Pentagon's global basing plan. 
Now, that is a large amount of money to be obligated within 1 
year, particularly given the long budgetary lead times that the 
Department so often cites in justifying decisions to fund such 
Army modularity through the supplemental.
    What types of activities will be funded in 2006 with the 
BRAC wedge? And how did the Department come up with the figure 
of $1.88 billion? What metrics were used?
    Mr. Grone. Senator Feinstein, the purposes of the account 
support all of the activities associated with the closure and 
realignment decisions. So military construction, operations and 
maintenance, PCS costs, family housing, environmental 
remediation----
    Senator Feinstein. It is $1.5 billion.
    Mr. Grone. Yes, ma'am.
    From the perspective of how we put it together, again what 
we did was we took a lesson from our prior BRAC activity. In 
the 1993 round, we asked for an amount of funds in the first 
year that was roughly equivalent in today's dollars to $1.5 
billion. In 1995, we asked for a request that would be in 
today's dollars approximately $1 billion. Knowing that we are 
not able to know precisely today, given the state of the 
recommendations, what we are able to sort of work through, we 
took a good, hard look at those lessons. The GAO's criticisms 
of the Department from the 1995 round suggested that we hold 
back on recommendations we might otherwise have brought forward 
out of cost considerations. So when looking at the experience 
of history, when looking at the needs for global posture 
realignment that would be executed through BRAC, $1.9 billion 
seemed an eminently reasonable figure, and I would fully expect 
that we would expend those funds.
    As I indicated to Senator Hutchison earlier during a 
question, we will provide a full report upon the disposition of 
the BRAC recommendations that will detail at great length how 
we will expend those funds in fiscal year 2006, and then in all 
subsequent fiscal years, it would become part of the normal 
budget justification process where we will detail all of that 
expenditure.
    Senator Feinstein. Could we also get an analysis of how 
these funds were spent in the past round?
    Mr. Grone. Yes, ma'am. But I can give you a very broad 
overview at this point, and we can certainly provide more 
detail for the record.
    [The information follows:]

    DOD Base Realignment and Closure (BRAC) Justification Data for 
previous BRAC rounds was provided to Congress in February 2005. A copy 
of that report is attached.

                     DOD Base Realignment & Closure

                 BASE REALIGNMENT AND CLOSURE OVERVIEW

Background
    The Defense Secretary's Commission on Base Realignment and Closures 
was chartered on May 3, 1988 to recommend military installations within 
the United States, its commonwealths, territories, and possessions for 
realignment and closure. The Congress and the President subsequently 
endorsed this approach through legislation that removed some of the 
previous impediments to successful base closure actions. The Defense 
Authorization Amendments and Base Closure and Realignment Act, Public 
Law 100-526, as enacted October 24, 1988, provides the basis for 
implementing the recommendations of the 1988 Commission. Under this 
Act, all closures and realignments were to be completed no later than 
September 30, 1995. Funding for these actions was included in the Base 
Realignment and Closure Account--Part I (BRAC I) which covered fiscal 
years 1990 through 1995.
    The National Defense Authorization Act for fiscal year 1990 and 
1991, Section 2831, allowed for the one-time transfer of $31 million 
from BRAC I into the fiscal year 1990 Homeowners Assistance Fund (HAP). 
The HAP funds are used to assist employees who are forced to move as a 
consequence of base closures and who find that they must sell their 
homes in real estate markets which have been adversely affected by the 
closure decision.
    In the Committee Reports accompanying the fiscal year 1990 Military 
Construction Appropriations Act, the Congress began applying some 
restrictions on the use of BRAC I funds. Concerned that the one-time 
implementation costs had increased by $1 billion when compared to the 
1988 Commission's estimate, the House Appropriations Committee (HAC) 
adopted a spending cap for military construction and family housing of 
$2.4 billion. This cap was reflected in the fiscal year 1990 act 
itself. The fiscal year 1992 Military Construction Appropriations Act 
lowered the cap to $1.8 billion commensurate with the budget request.
    On November 5, 1990, The President signed Public Law 101-510, Title 
XXIX, Defense Base Closure and Realignment Act of 1990, establishing an 
independent commission known as the Defense Base Closure and 
Realignment Commission which met only during calendar years 1991, 1993, 
and 1995. The purpose of the Commission was to ensure a timely, 
independent, and fair process for closing and realigning U.S. military 
installations. The actions to implement the recommendations of the 
1991, 1993, and 1995 Commissions are underwritten from the Base 
Realignment and Closure Account 1990 (BRAC II). By statute, action must 
be initiated no later than 2 years after the date on which the 
President transmits a report to Congress and all closures and 
realignments must be completed no later than the end of the 6 year 
period beginning on the same date. The implementation period for the 
1995 authorized round of base closure was complete as of 13 July 2001.
    Public Law 101-510 included a number of other provisions affecting 
base closure, one of which, section 2923, designated the Base Closure 
Account (BRAC I) to be the exclusive source of funds for environmental 
restoration projects at round one closure sites. The National Defense 
Authorization Act for fiscal year 1992, Section 2827, designated Base 
Closure Account 1990 as the exclusive source of funds for environmental 
restoration projects at closure sites approved by the 1991, 1993, and 
1995 Commissions.
    The intent of this section was to preclude the cleanup actions at 
bases slated for closure from competing with other sources of funding 
for environmental cleanup such as the Defense Environmental Restoration 
Account (DERA). A total of $9,007.1 million has been made available for 
cleanup for the four rounds of base closures through fiscal year 2005. 
The fiscal year 2006 budget program includes $449.1 million for 
environmental restoration at BRAC bases.
    The fiscal year 2002 National Defense Authorization Act, authorized 
an additional round of base realignment and closure in 2005 by amending 
the Defense Base Closure and Realignment Act of 1990 (Public Law 101-
510). The Secretary of Defense's BRAC 2005 recommendations for base 
closure and realignment must be provided to the BRAC 2005 Commission 
not later March 16, 2005. The Department of Defense Base Closure 
Account 2005 (Treasury code 0512) has been established as a single 
account on the books of the Treasury to execute actions to implement 
BRAC 2005 approved closures and realignments.

Budget Justification Requirements
    The Defense Authorization Amendments and Base Closure and 
Realignment Act, Public Law 100-526, is specific in the types of 
information required as to budget justification. The Act states, ``As 
part of each annual budget request for the Department of Defense, the 
Secretary shall transmit to the appropriate committees of Congress:
  --A schedule of the closure and realignment actions to be carried out 
        under this title in the fiscal year for which the request is 
        made and an estimate of the total expenditures required and 
        cost savings to be achieved by each such closure and 
        realignment and of the time period in which these savings are 
        to be achieved in each case, together with the Secretary's 
        assessment of the environmental effects of such actions; and
  --A description of the military installations, including those under 
        construction and those planned for construction, to which 
        functions are to be transferred as a result of such closures 
        and realignments, together with the Secretary's assessment of 
        the environmental effects of such transfers.''
    The fiscal year 2006 budget justification material has been 
developed to comply with the above requirements. The BRAC Executive 
Summary Book provides an overview of the BRAC costs and savings for 
each DOD Component through the 6 year implementation period. The DOD 
Components have prepared separate justification books providing 
detailed information by realignment and closure package, broken out by 
one-time implementation costs, anticipated revenues from land sales, 
and expected savings. This comprehensive approach addresses the total 
financial impact of realignment and closure actions and provides 
justification for the funds requested in the Base Closure Accounts.

DOD Base Closure Account Capitalization and Funding
    The Department has complied with the guidance contained in the 
House of Representatives Report 101-76, Military Construction 
Appropriations Bill, 1990, July 26, 1989, to determine the proper 
method of capitalizing the DOD Base Closure Accounts. In denying 
general transfer authority to the Secretary of Defense, the Committee 
expressed the belief that the necessary one-time costs to implement 
base realignments and closures be requested as new appropriated amounts 
to facilitate improved accounting of the funds appropriated. 
Additionally, the Committee indicated that any savings or cost 
avoidance due to base realignment or closure should be reflected 
through reduced requirements in the annual budget requests for the 
affected appropriations.
    The manner in which the impacts of base realignments and closures 
are reflected in BRAC appropriations accounts is consistent with this 
language. The new BRAC appropriations requested represent the costs of 
environmental restoration and caretaker functions at bases closed under 
the prior rounds of base closure authority. Also included in the 
appropriation request are funds to be transferred to the Homeowner's 
Assistance Program for the purpose outlined in Section III. Since the 
fiscal year 1991 budget request, parcels of land have been transferred, 
without compensation to the Department, thereby reducing projected 
offsetting receipts. Section IV provides examples of anticipated 
revenue from the sale of land and facilities and the anticipated 
revenue loss from land transfers.
    The implementation of base realignment and closures requires the 
relocation of units and activities from one site to another. Recurring 
savings (reduced base operations costs) are realized through the 
increased efficiencies inherent in the consolidation of functions on 
fewer bases. The net savings are reflected as savings in the specific 
appropriations, primarily operation and maintenance, and are not 
incorporated in the DOD Base Closure Accounts.
    Estimates for savings or cost avoidance have been incorporated into 
the DOD Component appropriation account where they are to accrue, 
resulting in corresponding reduced budget requests for those 
appropriations. The annual recurring saving from the four prior rounds 
of base closure and realignment are projected to be about $7 billion 
after the implementation period ending in fiscal year 2001.

Financial Management Procedures
    The Defense Authorization Amendments and Base Closure and 
Realignment Act, Public Law 100-526, established the Defense Base 
Closure Account (BRAC I) as a mechanism to provide the required funding 
to implement the approved recommendations of the Base Closure and 
Realignment Commissions. Public Law 101-510, Title XXIX, Defense Base 
Closure and Realignment Act of 1990, established Base Closure Account 
1990 (BRAC II) as a mechanism to provide the required funding to 
implement the approved recommendations of the BRAC 1991, 1993, and 1995 
Commissions. From aspects of management, budgeting and accounting, both 
Accounts are treated in the same fashion. Funding approved by Congress 
in both Accounts is appropriated and authorized in a lump sum amount 
and may be spent for construction, planning and design, civilian 
severance pay, civilian permanent change in station, transportation of 
things, and other costs related to the realignment or closure of the 
subject bases. The management structure of the program is described 
below.
    The Deputy Under Secretary of Defense (Installations & Environment) 
is responsible for issuing policy for management of the BRAC program 
and overseeing the DOD Components' execution of the program.
    To properly account for and manage appropriated fund resources, the 
DOD Base Closure Accounts were established on the books of the Treasury 
to aid the DOD Components in the closure and realignment of certain 
military installations. Treasury has assigned account symbol 97-0103 to 
identify the DOD Base Closure Account--Part I, 97-0510 to identify DOD 
Base Closure Account 1990--Part II, Part III, and Part IV, and 97-0512 
to identify DOD Base Closure Account 2005.
    Funds made available to the DOD Components are subdivided and 
distribute to the activities responsible for base closure actions. 
Separate allocations are made for each of the accounts by program year. 
Each DOD Component distributes the base closure funds in accordance 
with its normal fund distribution procedures. The applicable reporting 
requirements include:
    Military Construction:
  --Construction
  --Planning and Design
    Family Housing:
  --Construction
  --Operations
    Environmental
    Operation and Maintenance (O&M):
  --Civilian Severance Pay
  --Civilian Permanent Change of Station (PCS) costs
  --Transportation of things
  --Real Property Maintenance
  --Program Management (civilian work years, TDY travel, and related 
        support dedicated to implementation efforts)
    Military Personnel (limited to PCS expenses dedicated to 
implementation efforts)
    Other (including procurement-type items)
    The Under Secretary of Defense (Comptroller) makes funds available 
to the DOD Components based on their official financial plans. 
Financial plans are prepared by the DOD Components in cooperation with 
and at the direction of the program manager, the Deputy Under Secretary 
of Defense (Installations & Environment). The DOD Components' financial 
plans and the subsequent allocation of funds are supported by detailed, 
line-item military and family housing construction justification. 
Separate narrative explanations for other planned expenditures are also 
submitted to the Under Secretary of Defense (Comptroller) in sufficient 
detail to support the DOD Component's Financial plan. The DOD 
Components are allowed to revise planned execution as the situation 
dictates but must notify the Deputy Under Secretary of Defense 
(Installations & Environment) and the Under Secretary of Defense 
(Comptroller) of all changes. To keep the Under Secretary of Defense 
(Comptroller) apprised of these changes, the DOD Components are 
required to submit a revised current year financial plan and supporting 
documentation on a quarterly basis to reflect the status of the current 
plan being executed. When a military construction or family housing 
construction project is to be executed, but does not appear on the 
approved construction project list, the prior approval of the Under 
Secretary of Defense (Comptroller), and Congress is required. This will 
ensure that the Department has complied with the notification 
requirements of the House of Representatives Report 101-176, Military 
Construction Appropriation Bill, July 26, 1989, prior to the 
expenditure of DOD Base Closure Account funds. Each DOD Component is 
allocated funds based upon its official budget justification and 
financial plan.
    Decision Rule for Determining the Validity of Charging Cost to the 
DOD Base Closure Accounts.--In addition to being supported by the 
detailed budget justification, the general criterion to be applied when 
deciding whether to charge specific costs to the DOD Base Closure 
Account is that the cost in question is a one-time implementation cost 
directly associated with the overall base closure effort. For example, 
the one-time operation and maintenance-type costs at R&D-funded 
installations are charged to the appropriate sub-account of ``Operation 
and Maintenance.'' Low-dollar value construction projects budgeted as 
lump sum under the real property maintenance category are charged to 
that sub-account and not the construction subaccount of military 
construction, which is reserved for projects listed individually on the 
financial plan accompanying the fund allocation document. Recurring 
costs driven by the transfer of workload from one location to another 
is budgeted for and charged to the non-base closure accounts.

                             BUDGET SUMMARY

    The tables on the following pages provide information on one-time 
implementation costs, expected savings, and revenues from land sales by 
DOD Component and approved BRAC closure round. BRAC I closures and 
realignments have been projected to cost $2.8 billion and will generate 
total savings of $2.4 billion and land sale revenue of $65.7 million 
during the fiscal year 1990-1995 implementation period. BRAC II 
closures and realignments have been projected to cost $5.2 billion and 
will generate total savings of about $8.1 billion and land sale revenue 
of $25.7 million during the fiscal year 1992-1998 implementation 
period. BRAC III closures and realignments have been projected to cost 
$7.6 billion and will generate total savings of $8.3 billion and land 
sale revenue of $3.4 million during the fiscal year 1994-1999 
implementation period. BRAC IV closures and realignments are projected 
to cost $6.8 billion and will generate total savings of $6.2 billion 
and land sale revenue of $230.2 million during the fiscal year 1996-
2001 implementation period.

               FISCAL YEAR 2006--BUDGET ESTIMATES BASE REALIGNMENT AND CLOSURE ACCOUNT PARTS I-IV
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                            Fiscal year
                                                 ---------------------------------------------------------------
                                                       2003            2004            2005            2006
----------------------------------------------------------------------------------------------------------------
  BRAC Parts I-IV Continuing Environmental and
                 Caretaker Costs
Army:
    Environmental...............................         162.821          61.851          92.050          89.380
    Operations & Maintenance....................          18.557          10.145           8.255           4.473
Navy:
    Environmental...............................         462.166          96.509         101.700         236.581
    Operations & Maintenance....................          12.268          13.402          13.350          39.392
Air Force:
    Environmental...............................         125.569         193.141         127.749         117.167
    Operations & Maintenance....................          22.975           4.796          18.062          17.560
Defense Logistics Agency:
    Environmental...............................          10.168           9.811           6.652           5.974
    Operations & Maintenance....................  ..............           1.000             300             300
                                                 ---------------------------------------------------------------
      Total Environmental and Caretaker Costs...         814.524         390.655         368.118         510.827
                                                 ---------------------------------------------------------------
Homeowner's Assistance Program..................  ..............  ..............  ..............  ..............
Prior Year Financing............................          27.216          18.228           6.952  ..............
Estimated Land Sale Revenue.....................         211.738           2.000         115.000         133.000
BRAC IV Budget Request..........................         575.570         370.427         246.116         377.827
----------------------------------------------------------------------------------------------------------------

    The fiscal year 2006 budget requests $377.8 million of new budget 
authority for environmental restoration and caretaker cost for 
facilities closed under the previous four rounds of base closure 
authority. This funding will ensure bases are continuing to be cleaned 
efficiently to speed the transfer of property to redevelopment 
authorities.
    Anticipated land sale revenue of $133 million will be used to 
offset a portion of the department's fiscal year 2006 BRAC requirements 
of $510.8 million.
    Annual recurring savings from the four rounds of base closure and 
realignment are projected to be about $7 billion after the 
implementation period ending in fiscal year 2001.

                               BRAC 2005

    BRAC 2005 will make a profound contribution to transforming the 
Department by eliminating excess capacity and reconfiguring 
infrastructure. The fiscal year 2006 budget request includes $1,881.0 
million to implement the anticipated approved recommendations from the 
BRAC 2005 Commission.




                     HOMEOWNERS ASSISTANCE PROGRAM

    The Homeowners Assistance Program (HAP) provides assistance to 
eligible service members and civilian employee homeowners who have 
suffered losses through the depression of the real estate market 
resulting from actual or pending base closures. Pursuant to section 
2832 of Title 10, United States Code, as amended by section 2831 of 
Public Law 101-89, the National Defense Authorization Act for fiscal 
year 1990 and fiscal year 1991, the Secretary of Defense was granted 
authority to transfer $31 million of funds appropriated in BRAC I to 
HAP. Accordingly, the Department of Defense transferred $31 million in 
fiscal year 1990 to accommodate valid homeowner assistance requirements 
arising from implementation of the 1988 Commission's recommendations. 
From fiscal year 1992 through fiscal year 1999 the required homeowners 
assistance funding associated with base realignments and closures was 
budgeted in the Homeowners Assistance Program administered by the 
Department of the Army as executive agent for the program. Beginning in 
fiscal year 2000, funds were appropriated in the BRAC program for 
transfer to the Homeowners Assistance Program during budget execution 
to allow more effective and efficient use of these funds in support of 
BRAC implementation. No funds are budgeted within the BRAC program for 
transfer to the Homeowners Assistance Program in fiscal year 2006.

              REVENUE FROM THE SALE OF LAND AND FACILITIES

    In capitalizing the base closure accounts, the additional 
appropriations to pay for the onetime costs of implementation have been 
offset by the amount of revenues that are anticipated due to the 
authorized sale of land no longer required by the Department. Since the 
fiscal year 1991 budget request, parcels of land have been transferred, 
without compensation to the Department, thereby reducing projected 
offsetting receipts. The tables on the following pages show the 
anticipated land sale revenue and examples of projected land sales no 
longer anticipated due to loss revenue resulting from transfers of 
property outside of the Department. Land sale receipts from base 
closures have amounted to $595.1 million through September 2004. These 
receipts are used to offset anticipated BRAC costs. Anticipated land 
sale revenue of $133.0 million will be used to offset a portion of the 
department's fiscal year 2006 BRAC requirements of $510.8 million.

 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Kapalama Military Reservation, HI.......................          38,529
Pontiac Storage Facility................................           3,100
Fort Holabird, MD.......................................             100
USA Reserve Center Gaithersburg, MD.....................             785
Stand-Alone Housing, Various Locations..................          23,199
                                                         ---------------
      Total.............................................          65,713
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET EXTIMATES--BASE REALIGNMENT AND CLOSURES--PART I
                       LOSS OF LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Lexington...............................................           7,379
Army Material Tech Lab..................................           3,124
Jefferson...............................................          28,925
AMC Other...............................................           8,030
Presidio................................................          42,986
Hamilton................................................          49,550
Sheridan................................................          59,092
Fort Douglas, UT........................................           7,379
Fort Meade, MD..........................................         447,770
Cameron Station, VA.....................................         212,624
Stand Alone.............................................          62,053
                                                         ---------------
      Total.............................................         928,912
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
ANTICIPATED/REALIZED LAND REVENUE--NAVY AND PART I LOSS OF LAND REVENUE--
                                  NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NRC Coconut Grove, FL...................................           7,134
NH Philadelphia, PA.....................................              25
NTB Salton Sea, CA......................................              14
                                                         ---------------
      Total.............................................           7,173
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                       LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Naval Station New York (Brooklyn, NY)...................          57,000
Naval Station Puget Sound (Sand Point), WA..............          60,000
                                                         ---------------
      Total.............................................         117,000
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Chanute Air Force Base, IL..............................          13,000
George Air Force Base, CA...............................          90,000
Mather Air Force Base, CA...............................         305,000
Norton Air Force Base, CA...............................         100,000
Pease Air Force Base, NH................................         120,000
                                                         ---------------
      Total \1\.........................................          26,582
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                     LOSS OF LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
George Air Force Base, CA...............................          90,000
Mather Air Force Base, CA...............................         305,000
Norton Air Force Base, CA...............................         100,000
Chanute Air Force Base, IL..............................          13,000
Pease Air Force Base, NH................................         120,000
                                                         ---------------
      Total.............................................         628,000
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Cameron Station, VA.....................................          15,661
Fort Ben Harrison, IN...................................           4,634
Sacramento Army Depot, CA...............................             299
Fort Devens, MA.........................................           1,998
                                                         ---------------
      Total.............................................          22,592
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                       LOSS OF LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Fort Devens, MA.........................................         112,000
Fort Dix, NJ \1\........................................          83,000
Fort Ord, CA............................................         399,750
Harry Diamond Lab, VA...................................          30,000
Fort Benjamin Harrison, IN..............................         102,227
Sacramento Depot, CA....................................          24,879
                                                         ---------------
      Total.............................................         751,856
------------------------------------------------------------------------
\1\ Note: The anticipated revenues from Fort Dix were reduced from $83.0
  million to zero. The basis of the reduction is the proposed
  utilization of Fort Dix by other Federal and State agencies which
  precludes disposal of the anticipated excess land.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                 ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
MCAS Tustin, CA.........................................         203,500
NAS Chase Field, TX.....................................             791
NCBC Davisville, RI.....................................              63
NAS Moffett Field, CA...................................           6,250
NH Long Beach, CA.......................................          14,075
NS Philadelphia, PA.....................................           2,000
                                                         ---------------
      Total.............................................         226,679
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                       LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NAS Chase Field, TX.....................................           2,000
NCBC Davisville, RI.....................................          22,000
NH Long Beach, CA.......................................           1,400
NS Long Beach, CA.......................................          21,250
NS Philadelphia, PA.....................................          18,000
NS Puget Sound (Sand Point), WA.........................          12,800
NCCOSC San Diego, CA....................................           3,000
MCAS Tustin, CA.........................................         468,500
                                                         ---------------
      Total.............................................         548,950
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Carswell Air Force Base, TX.............................             178
Castle Air Force Base, CA...............................           4,136
England Air Force Base, LA..............................             783
Grissom Air Force Base, IN..............................           5,981
Loring Air Force Base, ME...............................             335
Lowry Air Force Base, CO................................           9,461
Myrtle Beach Air Force Base, SC.........................          10,455
Richards-Gebaur Air Force Reserve Station, MO...........             300
Rickenbacker Air Guard Base, OH.........................             600
Williams Air Force Base, AZ.............................           4,431
Wurtsmith Air Force Base, MI............................              49
                                                         ---------------
      Total \1\.........................................         36,709
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                     LOSS OF LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Williams Air Force Base, AZ.............................           8,000
Eaker Air Force Base, AR................................           8,000
Castle Air Force Base, CA...............................          27,000
Lowry Air Force Base, CO................................         100,000
MacDill Air Force Base, FL..............................          50,000
Grissom Air Force Base, IN..............................           8,000
Loring Air Force Base, ME...............................           8,000
Wurtsmith Air Force Base, MI............................           8,000
Richards Gebaur Air ForceReserve Station, MO............           8,000
Rickenbacker Air National Guard Base, OH................           8,000
Myrtle Beach Air Force Base, SC.........................           8,000
Bergstrom Air Force Base, TX............................           8,000
Carswell Force Base, TX.................................           8,000
                                                         ---------------
      Total.............................................         257,000
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
               III ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Various Locations.......................................             798
                                                         ---------------
      Total.............................................             798
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
               III ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
DOD Family Housing Niagara Falls, NY....................           1,125
MCAS El Toro, CA........................................         525,000
NAWC Trenton, NJ........................................           1,812
NTC Orlando, FL.........................................          11,126
NAS Cecil Field, CA.....................................              48
NTC San Diego, CA.......................................              80
NH Oakland, CA (Oak Knoll)..............................          15,000
PWC San Francisco, CA...................................          10,330
NS Staten Island, NY....................................             602
NSY Charleston, SC......................................           1,100
Various Locations.......................................           1,107
                                                         ---------------
      Total.............................................         567,330
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
                     III LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NS Mobile, AL...........................................          28,000
Various Locations.......................................         309,263
                                                         ---------------
      Total.............................................         337,263
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
            III ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Gentile Air Force Station, OH...........................              54
Griffiss Air Force Base, NY.............................              82
Homestead Air Force Base, FL............................             488
March Air Force Base, CA................................             995
O'Hare IAP ARS, IL......................................              65
Plattsburg Air Force Base, NY...........................           1,288
                                                         ---------------
      Total \1\.........................................          2,972
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Fort Devens, MA.........................................           2,500
Fort Ben Harrison, IN...................................             938
Cameron Station, VA.....................................          14,861
Stratford AAP, CT.......................................           6,590
Army Material Technology Lab, MA........................           6,284
Bayonne MOT, NJ.........................................             278
Hamilton AAF, CA........................................             944
Jefferson Proving Ground, IN............................              55
Detroit, ATP, MI........................................           5,924
Fort Sheridan, IL.......................................           5,150
Stand Alone Housing.....................................             110
Savanna AD..............................................               8
Fort Ritchie............................................              54
Fitzsimons AMC..........................................             172
City of Chicago.........................................          15,980
Fort McClellan..........................................             460
Fort Ord................................................           7,250
New Orleans MOT.........................................             275
Defense Depot Ogden.....................................             680
VHFS....................................................             992
                                                         ---------------
      Total.............................................          69,505
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
                 ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
San Pedro (Housing) Long Beach, CA......................          66,000
NAWC Warminster, PA.....................................              63
NAF Key West, FL (Housing)..............................          15,100
NAS Key West, FL........................................             600
Various Locations.......................................             700
                                                         ---------------
      Total.............................................          82,463
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
City of Chicago, Illinois--O'Hare International Airport           94,602
 \1\....................................................
Kelly Air Force Base, TX................................             478
McClellan...............................................           1,218
Reese Air Force Base, TX................................              53
Roslyn Air Guard Station, NY............................           3,031
                                                         ---------------
      Total.............................................         99,382
------------------------------------------------------------------------
\1\ Revenue from the City of Chicago for the movement of the Air
  National Guard facilities to Scott Air Force Base, Illinois.


    Mr. Grone. Of the $22 billion that was expended for prior 
BRAC activity, 30 percent of that went to construction and 
construction activity.
    Senator Feinstein. No. I mean tell us for what.
    Mr. Grone. Oh, yes, ma'am. But 30 percent of it went to 
environmental remediation and 40 percent went to PCS, O&M, and 
caretaker costs. But we will certainly try to break that down 
for you for the record.
    Senator Feinstein. I think the time has come, as we go 
through these BRAC rounds, to really know dollar for dollar 
where this money goes, and I would sure like to know.
    Mr. Grone. The justification material for the current 
fiscal years' request for prior BRAC, the $377 million, should, 
I believe, provide a comprehensive breakdown of the accounts 
from prior years. And we certainly would include that in the 
record here so that it is comprehensive.

          SELLING EXCESS PROPERTIES AND APPLYING THE PROCEEDS

    Senator Feinstein. Thank you.
    Now, the Navy has done a good job selling its excess 
properties and applying those proceeds to BRAC environmental 
restoration. I think this year the Navy has requested a $143 
million appropriation and expects to apply another $133 million 
from property sales. Could we have your assurance that, if 
appropriated, the sum of these funds will be applied to Navy 
environmental remediation?
    Mr. Grone. I believe I can give that assurance, yes, ma'am.
    Senator Feinstein. Thank you. And that further land sales 
will be treated the same?
    Mr. Grone. Treated the same in which sense?
    Senator Feinstein. In that the money is then applied for 
environmental cleanup.
    Mr. Grone. For prior BRAC, almost all of our costs at this 
point for prior BRAC is environmental remediation and a very, 
very small, modest amount for property caretaker costs. So to 
the extent we have any additional land sales from BRAC rounds 
one through four, that is certainly how they would be applied.
    Senator Feinstein. Thank you. That is very helpful.

                       STATUS OF GLOBAL REBASING

    Mr. Grone, through global rebasing in the coming years we 
can expect to see the largest reduction of troops permanently 
based overseas since the end of the Cold War. A series of 
global rebasing decisions will be subject to BRAC 2005. What is 
the status of the global rebasing plan? In particular, are 
there negotiations with foreign countries? Is there a green 
light? Are we moving ahead? Are we not moving ahead?
    There are $314 million set aside in the BRAC wedge, as you 
mentioned, for global rebasing. Is any of that funding intended 
to be spent overseas on closed bases in Germany or elsewhere?
    Mr. Grone. Senator, to the latter part of your question, 
BRAC funds are not an eligible source of funds for closure 
costs for closure and realignment activity installations 
abroad.
    Senator Feinstein. So the answer is no.
    Mr. Grone. The answer is no.
    The scope of our BRAC authority, with regard to global 
posture. We intend to use the BRAC round to facilitate the 
return of U.S. forces in the following way. Without BRAC, we 
would largely be asked to address the question of where could 
we fit them, in terms of our present basing configuration. BRAC 
gives us the ability, because the entire domestic chessboard 
will be open, to ask ourselves a different question, which is 
where are they best positioned. Through their realignment 
activities of domestic bases, we will have an ability to put 
those returning forces where the services and the Secretary 
believe they are most effective for the future. We will, 
through BRAC, execute construction activity to support those 
forces through the BRAC appropriation, but other costs 
associated with cost overseas would be paid for other accounts 
that the services have under their financial control.
    Senator Feinstein. Thank you. That is helpful.

                RENEWABLE ENERGY ASSESSMENT OF DOD BASES

    Some time ago, Senator Hutchison and I asked your 
Department to give us a renewable energy assessment of the 
bases. We have not received it. Could you give us a sense of 
the major findings?
    Mr. Grone. I can give you a very direct sense of where the 
report is because it just hit my desk yesterday.
    Senator Feinstein. Good.
    Mr. Grone. I am aware and certainly apologize for the 
initial part of the report being late. It was due in December. 
That part of the report was to basically do the assessment. 
What the committee also asked us for was an implementation plan 
based on our assessment. When you see the report in a matter of 
days, if not this week, it will contain both the assessment 
that we have done, as well as the implementation plan. So it 
will contain both elements.
    We think that there is a lot of benefit that we have gained 
through this assessment and the study that the subcommittee had 
requested. In fiscal year 2003, about $5 million of our energy 
conservation investment funds went to renewable projects. This 
year it is going to be $18 million principally in geothermal 
and in solar.
    We also think, as a result of the study that we have gone 
through, that there are opportunities on the purchase side of 
it for us to begin to engage on a supplier basis with certain 
suppliers who specialize in renewable energy sources.
    So we are learning a great deal through the assessment. We 
would welcome a continuing dialogue over the implementation 
plan certainly and would look for any views that you may have 
on it because we do think it has been a very valuable exercise 
as we have gone through it.
    Senator Feinstein. Thank you very much. We look forward to 
receiving that.

                       PERCHLORATE CONTAMINATION

    Now my perchlorate question. I will admit I am reaching 
here. Is there a way to use some of these environmental cleanup 
monies to take some of the most contaminated sites where they 
most have affected drinking water and get a commitment to 
participate in cleanup efforts?
    Mr. Grone. Senator, that question is not a difficult--it is 
a difficult one but one that sort of, I think, bears a little 
bit of a sense of sort of where we are now. I am not trying to 
avoid the question, but I do think this, as you well know, is a 
very, very complicated issue.
    There has been a lot of uncertainty, scientific 
uncertainty, associated with perchlorate. The National Academy 
of Sciences recently conducted a review of the toxicity of 
perchlorate, and that review was completed in January and the 
administration, including the Department, supported the 
conclusions reached by the NAS. In fact, EPA has used the 
conclusions reached by the NAS to develop a reference dose 
which commonly would be referred to as a 24.5 parts per billion 
reference dose. We will use that reference dose as a factor in 
our risk-based assessments.
    And I would say also with regard to the work that we are 
going with the State of California in the prioritization 
protocol, that work is proceeding very well with a high degree 
of cooperation between the State and the Department. Certainly 
as we proceed, we understand that the State of California may 
well consider a regulatory standard for perchlorate. Once the 
State establishes, if they should choose to do so, a State 
standard, as well as once a Federal standard, if one should be 
promulgated, we certainly will comply with that standard.
    Where we are in terms of remediation today is that it 
becomes part of the risk prioritization as we go through it.
    Senator Feinstein. Let me stop you because I need to 
understand this. Are you saying that you are waiting for the 
State to declare a standard? Because the State does have a 
standard.
    Mr. Grone. No. I am not suggesting that. A standard for 
regulatory purposes. If any State or the Federal EPA declares a 
standard for regulatory purposes, not a draft, but for 
regulatory purposes, we certainly will comply with that. But 
even today we are putting the 24.5 parts per billion reference 
dose that EPA has promulgated and including that as part of our 
risk-based prioritization standard. And in those instances 
certainly where there is a level of significance, we will 
remediate based on the prioritization of remediation as we 
develop it.
    Senator Feinstein. I want to make this point, though. DOD, 
as you know, tried to get liability protection on perchlorate 
and we were able to stop that. Perchlorate is now turning up in 
mother's milk. In one person tested, it was like 91 parts per 
billion. It is turning up all over in the food chain. The 
bottom line fact is DOD has a responsibility to help with the 
cleanup. We have got towns where the drinking water is really 
severely compromised, small areas, Rialto, for example. In 
California their wells are compromised. They have to get 
cleaned up.
    The process we know is expensive. It is about $2 million a 
well with reverse osmosis.
    I have been trying for years now to move EPA to come up 
with a standard. EPA is not about to be moved to come up with a 
standard. In the meantime, you are finding it in milk products, 
you are finding it in lettuce products, and now you are finding 
it in nursing women's breast milk at three times the level that 
you just mentioned of 24 parts per billion.
    So my view is we have to get cracking and get it cleaned 
up. It seems to me that this might be a place to start.
    Mr. Grone. Well, Senator, all I can tell you right at the 
present time, so far we have expended $50 million in 
toxicological and analytical research. We are continuing to 
work with the scientific community----
    Senator Feinstein. $50 million on research on perchlorate? 
It cannot be.
    Mr. Grone. Groundwater treatment technologies for 
perchlorate and possible substitutes for perchlorate in 
military applications.
    Senator Feinstein. $50 million on studies?
    Mr. Grone. In research.
    Senator Feinstein. Okay. Do you have a product for the $50 
million?
    [The information follows:]

    
    
    Mr. Grone. We can supply for the record what we have been 
doing on the analytical agenda on both the toxicological side, 
the science-based side of perchlorate, as well as looking for 
alternatives for the use of perchlorate, both of which we have 
as active parts of the agenda.
    Senator Feinstein. Well, I do not want to take up the 
chairman's time, although the chairman has a problem in her 
State as well. But if we could talk with you about it, we need 
to come to some agreement of what DOD is willing to do. I have 
been trying now for 3 or 4 years, and at some point one runs 
out of patience. That is all I want to say.
    Mr. Grone. Senator, I am prepared to have whatever 
discussions you deem necessary. I am prepared to meet with you 
whenever you feel it appropriate----
    Senator Feinstein. Okay, that would be great.
    Mr. Grone [continuing.] To have the continuing discussion.
    Senator Feinstein. Thank you.

                PERMANENT CONSTRUCTION AT GUANTANAMO BAY

    And the last question. It is a question I asked Chairman of 
the Joint Chiefs Myers at the supplemental hearing of approps, 
and that is the justification for siting the facility in 
Guantanamo.
    Now my understanding was the original justification was to 
avoid review by United States courts. Now, putting aside the 
question of whether that is good policy or not, the United 
States Supreme Court has made clear that much, if not all, of 
the legal argument which was based for that justification was 
unfounded. Simply put, the original justification is no longer 
compelling.
    Now, Senator Hutchison and I with the Secretary had a 
chance to go to Guantanamo 3 or 4 years ago, and so we saw 
pretty much the temporary facilities. I think an argument can 
certainly be made for improvement. But the question is to build 
a permanent facility, $42 million I guess in this MILCON 
budget, when the rationale for putting people at Guantanamo may 
no longer exist.
    My question is, with that rationale gone, do you still want 
to go ahead and build a permanent facility?
    Ms. Jonas. Senator, let me just take a few minutes on this. 
My understanding is that the upgrades were for the humanitarian 
and operational concerns that they have down there. These are 
some of the things that were identified by the ICRC. So the 
security fence and then making the facility a little bit more 
compliant there on humanitarian purposes not on any permanent 
basis.
    Senator Feinstein. I just said perhaps we should go back 
and take a look before we do this. You are saying the $42 
million is just an upgrade for humanitarian purposes. It is not 
a permanent facility?
    Ms. Jonas. Well, I understand the upgrades are to deal with 
the humanitarian concerns, some of the things that were 
identified by the ICRC and force protection or security, I 
should say, the security fence around the area. The security 
fence that they are going to develop there, if funds are 
provided, would reduce the military personnel there by 350. So 
I guess that is one of the pieces, but we would sure be glad to 
have you make a visit and would be glad to provide additional--
--
    Senator Feinstein. Perhaps we can get the detail on that 
request.
    Ms. Jonas. Absolutely.
    [The information follows:]


                            GUANTANAMO NAVAL STATION, CUBA--CAMP 6 DETENTION FACILITY
----------------------------------------------------------------------------------------------------------------
                 Item                             U/M                  QTY            Cost             Cost
----------------------------------------------------------------------------------------------------------------
Primary Facility:                                                                                       $26,848
    Confinement Facility.............  SF......................          43,111         $501.58         (21,624)
    Medical Station..................  SF......................           7,889          537.29          (4,239)
    Sound proofing cell interior wall  SF......................          20,000           12.26            (245)
    Sound proofing cell ventilation..  EA......................             200           90.30             (18)
    Prison design recessed sprinkler   EA......................             280          122.55             (34)
     heads.
    Security Lighting................  EA......................              40           4,644            (186)
    Information Systems..............  LS......................  ..............  ..............            (300)
    Building Information Systems.....  LS......................  ..............  ..............            (202)
Supporting Facilities:                 ........................  ..............  ..............           5,345
    Electric Service.................  LS......................  ..............  ..............          (2,556)
    Water, Sewer, Gas................  LS......................  ..............  ..............          (2,194)
    Paving, Walks, Curbs And Gutters.  LS......................  ..............  ..............             (80)
    Storm Drainage...................  LS......................  ..............  ..............            (129)
    Site Imp (67) Demo (  )..........  LS......................  ..............  ..............             (67)
    Information Systems..............  LS......................  ..............  ..............            (319)
                                                                                                ----------------
Estimated Contract Cost..............  ........................  ..............  ..............          32,193
Contingency Percent (5 percent)......  ........................  ..............  ..............           1,610
                                                                                                ----------------
      Subtotal.......................  ........................  ..............  ..............          33,803
Supervision, Inspection & Overhead     ........................  ..............  ..............           2,197
 (6.50 percent).
                                                                                                ----------------
      Total Request..................  ........................  ..............  ..............          36,000
      Total Request (Rounded)........  ........................  ..............  ..............          36,000
Installed EQT-Other Appropriations...  ........................  ..............  ..............             (99)
----------------------------------------------------------------------------------------------------------------

    Description of Proposed Construction.--Construct a maximum security 
facility at Camp 6 to detain 220 personnel. Primary facilities include 
pre-engineered concrete modular building units on concrete foundations, 
isolation cells, showers, restrooms, indoor and outdoor exercise areas, 
security operations, administrative spaces, interview spaces, security 
and perimeter fence, lighting, associated pedestrian and vehicular 
gates, and a Level II detainee medical station which includes a medical 
ward with 5 total beds; 2 general treatment rooms, a single dental 
treatment room and a medical administration area. Supporting facilities 
include communication/security systems, electrical substation and site 
utilities. Air conditioning is estimated at 120 tons. Project also 
includes the demolition of existing, substandard, water distribution 
line to the area.
    REQ: 1 Each; ADQT: None; SUBSTD: 1 Each
    Project.--Construct a durable maximum security detention facility 
to support the JTF Detainee Operations.
    Requirement.--Provide an adequate maximum security detainee 
facility to house 220 detainees to support the Global War on Terrorism 
(GWOT). The facility will use Federal Bureau of Prison Standards and 
provide a more humane housing for long-term detainees. Provide facility 
standards meeting provisions highlighted in the Geneva Convention. 
These include providing housing units and core functions that are 
contiguous and allow for communal conditions where practical. Address 
facility and operational concerns of GWOT Allies. Upgrading facility 
standards will decrease the personnel required to operate the facility 
safely. Provide necessary utility infrastructure to support all 
facilities.
    Current Situation.--Current facilities are temporary and no longer 
meet the mission requirement. The facilities are labor intensive for 
both security and maintenance resources. Current operations require 150 
more personnel than will be required for the requested facility. The 
new facility will free up this significant number of personnel for 
combat operations in support of GWOT. The inefficiencies experienced in 
proper separation, seclusion, and control of occupants forces JTF to 
maintain a much larger workforce to conduct the mission. Existing 
temporary facilities at Camps 1, 2, and 3 do not provide the communal 
living conditions. These facilities are also close to exceeding the 
utility systems capacity.
    Impact if not Provided.--Existing Camps 1, 2, and 3 were designed 
as temporary facilities and are at the end of their useful life. 
Maintenance and operation of these facilities will continue to be a 
significant draw of manpower, materials, and money due to their 
deteriorating conditions. Mission operations in these antiquated cell 
blocks will continue to be strained and require an increased number of 
security and medical personnel due to the weaknesses in the design and 
materials of the existing facilities. Existing facilities will not meet 
the Geneva Convention requirements, and there will be continued 
scrutiny by the International Committee of the Red Cross (ICRC) and the 
international community until facility standards are raised. The 
waterline security will remain compromised and the water quality will 
remain degraded if this project is not provided. The electrical 
distribution system will become overloaded, unreliable, and a potential 
safety hazard. Outages will result due to circuit overloading creating 
additional equipment maintenance and repairs.
    Additional.--This project has been coordinated with the 
installation physical security plan and all physical security measures 
are included. All required antiterrorism/force protection measures are 
included. Alternative methods of meeting this requirement have been 
explored during project development. This project is the only feasible 
option to meet the requirement. Sustainable principles will be 
integrated into the design, development, and construction of the 
project in accordance with Executive Order 13123 and other applicable 
laws and Executive Orders.

    Mr. Grone. Senator, the only thing that I would add to my 
colleague's comments is I believe the Chairman indicated that 
what we are doing, and the Secretary as well, but I know the 
Chairman had indicated what we are doing is we are 
transitioning to a long-term detention mission which in the 
context of both the humanitarian end of this, as well as the 
reduction--and to be able to operate the facility in a way that 
provides for a safer and more efficient operation, it will, 
(a), reduce the manpower but, (b), provide a safer environment 
for our own military personnel to manage the facility.
    The most cost effective construction method for the 
structure is as it has been detailed to the subcommittee. It 
will be much easier to sustain than the metal structures we 
have there now. As the Comptroller indicated, we have a number 
of important reasons for seeking the funds at this time.
    Senator Feinstein. Well, I just was handed the request, and 
it says, under description of proposed construction, construct 
a maximum security facility at Camp 6 to detain 220 personnel. 
Primary facilities include pre-engineered concrete modular 
building units on concrete foundations, isolation cells, 
showers, rest rooms, indoor and outdoor exercise areas, 
security operations, administrative spaces, interview spaces, 
security and perimeter fence, lighting, and associated 
pedestrian and vehicular gates. So from what I gather from 
this, I mean, this is a whole new permanent facility. The word 
``permanent'' is used and ``maximum security.''
    Now, I would just like to know. It may well be that despite 
the fact that the United States is not going to be able to deny 
people basic due process rights, you still want to have the 
facility. But one of the things I think we do not want to do is 
authorize the money and then find out you change your mind, 
which has happened.
    Mr. Grone. Certainly, Senator--I am sorry, Madam Chairman.
    Senator Hutchison. I think there is another factor here 
which is where is the safest place to house prisoners. I think 
there has always been a concern about having them in America 
and within the 48 States because of actions that might be taken 
to get them released. I do not think it is necessarily a 
treatment issue so much as where do you put potential terrorist 
prisoners where you do not endanger the lives of the people 
around and where is it harder to get to.
    Senator Feinstein. Except, Madam Chairman, we do house 
known terrorists who have committed terrorist acts here in the 
United States.
    Senator Hutchison. Well, but we also have a number of them 
that are not in the United States. They are in Guantanamo Bay. 
I think having a prison that is pretty hard to get to is a 
factor to be considered.
    Senator Feinstein. I thought they were detainees. I mean, 
we have people convicted doing time, the 1993 World Trade 
Center bombing, et cetera. We have a place in Colorado where a 
number of them are incarcerated.
    I just feel I want to be told the truth about this 
facility, why it is being built, instead of building it 
somewhere on ex-surplus military land here, why you are 
building it in Guantanamo. Because none of these people have 
been convicted of anything. They are all detainees.
    Mr. Grone. Senator Feinstein, what I can best tell you is 
that the location represents the best military judgment that we 
have in terms of the location. Neither of us have policy 
cognizance for this. The Under Secretary of Defense (Policy) 
and the Deputy Assistant Secretary of Defense for Detainee 
Affairs are the responsible policy officials, and certainly the 
combatant commander of Southern Command also has very 
significant responsibilities in this area. I believe we can 
work to arrange whatever briefings are necessary for you and 
the chairman and any other member or staff that may be required 
to address the question.
    But the Secretary and the Chairman I believe addressed the 
immediate requirement pretty directly. And the type of 
construction involved that you cited is the most cost effective 
construction at that location to build the kind of facility 
that will allow our military personnel to operate in a safe and 
efficient manner and also provide, consistent with our 
standards, a more humane environment with a little bit more 
room for detainees to live in the facility. But certainly we 
can arrange for whatever briefings may be necessary in that 
regard.
    Senator Feinstein. I appreciate that. Thank you.
    Thanks, Madam Chairman.
    Senator Hutchison. Thank you. I think that is the end for 
this panel. We very much appreciate your time in coming.
                         Department of the Navy

STATEMENT OF HON. B.J. PENN, ASSISTANT SECRETARY OF THE 
            NAVY (INSTALLATIONS AND ENVIRONMENT)

ACCOMPANIED BY:
        REAR ADMIRAL WAYNE ``GREG'' SHEAR, JR., DEPUTY DIRECTOR, ASHORE 
            READINESS DIVISION, UNITED STATES NAVY
        BRIGADIER GENERAL WILLIE WILLIAMS, ASSISTANT DEPUTY COMMANDANT, 
            INSTALLATIONS AND LOGISTICS (FACILITIES), U.S. MARINE CORPS
    Senator Hutchison. I want to now ask our second panel to 
come forward. Making his first appearance before our 
subcommittee is the Honorable B.J. Penn, Assistant Secretary of 
the Navy for Installations and Environment. Joining him are 
Rear Admiral Wayne Shear, United States Navy Deputy Director 
for the Ashore Readiness Division; and Brigadier General Willie 
Williams, U.S. Marine Corps, Assistant Deputy Commandant for 
Facilities.
    Secretary Penn, if you would give us a summary of your 
statement, we would be happy to hear it, and then we will ask 
questions.
    Mr. Penn. Madam Chairman, my pleasure. Madam Chairman, 
members of the subcommittee, being in this job for about a 
week, I assure you I have no trouble in being brief.
    I am accompanied by Brigadier General, soon to be Major 
General, Willie Williams for Marine Corps Installations, and 
Rear Admiral Greg Shear from Commander Naval Installations.
    I have spent most of my initial days getting acquainted 
with my staff and senior leadership of the Navy and Marine 
Corps. I am quite impressed with their skills and dedication.
    I remember when I was on active duty as a naval aviator, 
serving as commanding officer of Naval Air Station North Island 
in California in the late 1980s thinking what new policy 
approaches from Washington might improve installation 
management. Be careful what you dream of.
    Things have obviously changed since that time. I will soon 
begin visiting bases and stations so that I can listen 
firsthand to the needs and concerns from installations 
commanders, sailors, marines, their families, along with the 
civilian employees and contractor personnel who live or work at 
our shore installations and surrounding communities. I hope 
during my tenure to meld their views with those inside the 
beltway, of Congress, the Secretary of Defense, the service 
Secretaries, chiefs of staff, to shape a future for naval 
installations that provides cost effective support for the 
needs of our warfighters. Clearly implementation of BRAC 2005 
decisions will be a major focus of my efforts.
    I have submitted a rather detailed statement for the record 
on our fiscal year 2006 budget request. From a macro 
perspective, funding levels are strong, although I am 
admittedly on the front end of the learning curve on the 
details. General Williams and Admiral Shear helped shape this 
budget, so I will rely heavily on them.
    I would, however, like to talk about one specific aspect of 
our fiscal year 2006 budget request--the financing of our prior 
BRAC cleanup and caretaker needs with the mix of $143 million 
in appropriated funds and an estimated $133 million in land 
sales revenue.
    It is important to view the fiscal year 2006 prior BRAC 
request in the context of the 2005 request. The Department 
expected to finance the entire fiscal year 2005 BRAC program 
from the sale of the former Marine Corps Air Station El Toro, 
California and did not request nor receive any appropriations 
in fiscal year 2005. That sale was delayed by unforseen 
circumstances. Fortunately, the sale of the former Marine Corps 
Air Station Tustin, California in 2003 gave the Department the 
financial flexibility to slow 2004 program executions to 
conserve cash to cover its fiscal year 2005 environmental 
commitments, most of which are in the State of California.
    With fiscal year 2005 execution depleting prior year BRAC 
funds and the public auction of the El Toro property still a 
future event, the Department last fall opted to include 
appropriated funds in fiscal year 2006 to finance its minimum 
cleanup and caretaker status, along with a conservative 
estimate for land sale revenue to accelerate environmental 
cleanup. Although the auction of the El Toro property has now 
been completed, with a winning bid of nearly $650 million, I 
must caution the members of this committee that there is still 
some measure of risk ahead until the buyer and Navy complete 
the sales transaction at settlement.
    I want to emphasize that we cannot be absolutely sure of 
having land sales revenue until settlement occurs, which is 
planned for July. The buyer of previous property in 2003 
defaulted at settlement. Even after settlement, our past 
experience is that it often takes well over 4 months for the 
sale proceeds to be processed through DOD accounting systems 
before the funds are available to the Navy for program 
execution.
    We still have a substantial cost to complete environmental 
cleanup, primarily at closed bases in California, and we are 
developing plans to responsibly accelerate cleanup. That would 
be our first priority for use of the land sales revenue.
    Even with successful settlement of the El Toro property in 
July, we may still need some measure of fiscal year 2006 
appropriated funds to finance first quarter program 
commitments.
    I look forward to working with the Congress on resolving 
this situation, along with more challenging installations and 
facilities issues.
    [The statement follows:]

                    Prepared Statement of B.J. Penn

    Madam Chairman and members of the Committee, I am pleased to appear 
before you today, accompanied by Brigadier General Willie Williams, 
Assistant Deputy Commandant of the Marine Corps for Installations and 
Logistics, and Rear Admiral Wayne Shear, Deputy Director of the Navy's 
Ashore Readiness Division. We will provide an overview of the Navy and 
Marine Corps team's shore infrastructure programs and base closure 
efforts.

                    FISCAL YEAR 2006 BUDGET OVERVIEW

    Our bases and stations provide the essential services and functions 
that help us train and maintain our Naval forces, and enhance the 
quality of life for our Sailors, Marines and their families. Winning 
the Global War on Terrorism (GWOT) is our number one priority while we 
transform our force structure and business processes to meet the 
readiness needs of today and tomorrow. The Department of the Navy (DoN) 
has a considerable investment in shore infrastructure: 104 
installations in the continental United States and 18 overseas 
locations with a combined plant replacement value of about $181 
billion.
    The DoN fiscal year 2006 budget request for installations and 
environmental programs totals $9.8 billion \1\ and provides the funds 
to operate, recapitalize and transform our shore installations. In this 
budget, we have focused our efforts on balancing the risks across the 
operational, institutional, force management and future challenges 
identified by the Department and the Department of Defense (DOD).
---------------------------------------------------------------------------
    \1\ To avoid double counting in the graph, environmental is shown 
separately from BOS, and MILCON is shown separately from SRM funds.




    The Base Operations Support (BOS) request of $4.8 billion, 
excluding environmental which is shown separately, provides fundamental 
services such as utilities, fire and security, air operations, port 
operations, and custodial care that enable the daily operations of our 
bases. The increase of $471 million to the fiscal year 2005 enacted 
level is primarily due to functional transfers to properly align Navy 
Marine Corps Internet with Base Operating Support and program growth to 
accomplish utilities privatization preparation, improve overseas 
Morale, Welfare and Recreation Programs supporting our forward deployed 
forces, and to restore funding required to execute shore mission 
support without degrading quantity or quality of support. We believe we 
have properly priced BOS to avoid execution year adjustments as we have 
experienced in the past. We are also working with the Office of the 
Secretary of Defense and the other Components to define common 
standards and performance metrics for managing installations support.
    Our Military Construction Navy and Naval Reserve request is a very 
robust $1,074 million, about the same as the enacted fiscal year 2005 
level of $1,114 million after excluding the $139 million the DoN 
received in the Emergency Hurricane Supplemental Appropriations Act, 
2005. This level of funding keeps us on track to eliminate inadequate 
bachelor housing, and provides critical operational, training, and 
mission enhancement projects.
    The Family Housing request of $813 million is about the same as the 
enacted fiscal 2005 level of $835 million after excluding the $9 
million the DoN received in the Emergency Hurricane Supplemental. It 
provides $219 million in family housing construction and improvements 
funds, 80 million above the enacted fiscal 2005 level of $139 million. 
Funds to operate, maintain and revitalize the worldwide inventory of 
about 33,000 units total $594 million, $103 million less than the 
enacted fiscal 2005 level (excluding the $9 million in the Emergency 
Hurricane Supplemental), due to a decline of over 18,000 homes from the 
fiscal 2005 level from our housing privatization efforts. The DoN 
continues to fund Basic Allowance for Housing (BAH) at a level that 
eliminates average out-of-pocket housing expenses for service member. 
BAH makes finding affordable housing in the community more likely for 
our service members, and it helps our housing privatization efforts 
succeed.
    Sustainment, Restoration and Modernization (SRM) includes military 
construction and Operation and Maintenance funds. Our fiscal year 2006 
request is $71 million above the enacted fiscal year 2005 level without 
the Hurricane Supplemental. Sustainment funds the necessary maintenance 
and repairs needed to keep a facility in good working order over its 
expected service life. Facilities sustainment requirements are based on 
a DOD model. The fiscal year 2006 budget maintains 95 percent of the 
model requirement for Navy and Marine Corps bases. Restoration and 
Modernization funds regenerate the physical plant either through 
reconstruction or major renovation to keep the facility modern and 
relevant.
    Our environmental program of $1,149 million, comprised of a variety 
of operating and investment appropriations, climbs $123 million above 
the fiscal year 2005 enacted level. Within this broad category, 
compliance accounts decline as a result of fewer one-time projects; 
conservation and pollution prevention funds remain steady; research and 
technology development decline by $15 million as fiscal year 2005 
congressional increases are not continued in fiscal year 2006; cleanup 
of active bases increases by $39 million, primarily to support cleanup 
of the former Vieques training range in Puerto Rico. Of particular 
interest to this Subcommittee, we have included $143 million in fiscal 
year 2006 appropriations to cover minimum required environmental 
cleanup and caretaker costs. In preparing the budget, we also included 
$133 million in estimated land sales revenue that would be used to 
accelerate cleanup efforts.
    Here are some of the highlights of these programs.

                                HOUSING

    Our fiscal year 2006 budget request reflects the DoN's continued 
commitment to improve living conditions for Sailors, Marines, and their 
families. We have programmed the necessary resources and expect to have 
contracts in place by the end of fiscal year 2007 to eliminate our 
inadequate family and bachelor 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 BAH 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.
    We will be able to eliminate 77 percent of our inadequate inventory 
through the use of public/private ventures. As of 1 March, we have 
awarded 15 projects totaling over 26,000 units. As a result of these 
projects, almost 17,500 homes will be replaced or renovated. An 
additional 2,700 homes will be constructed for Navy and Marine Corps 
families. Through the use of these authorities we have secured almost 
$3.0 billion in private sector investment from $300 million of DoN 
funds for these 15 projects. This represents a leverage ratio of ten to 
one. During fiscal year 2005 and 2006, we plan to award projects 
totaling 29,000 homes at ten Navy and Marine Corps locations. This will 
allow us to improve our housing stock and provide more homes to 
Sailors, Marines and their families much faster than if we relied 
solely on traditional military construction. By the end of fiscal year 
2007, the Navy and Marine Corps will have privatized 78 percent and 95 
percent, respectively, of their worldwide housing stock.
    Our fiscal year 2006 family housing budget includes $219 million 
for family housing construction and improvements. This amount includes 
$112 million as a Government investment in family housing privatization 
projects. It also includes $594 million for the operation, maintenance, 
and leasing of DoN family housing.

                     PLANNED PRIVATIZATION PROJECTS
------------------------------------------------------------------------
                                                             Number of
            Fiscal year                   Location             homes
------------------------------------------------------------------------
                USN
2005..............................  Mid Atlantic........           5,930
2006..............................  Midwest Regional....           1,879
2006..............................  Southeast Regional I           4,437
2006..............................  San Diego Phase III.           4,268
2006..............................  Oahu II.............           2,336
                                                         ---------------
      Subtotal....................  ....................          18,850
                                                         ===============
               USMC
2005..............................  Camp Lejeune/Cherry            3,426
                                     Pt.
2005..............................  29 Palms/Kansas City           1,510
2006..............................  MCB Hawaii..........           1,136
2006..............................  Camp Lejeune/Cherry              959
                                     Pt II.
2006..............................  Camp Pendleton IV...           3,359
                                                         ---------------
      Subtotal....................  ....................          29,240
------------------------------------------------------------------------

Bachelor Housing
    Our budget request of $184 million for bachelor quarters 
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 18,400 junior enlisted unaccompanied Sailors 
        worldwide who live aboard ship even while in homeport. The Navy 
        has programmed funding through fiscal year 2008 to achieve its 
        ``homeport ashore'' initiative by providing ashore living 
        accommodations for these Sailors. We will achieve this goal 
        through a mix of military construction, privatization 
        authorities, and, for the interim, more intensive use of our 
        barracks capacity by housing two members per room. Our fiscal 
        year 2006 budget includes three ``homeport ashore'' projects: 
        $7.8 million at Naval Station Mayport, FL (216 spaces); $50 
        million at Naval Station, Everett, WA (818 spaces); and $13.7 
        million at Naval Amphibious Base Coronado, CA (800 spaces), 
        which is planned for privatization. The funds would be used as 
        a Government cash contribution to a public/private entity.
  --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 his or her own 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 2016; the 
        Marine Corps by fiscal year 2012. We are pursuing a waiver of 
        the ``1+1'' standard to allow us to build an enlisted barracks 
        project in Norfolk to private sector standards. We believe this 
        will reduce construction costs, improve amenities, and 
        facilitate opportunities to privatize barracks in the future.
  --Eliminate Gang Heads.--The Navy and Marine Corps remain on track to 
        eliminate inadequate barracks with gang heads \2\ for permanent 
        party personnel. The Navy achieves this goal by fiscal year 
        2007, the Marines by fiscal year 2005.
---------------------------------------------------------------------------
    \2\ Gang heads remain acceptable for recruits and trainees.
---------------------------------------------------------------------------
BQ Privatization
    We are applying authority provided to us by Congress to proceed 
with three pilot unaccompanied housing privatization projects. We 
issued a solicitation for our first project at San Diego in September 
2004 and received very positive responses from industry. We will soon 
take the next step to narrow the field and invite up to four highly 
qualified offerors to submit detailed technical and financial 
proposals. We plan to select a single proposal by late Spring 2005 and 
make an award in January 2006 after notifying Congress.
    We intend to notify Congress of our intent to issue a solicitation 
for our second pilot project--at Hampton Roads, Virginia--in the very 
near future. We have also initiated a concept development for our third 
pilot project to provide unaccompanied housing in the Pacific 
Northwest.

                         MILITARY CONSTRUCTION

Military Construction Projects
    The DoN fiscal year 2006 Military Construction program requests 
appropriations of $1,029 million, consisting of $830 million for Navy, 
$169 million for Marine Corps, and $30 million for planning and design. 
The authorization request totals $1,078 million. Our fiscal year 2006 
budget uses $92 million in prior year savings identified during budget 
formulation to finance additional military construction needs above the 
fiscal year 2006 appropriation request. Fiscal year 2006 projects were 
properly priced consistent with the analysis that identified the prior 
year savings. The Naval and Marine Corps Reserve Military Construction 
appropriation and authorization request is $45 million.
    The active Navy program consists of:
  --$218 million for eight Chief of Naval Operations projects for 
        Homeport Ashore, Great Lake Recruit Training Command 
        recapitalization and the Naval Academy.
  --$215 million for seven waterfront and airfield projects.
  --$92 million for three special weapons protection projects.
  --$239 million for 12 projects supporting new weapons systems such as 
        F/A 18 E/F, V-22, H60R/S, and VXX.
  --$58 million for four mission enhancement projects such as the 
        Pacific War fighting Center at Naval Station Pearl Harbor, HI; 
        and
  --$9 million for one environmental compliance project at Naval Air 
        Station Pensacola, FL.
    The active Marine Corps program consists of:
  --$58 million for two barracks, one mess hall and one fire safety 
        quality of life project.
  --$25 million in a continuing effort to correct wastewater 
        environmental compliance violations at Camp Pendleton, CA.
  --$54 million for three airfield recapitalization projects at Marine 
        Corps Air Station Quantico, VA, including the second increment 
        of funding to replace 1930's vintage HMX maintenance hangars 
        and a parking apron.
  --$18 million for four projects to provide maintenance facilities, 
        including the new Assault Breacher Vehicle at Camp Pendleton, 
        CA and Camp Lejeune, NC; hot refueling for rotary wing aircraft 
        at MCAS Yuma, AZ; and critical training for Marines with a 
        Multi-Purpose Machine Gun Range at Camp Lejeune, NC.
  --$14 million for five projects that cover a broad range of facility 
        improvements, e.g., main gate access and inspection; 
        encroachment remedies; missile storage.
    The Naval and Marine Corps Reserve program consists of two joint 
reserve centers, a Marine Corps reserve centers, a Marine reserve-
training center, and a hanger modification.
    Fourteen Navy and two Marine Corps \3\ projects have construction 
schedules exceeding 1 year and cost more than $50 million, thus meeting 
the DOD criteria for incremental funding in the fiscal year 2006 
budget. Seven Navy and one Marine Corps projects received full 
authorization in fiscal year 2004 or fiscal year 2005 and are being 
continued or completed in fiscal year 2006. The budget request new 
authorization to start seven Navy and two Marine Corps incrementally 
funded projects in fiscal year 2006.
---------------------------------------------------------------------------
    \3\ The budget also incrementally funds a $14 million Marine Corps 
project.
---------------------------------------------------------------------------
Outlying Landing Field, Washington County, North Carolina
    The new F/A-18E/F Super Hornet is replacing F-14 and older F/A-18C 
aircraft. A Navy Environmental Impact Statement (EIS) examined 
alternatives for homebasing these new aircraft on the East Coast, 
opting to base eight tactical squadrons and a fleet replacement 
squadron at Naval Air Station Oceana, VA, and two tactical squadrons at 
Marine Corps Air Station, Cherry Point, NC.
    This homebasing decision requires a new Outlying Landing Field 
(OLF) to support fleet carrier landing practice training. The current 
site near Virginia Beach, VA is not as effective for night-time 
training due to ambient light sources, and it lacks the capacity to 
handle a training surge such as experienced for the war on terrorism 
and Operation Iraqi Freedom. The Navy selected a site in Washington 
County, North Carolina, about halfway between NAS Oceana and MCAS 
Cherry Point, as the best alternative from an operational perspective.
    A Federal District Court ruled last month that Navy did not fulfill 
its obligations under the National Environmental Policy Act (NEPA) 
before making the decision to construct the OLF, and has enjoined the 
Navy from taking further actions to plan, develop, or construct the OLF 
until it completes additional NEPA analysis. The Navy continues to 
believe that the EIS that it prepared was based on sound science and 
rigorous analysis, and met all requirements of NEPA. Nonetheless, the 
Navy is carefully examining the court's ruling and examining available 
alternatives. The fiscal year 2006 budget includes $23 million in 
available prior year funds to complete land acquisition in the OLF core 
area and commence horizontal construction. We continue to believe that 
these funds will be required for these purposes and will be executable 
in fiscal year 2006.

                                  VXX

    We are pleased to report significant progress on VXX, the next 
generation helicopter transportation for the President, Vice President 
and heads of State. Marine Helicopter Squadron One (HMX-1), located at 
the Marine Corps Air Facility, Quantico, VA, performs these helicopter 
transportation mission using the VH-3D introduced in 1974 and the VH-
60N fielded in 1989. These aircraft are approaching the end of their 
service lives, and do not have the growth margin to incorporate the 
improved capabilities required to meet evolving mission needs in the 
post 9/11 environment.
    The Navy awarded a System Development and Demonstration acquisition 
contract to Lockheed Martin in January 2005 to build and deliver eight 
VXX aircraft for test and evaluation and pilot production. The new 
aircraft will provide increased performance; improved mission, 
communication, navigation, and maintainability; and expanded potential 
for future growth. Developmental flight-testing will begin mid fiscal 
year 2005, with delivery of the first test article by April 2007. 
Initial operating capacity is set for the fourth quarter fiscal year 
2009.
    The Navy also awarded a construction contract in January 2005 to 
build an eight-bay test and evaluation hanger with laboratory, 
maintenance, and office space for a combined Lockheed Martin--Navy 
program management team at Naval Air Station Patuxent River, MD. The 
Navy commissioned an independent study to consider alternate methods of 
providing in-service support for the aircraft. The study concluded that 
a government owned contractor operated facility at Patuxent River 
provided significant life cycle cost savings to the Navy. The $96 
million, incrementally funded design/build facility will also include 
an in-service support capacity for the aircraft once operational. The 
current working estimate for construction is $10 million below the 
authorization request in the fiscal year 2005 budget.

                               FACILITIES

Facilities Sustainment, Restoration and Modernization (SRM)
    Sustainment.--The DOD uses models to calculate life cycle facility 
maintenance and repair costs. These models use industry-wide standard 
costs for various types of buildings and geographic areas and are 
updated annually. Sustainment funds in the Operation and Maintenance 
accounts maintain shore facilities and infrastructure in good working 
order and avoid premature degradation. The Navy and Marine Corps 
achieve 95 percent funding of the sustainment model requirements in 
fiscal year 2005 and fiscal year 2006, consistent with the DOD goal. 
The DoN funding increases by 1.4 percent from fiscal year 2005 to 
fiscal year 2006.
    Recapitalization.--Restoration and modernization provides for the 
major recapitalization of our facilities using Military Construction, 
Operation and Maintenance, Navy Working Capital Fund, and Military 
Personnel Navy 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 DOD goal is to attain an annual 67-
year rate by fiscal year 2008. Neither the Navy nor the Marine Corps 
attains the 67-year goal in the current FYDP due to affordability.

                                   SRM
------------------------------------------------------------------------
                                                   Fiscal Year
                                        --------------------------------
                                            2004       2005       2006
------------------------------------------------------------------------
                  Navy
Sustainment (percent)..................         75         95         95
Recap rate (years).....................        103        104         98

              Marine Corps
Sustainment (percent)..................         96         95         95
Recap rate (years).....................        109         82        103
------------------------------------------------------------------------


    The fiscal year 2006 recapitalization rate has improved 
substantially from that reported last year as a result of a recent DOD 
policy change that allows the military departments to take credit for 
centrally managed Service demolition programs. The Navy has $51 million 
and the Marine Corps $5 million for their fiscal year 2006 central 
demolition programs, which combined is expected to demolish over 2.5 
million square feet of outdated facilities. The new policy allows us to 
consider the construction of new facilities as part of the recap metric 
calculation as long as an equivalent square footage of old facilities 
are demolished anywhere else. We believe that this corporate view is a 
more accurate reflection of the age of our while inventory and the need 
for recapitalization.

                              EFFICIENCIES

Naval Safety
    We remain committed to achieving Secretary Rumsfeld's 2-year 
challenge to reduce fiscal year 2002 baseline mishap rates and 
accidents by 50 percent by the end of fiscal year 2005. At the end of 
calendar year 2004, 15 months into the 2-year challenge, the Department 
was on track to meet the SECDEF goal in over 70 percent of the targeted 
areas.
    The Secretary of the Navy has embraced improving safety as one of 
his top objectives for this fiscal year. Last year Secretary England 
convened the first semi-annual Navy and Marine Corps Safety Council, 
comprised of Senior Flag and General Officers, to review ongoing mishap 
reduction efforts. The DoN is pursuing Occupational Safety and Health 
Administration OSHA (OSHA) Voluntary Protection Program (VPP) status at 
our shipyards and other industrial activities; over the last 16 months, 
we have achieved an average 31 percent reduction in civilian lost 
workdays due to injuries at our three installations with the highest 
injury rates. Increased command emphasis for safety in Operation Iraqi 
Freedom has played a major role in reducing the percentage of Marine 
Corps non-combat fatalities to combat fatalities from 42 percent in 
fiscal year 2003 to less than 9 percent in fiscal year 2004.



    Our fiscal year 2006 budget includes $4.5 million to continue 
development of the Military Flight Operations Quality Assurance 
program. We want to adapt a successful commercial aviation program to 
analyze performance data (i.e., ``black box'' data) after every flight 
and allow aircrew and aircraft maintenance personnel to replay a high 
fidelity animation of the flight and associated aircraft performance 
parameters. That will allow them to recognize and avoid situations 
where flight safety tolerances are exceeded. In addition to the safety 
benefit, we expect significant future savings in reduced maintenance 
costs.

Commander, Navy Installations
    Commander, Navy Installations Command (CNI) had a productive first 
year in its effort to transform the Navy shore establishment into 
centralized shore services and support structure. The Navy is now 
aligned to permit mission commanders to focus on their core mission to 
deliver combat power, while CNI focuses on shore infrastructure 
support.
    A key CNI accomplishment was to implement a Capabilities Based 
Budgeting (CBB) process. This annual, zero-based analysis links the 
delivery of specific shore functions to their resources, and allows 
managers to predict how varying resource inputs alter the performance 
capability of that shore function. Identifying the risks in delivering 
service at varying output levels allows Navy leadership to select the 
desired level of output and associated resourcing based on an 
evaluation of these risks. This process allows us to better align shore 
support services with mission customers' requirements. CNI is now 
expanding this effort to derive common base support models with the 
other military services.



Strategic Sourcing
    The DoN continues to seek efficiencies in its business processes. 
We want to focus on finding the most cost efficient means to support 
our war fighters. There are a number of approaches to achieve this 
goal, e.g., eliminating an unnecessary function or one with marginal 
benefit; re-aligning a function to improve efficiency; or competing a 
function to see if it can be provided more effectively or at a lower 
cost by private industry. We have committed to review over 30,000 \4\ 
positions for competition using the OMB Circular A-76 process by fiscal 
year 2008, although execution plans have temporarily slowed that pace 
as we adopt new OMB and Congressional direction on competition 
policies. We are focusing competitions on those functions that are not 
critical or core to our military operations, are readily available and 
can potentially be performed more effectively by the private sector.
---------------------------------------------------------------------------
    \4\ Represents about 5 percent of the DoN's military and civilian 
workforce.
---------------------------------------------------------------------------
    We recognize the difficulty these competitions have on employee 
morale. However, the gains in clearly defining the Government's 
requirement with resulting savings warrant the continued use of 
competition to determine the most cost-effective service provider. 
Competition between the in-house and contractor work force benefits the 
DoN and taxpayer in the long run. OMB Circular A-76 competitions 
generate on average 36 percent cost avoidance. Our workforce is among 
the best in the world and has responded to the challenge by winning 
over 80 percent of the A-76 competitions.

Utility Privatization
    We are proceeding with efforts to privatize when economical our 
electricity, water, wastewater, and natural gas utility systems. Ten 
USC  2688 provides the legislative authority to convey utility systems 
where economical. Privatization allows installations to focus on core 
missions, relieving them of activities that can be done more 
efficiently and effectively by others. Privatization can help us reap 
private sector efficiency while upgrading aged systems to industry 
standards without compromising safe and reliable services.
    As of February 1, 2005, DoN has privatized 15 of its 645 utility 
systems while exempting 73 utility systems. Approximately half of the 
Source Selections Authority (SSA) decisions have been achieved during 
the past year, with the rest expected by September 30, 2005. When the 
current round of utilities privatization concludes in September 2005, 
DoN intends to pursue other alternatives to enlist industry capability. 
In the end, we need safe reliable utility systems that are operated in 
the most economical manner, and that rely on private industry wherever 
practicable.

                PRIOR BRAC CLEANUP AND 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. We have had significant successes on all fronts.
    Last year DoN relinquished over 71,000 acres at the former Naval 
Air Facility Adak, Alaska, to the Department of the Interior, which 
enabled Interior to exchange portions of the property with The Aleut 
Corporation for other lands. Additionally, the Navy achieved a 
significant milestone at the former Hunters Point Naval Shipyard in San 
Francisco by conveying 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) left to dispose by the end of this 
fiscal year.

Property Sales
    We have been very successful using property sales to assist in 
environmental cleanup and property disposal as well as recover value 
for taxpayers. We have used various methods to conduct these sales, 
including General Services Administration (GSA) on-site auctions, GSA 
Internet auctions, and Internet auctions using commercial real estate 
brokers. We used the GSA Internet web site in 2003 to sell 235 acres at 
the former Marine Corps Air Station Tustin, CA, for a net $204 million. 
We also sold 22 acres at the former Naval Air Facility Key West, FL, in 
January 2004 for a net $15 million. The City of Long Beach, CA, opted 
to pre-pay its remaining balance plus interest of $11.3 million from a 
promissory note for the 1997 economic development conveyance of the 
former Naval Hospital Long Beach. We applied these funds to accelerate 
cleanup at the remaining prior BRAC locations.
    Last month the DoN completed its largest public sale via Internet 
auction consisting of four large parcels that total 3,720 acres at the 
former Marine Corps Air Station, El Toro in Irvine, CA, with bids 
totaling $649.5 million. The Internet auction public sale of 62 acres 
at the former San Pedro housing site in Los Angeles, CA, is still in 
process with a top bid of $87 million as this statement was being 
prepared for printing. We expect to close these sales later this year. 
We will also soon close escrow on the public sale of approximately 20 
acres in Orlando, FL, which is noteworthy as the first deed conveyance 
of property prior to completion of all environmental cleanup using the 
public sale process.
    Public sales of smaller parcels were completed in Charleston, SC, 
and Novato, CA, and we expect to proceed soon with the sale of property 
at the former Oak Knoll Naval Hospital upon resolution of legal issues 
stemming from a lawsuit by the local redevelopment authority.

Land Sales Revenue Caution
    A word of caution is necessary regarding land sales revenue. 
Although the auction for El Toro has ended and the auction for San 
Pedro should end soon, it will be several months before these sales 
close escrow, and several additional months until the DoN receives the 
sale proceeds in the DoN prior BRAC account. Until then, litigation or 
default by the winning bidder can delay or cancel the sale, as happened 
with the sale of the former Oak Knoll Naval Hospital in 2003. The El 
Toro sale, planned to occur last year, was delayed for 1 year due to 
litigation and the need to resolve redevelopment issues with the City 
of Irvine. That required us to conserve cash for fiscal year 2005 
execution.
    Because of our experience with the risks associated with predicting 
future receipt of land sales revenue, our fiscal year 2006 budget 
includes an appropriation request of $143 million to cover minimum 
required environmental cleanup actions under enforceable schedules and 
ongoing program costs for properties not yet disposed. Notwithstanding 
these risks, we are optimistic that the El Toro and San Pedro sales 
will close and the funds will become available.

Prior BRAC Environmental Cleanup
    The DON has spent over $2.5 billion on environmental cleanup at 
prior BRAC locations through fiscal year 2004. We estimate the 
remaining cost to complete cleanup at about $559 million for fiscal 
year 2007 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.

Closure of Naval Station Roosevelt Roads, Puerto Rico
    In addition to completing property disposals from the four prior 
BRAC rounds, the Navy closed Naval Station Roosevelt Roads on March 31, 
2004, as directed by section 8132 of the fiscal year 2004 Defense 
Appropriations Act. All military mission activities have been 
relocated. The DOD schools remained open through the completion of the 
2003-2004 school year, as encouraged by the conference report 
accompanying the Act. Naval Activity Puerto Rico has been established 
to protect and maintain the property and preserve its value until 
disposal.
    As directed in the Act, the closure and disposal is being carried 
out in accordance with the procedures contained in the Defense Base 
Closure and Realignment Act (BRAC) of 1990, as amended. Pursuant to 
these procedures, the Navy has approved property transfers to the 
Department of the Army for use by reserve components, and the 
Department of Homeland Security. The Commonwealth of Puerto Rico formed 
a Local Redevelopment Authority (LRA). Using grant funding from the DOD 
Office of Economic Adjustment, the LRA prepared a redevelopment plan 
for the property that envisions a mix of commercial, residential, and 
public uses, as well as conservation of large areas of mangrove forest 
and wetlands. As required by BRAC procedures, we are analyzing the 
potential environmental impacts of property disposal in accordance with 
that redevelopment plan. We expect that property disposal process will 
begin in 2006 and that substantial portions of the property will be 
disposed through competitive public sale. We do not expect this process 
to be completed until fiscal year 2007, and have requested $27 million 
in fiscal year 2006 to cover caretaker costs and maintain the property 
in preparation for sale. The Government Accountability Office (GAO) 
recently reviewed Navy plans and progress in disposing of the former 
Naval Station Roosevelt Roads. GAO found that Navy was following 
prescribed procedures and completed their review with no 
recommendations.

                               BRAC 2005

BRAC 2005 Decision Process
    A successful BRAC 2005 is most important to the DoN, the DOD, and 
the Nation. It may be our last opportunity in the foreseeable future to 
reduce excess infrastructure, move scarce dollars to areas that result 
in increasingly improved readiness, and transform our infrastructure 
consistent with our defense strategy.
    BRAC 2005 provides a fair process that will result in the timely 
closure and realignment of military installations in the United States. 
All military installations inside the United States must be considered 
equally without regard to whether the installation has been previously 
considered or proposed for closure or realignment. All closure and 
realignment recommendations must be based on certified data, the 20-
year force structure plan, and the published selection criteria that 
make military value the primary consideration.



    For BRAC 2005, the Secretary of Defense directed that the analysis 
be divided into two categories of functions. Joint Cross Service Groups 
(JCSGs) are analyzing common business-oriented support functions while 
the Military Departments are focusing on analysis of service unique 
functions. The following seven JCSGs were established: Education and 
Training; Headquarters and Support; Industrial; Medical; Supply and 
Storage, Technical; and Intelligence. The JCSGs and the Military 
Departments will make their BRAC recommendations to the Infrastructure 
Executive Council (IEC), the DOD policy making and oversight body for 
the entire BRAC 2005 process. JCSGs were also utilized in BRAC 1995 but 
in a substantially different manner. In BRAC 1995, JCSG analysis and 
recommendations were provided to the Military Departments for 
consideration in developing their BRAC recommendations. The creation of 
the IEC ensures that DOD senior leadership is directly engaged in 
making these important decisions. Analysis and evaluation by all of the 
BRAC groups are on-going, with a goal of supporting the Secretary of 
Defense's delivery of a comprehensive set of base closure and 
realignment recommendations by May 16th.



    Despite what some may have read in the newspapers, seen on the 
Internet, or heard through the rumor mill, the DOD does not have a list 
of closures or realignments at this time. The number and location of 
such closures or realignments will only be determined after a 
comprehensive and rigorous analytical process that is now underway in 
the Military Departments and Joint Cross Service Groups.

BRAC 2005 Implementation Funding
    DOD has programmed funds through the Future Years Defense Plan for 
implementing BRAC 2005 decisions. Discussions are underway as to how 
these funds may be allocated to the Military Departments for 
implementing BRAC 2005 decisions. Expectations are that BRAC 2005 
implementation costs will be financed by a mix of (1) allocation of the 
DOD funds, realignment of funds from military construction projects and 
SRM funds no longer needed at closing locations, transfers from 
environmental restoration accounts, and if necessary, additional 
military service funds to implement BRAC 2005 decisions.

Preparing to Implement BRAC 2005
    The DoN is building upon its experience in completing cleanup and 
disposal of property from prior BRAC rounds to prepare to implement 
BRAC 2005 decisions. Recently, the Secretary of the Navy approved 
formation of a BRAC Program Management Office (PMO) that reports to the 
Assistant Secretary of the Navy for Installations and Environment. BRAC 
PMO has assumed responsibility for completing cleanup and disposal of 
the remaining property from prior BRAC rounds, and it will become 
responsible for cleanup and disposal of property at installations 
closed or realigned in BRAC 2005.
    The DoN has examined lessons learned from cleanup and disposal of 
property at prior BRAC bases, especially recent successes using 
competitive public sales. 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. 
A close examination of existing statutory authority and Federal 
regulations for property disposal showed there were ample opportunities 
to improve the disposal process without the need for new legislation. 
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. The DoN expects to take increased advantage of these private 
sector capabilities.
    We will continue to use all of the property disposal authorities in 
the right circumstances, as we have in the case of the disposal of 
Naval Station Roosevelt Roads. Like Roosevelt Roads, however, we 
believe there will be more opportunities to quickly dispose, in 
cooperation with the local community, BRAC 2005 property requiring 
environmental cleanup in its existing condition. The Navy will dispose 
of property using public sale and will include the cleanup of that 
property with it, as is done in ``brownfield'' disposals nationwide. 
This will allow developers with the experience and expertise to 
complete the cleanup as they redevelop the property. That benefits 
communities 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. The DON goal for implementing BRAC 2005 is that the last Sailor 
or Marine leaving the closed base hand the deed to the property to the 
new owner. We are convinced that this goal is achievable is we start 
preparations for property disposal as soon as closure decisions are 
final.

                               CONCLUSION

    In conclusion, we believe we have put forward a very strong fiscal 
2006 budget request for our facilities and environmental efforts, while 
still recognizing the compelling needs of the Global War On Terror. We 
have funded x percent of Navy and y percent of Marine Corps expected 
base operating costs, funded 95 percent of predicted sustainment 
requirements, while the Navy makes progress on its facility recap 
metric.
    We are funding environmental programs to maintain compliance with 
all environmental standards while accelerating cleanup of past 
contamination and investing in research and development efforts to 
solve emerging environmental concerns.
    We are proceeding with the analysis and scenario development that 
will lead to the Secretary of Defense announcement of BRAC 2005 
recommendations. We have carefully reviewed our implementation 
practices from the previous four BRAC rounds and are establishing, in 
cooperation with DOD, the necessary organizational structures and 
business policies and practices to accelerate closure, environmental 
cleanup, and property disposal.

                             FAMILY HOUSING

    Senator Hutchison. Thank you very much. I want to start the 
questioning with family housing projects that we have funded 
over the past few years, some of which have been canceled 
without notification in order to use the funds for 
privatization purposes. Now, we all support privatization, but 
I wanted to ask if there are any construction projects in the 
request that you are making that you anticipate might be 
diverted to privatized housing, and if you do decide to pursue 
any different programs after we do appropriate for 
construction, will you inform the committee of your decision to 
cancel a project?
    Mr. Penn. Madam Chairman, we had that discussion just this 
morning with some of your staffers, and we have agreed we are 
going to work very closely with the members of your staff on 
this issue.
    Admiral, would you like to----
    Admiral Shear. Ma'am, I would just say that family housing 
improvement and construction projects we have in the 2006 
proposal are in Guam and Japan. So I think the concern that 
they might be diverted is probably not going to be due to 
privatization, since we do not have plans to privatize in those 
areas.
    But as the Secretary said, we also recognize we have a duty 
to keep the committee informed about how we are handling the 
money that goes to privatization, and we have some work to do 
in that regard. So we recognize there is an issue there.

                          JOINT RESERVE CENTER

    Senator Hutchison. Secretary Penn, the Naval Reserve is a 
participant in the real property exchange that will result in 
moving a unit to Ellington Field in Houston, Texas, from 
another location closer to the city itself. I am very 
supportive of this process and the potential for joint 
opportunities that exist at Ellington between the services and 
also components of a homeland security unit of the Coast Guard. 
I wanted to ask if the Navy is satisfied with the progress on 
this move to Ellington and are you looking for other joint 
opportunities, particularly with the Coast Guard, that might be 
beneficial for both the Navy and Homeland Security.
    Mr. Penn. Madam Chairman, yes, ma'am, we are. The 
Department is very pleased to cooperate with the proposal to 
relocate the existing Reserve center, which will include Army, 
Navy, and Marine Corps. We are looking for opportunities to 
work with the Coast Guard. They are at several locations with 
us at this time, and we are looking for ways to enhance this 
opportunity.
    Senator Hutchison. I appreciate that very much because I 
think that with the Air Guard unit that is there, it really 
does provide an opportunity for a truly joint use, and I hope 
that everyone is going to be working together toward that goal.
    The issue of the sale of the land that you addressed we 
think is a very good way to go, and I think you have addressed 
the questions there about using the money for the environmental 
cleanup. Assuming that that final sale goes forward, that would 
be what we would expect, that the money would go toward 
environmental cleanup of both that and the previous BRAC 
requirements.
    Thank you very much, Mr. Penn. Now I will turn to my 
colleague, Senator Feinstein.
    Senator Feinstein. Thank you very much, Madam Chairman.
    Mr. Secretary, welcome.
    Mr. Penn. Thank you.

                          EL TORO LAND AUCTION

    Senator Feinstein. I want to ask about the El Toro land 
auction. It was recently closed. The final bid was $649.5 
million. Now, this is just half of the $1.2 billion that was 
forecast earlier in the process. My question really is why did 
the bids fall so short of the projections, and what does that 
portend, if anything, for other Navy BRAC land sales?
    Admiral Shear. Ma'am, the only comment is that my 
understanding is that the auction price of the land was in line 
with our assessments of earlier. We hired an independent agency 
to assess the value of the property. Some of the auction price 
had to be sent to fees for the local municipality. So the 
actual cost of the developer is higher than $649 million. My 
information is that it is in line with what we were estimating.
    Senator Feinstein. It is my understanding it is not, that 
you said that it could bring as much as $1.2 billion. That was 
the forecast. Now, it may be in line with the assessments, but 
it also may well be that you made judgments that simply were 
not correct. To come 50 percent in a booming land market is, 
Admiral, kind of a sobering judgment.
    Mr. Penn. Senator, if I may, we found in order to develop 
the property, the City of Irvine will require the purchaser to 
enter into development agreements that require the purchaser to 
spend an additional $400 million in developer fees and dedicate 
a substantial percentage of the property for public purposes. 
So an additional $400 million will come off that $1 billion 
figure.
    Senator Feinstein. All I am saying is that you estimated--
not you but the Department estimated--that this would bring in 
double what it does bring in. And now you are saying it is 
going to bring even less because you are going to have to pay a 
number of fees. So the entire $649.5 million is not available 
to the Navy. Is that correct? It is correct.
    Admiral Shear. My understanding is that the price was more 
on the order of $1 billion, of which $649 will be available to 
the Navy. We are not familiar with--or I am not--we will have 
to report back to you on----
    Senator Feinstein. Could you take a look at that?
    Admiral Shear. Yes, ma'am.
    Mr. Penn. Yes, ma'am.
    Senator Feinstein. Could you let our staff know?
    Admiral Shear. Yes, ma'am, we will do that.
    Senator Feinstein. I would very much appreciate that.

                    MARINE CORPS FORCE RESTRUCTURING

    I would like to ask a question about the $75 million for 
Marine Corps force restructuring. The House in its draft report 
on the supplemental roundly criticizes the Pentagon for 
including this funding in a supplemental instead of in the 
regular budget process. However, the House proposes funding all 
but two of the projects requested in the supplemental to 
support this initiative. The two projects that were not funded 
were proposed for Camp Pendleton, California. The reasons cited 
in the committee report is that the final basing decision for 
the second new infantry battalion to be created by the force 
restructuring is still uncertain.
    General Williams. I might ask you this question. And 
welcome. Although the Marine Corps force restructuring plan was 
approved in 2004, this is the first time this committee has 
heard of any military construction requirements associated with 
it. So why was this sprung in a supplemental instead of being 
presented in the regular budget process?
    General Williams. First of all, Madam Chairman, Senator 
Feinstein, on behalf of the marines and sailors and all of 
their families, I really would like to just thank you for all 
that you have done in supporting them in their current effort. 
As you know, at the Marine Corps we are committed to ensuring 
that we have a well-trained, well-cared-for, and a ready force 
to go out and fight our Nation's wars. And the Marine Corps is 
committed to ensure that we have the installations, that we 
appropriately invest in our installations that would ensure 
that they are capable of accomplishing such tasks.
    On the questions of the MILCON projects in the 2005 
supplemental, when the Commandant of the Marine Corps directed 
a study of his force structure to ensure he had the capability 
that he needed in order to continue to support the global war 
on terrorism, he in fact directed this force restructuring 
study group. When the group completed its work and the 
recommendations of the group were approved, it was after the 
opportunity to include those support requirements in the 
baseline budget.
    In addition, at the direction of the----
    Senator Feinstein. Did you say that it was going to be in 
the baseline budget?
    General Williams. No, ma'am. I said it was after the 
opportunity to include them in the baseline budget passed.
    In addition, with the 2005 authorization, we got the 
strength increased. It authorized an increase to 178,000, 
allowing then the opportunity to begin to bring forces on line 
during the summer of 2005. Of course, now, what we were faced 
with is having units come on line without facilities and things 
to support them. The facilities and this entire restructuring 
was in support of the Global War on Terrorism.
    Senator Feinstein. I got that. I got your answer.
    General Williams. So at the direction of the administration 
and in accordance with the precedent that had been set by 
Congress in the past, the Department requested that those 
incremental funds, those incremental costs of war funds then 
would be included in the supplemental appropriation. So we, 
thus, included those in the submission.
    Senator Feinstein. Okay, I understand. Thank you.
    What is the status of the site selection for the second 
infantry battalion, and if it is not at Pendleton, where is it 
going to go?

                       SECOND INFANTRY BATTALION

    General Williams. Yes, ma'am. The siting of the second 
infantry battalion--that decision is being discussed and 
debated by senior leadership of our Commandant, as well as our 
Marine Forces Command, Atlantic and Marine Forces Pacific. As I 
understand it, the decision is, of course, based upon a number 
of things. Some of it is the installations' ability to accept 
the additional sites as well as having all the support 
structure required to support the increased manning of those 
facilities.
    So as far as the actual location, we are looking at Camp 
Lejeune, North Carolina. I would say that that decision has 
been made that we would certainly look at them first in order 
to get that----
    Senator Feinstein. It is awful humid in the summer there.
    General Williams. Yes, ma'am.
    Senator Feinstein. Thank you very much and thank you for 
your service to our country.

                         OUTLYING LANDING FIELD

    Let me ask a question about the outlying landing field for 
Washington County, North Carolina. Mr. Secretary, Congress has 
provided a total of $57.6 million for land acquisition and 
construction of facilities for the proposed F-18 outlying 
landing field for North Carolina.
    You referenced in your prepared testimony last month's 
Federal court ruling which has barred the Navy from continuing 
to acquire land for this project. Given this most recent legal 
setback for the Navy on this, as well as the extent of local 
opposition to the project, is the Navy reconsidering its 
decision to locate the OLF in Washington County? Are you 
looking at any other sites?
    Mr. Penn. The Navy continues to believe that the EIS it 
prepared was based on sound science and rigorous analysis and 
met the requirements of NEPA. Nonetheless, the Navy is 
carefully examining the court's ruling and examining available 
alternatives.
    Senator Feinstein. In your testimony, you note that the 
2006 budget includes $26 million in available prior year funds 
for this project. As I mentioned, we have appropriated a total 
of $57.6 million. Are you saying that the Navy has already 
obligated $31.6 million for this project, or are you holding 
some of the previously appropriated funds in reserve for future 
activities beyond 2006?
    Mr. Penn. No, ma'am. Thus far, the Navy has obligated $8.1 
million total, leaving $25.5 million unobligated before the 
district court halted further expenditures. The 2006 budget 
includes $23 million in prior year savings not related to OLF 
unobligated balances. We believe that the Navy will be 
successful in resolving the litigation and that these funds 
will be needed for execution in fiscal year 2006.
    Senator Feinstein. So you have spent $8 million. Is that 
what you are saying?
    Mr. Penn. Yes, ma'am, thus far.
    Senator Feinstein. Is that of the $30 million that we 
appropriated in 2005, or is it of earlier money?
    Mr. Penn. Fiscal year 2004 and 2005, $33.6 million in 
fiscal year 2004, 2005.
    Senator Feinstein. I have that we appropriated $30 million 
in 2005, is that correct, for this project?
    Admiral Shear. Yes, ma'am.
    Senator Feinstein. So that money is still there. Is that 
correct?
    Mr. Penn. Yes, ma'am. That is correct.
    Senator Feinstein. And that money is not obligated. Is that 
right?
    Mr. Penn. To the best of my knowledge, yes, ma'am.
    Senator Feinstein. So is there more than $30 million in 
unobligated funds for this project?
    Mr. Penn. No, ma'am, there is not.
    Senator Feinstein. Okay, just $30 million. Well, I was just 
told it is $27.6 million in 2004 that is unobligated. It is 
appropriated but not used.
    Mr. Penn. As I mentioned, ma'am, Congress appropriated a 
total of $33.6 million fiscal year 2004 and fiscal year 2005 
for OLF acquisition and horizontal construction. The Navy has 
obligated $8.1 million total, leaving $25.5 million unobligated 
before the district court halted our further expenditures.
    Senator Feinstein. See, we have different figures. Our 
total appropriation already done is $57.6 million, of which the 
Navy has obligated $31.6 million. And you are telling me that 
the $30 million which was appropriated in 2005, is still there. 
It has not been spent. I think we need to get together and go 
over this and see exactly where that is.
    Mr. Penn. Yes, ma'am. I agree. I was told that fiscal year 
2005 rescinded $24 million of the fiscal year 2004 funds. So we 
will get together and coordinate those numbers.
    Senator Feinstein. Yes. So that would be appreciated. Thank 
you all very much. I appreciate it.
    Thank you, Madam Chairman.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. Thank you. That ends the hearing. We 
thank you very much. Welcome aboard. After 1 week, you have 
just passed your first test, your rite of passage, and we very 
much appreciate the information we have gotten today.
    Mr. Penn. Well, thank you very much and thank you for all 
you are doing for our great country.
    Senator Hutchison. Thank you.
    [Whereupon, at 4:23 p.m., Tuesday, March 8, 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 2006

                              ----------                              


                        TUESDAY, MARCH 15, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:32 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Craig, Feinstein, Byrd, and 
Murray.

                     DEPARTMENT OF VETERANS AFFAIRS

                        Office of the Secretary

STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY
ACCOMPANIED BY:
        JONATHAN B. PERLIN, M.D., Ph.D., MSHA, FACP, ACTING UNDER 
            SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION
        HON. VICE ADMIRAL DANIEL L. COOPER (USN RET.), UNDER SECRETARY 
            FOR BENEFITS, VETERANS BENEFITS ADMINISTRATION
        RICHARD A. WANNEMACHER, ACTING UNDER SECRETARY FOR MEMORIAL 
            AFFAIRS, NATIONAL CEMETERY ADMINISTRATION
        HON. TIM McCLAIN, GENERAL COUNSEL
        RITA A. REED, DEPUTY ASSISTANT SECRETARY FOR BUDGET

           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. Our meeting will come to order. I will 
say that this is our first hearing for the Veterans Affairs 
Department for our new subcommittee. I am very pleased to be 
able to work with the Department of Veterans Affairs. Of 
course, I have known the Secretary for a long time and have 
worked with the previous Secretary for this important 
Department. We are delighted that we now have this 
jurisdiction.
    I want to first tell you that we have votes starting at 3 
o'clock, five votes. So I am going to dispense with my opening 
statement because I want to hear from you, and then I want to 
have time for questions. I think what we will do is get as far 
as we can until the vote starts, and then we will see where we 
are and perhaps have to take a small recess and come back. But 
I will dispense with my opening statement and put it in the 
record.
    Welcome to you.
    Let me call on my distinguished ranking member with whom I 
work very closely. It is a great relationship. I think it is 
safe to say we are both very happy to have the Veterans Affairs 
Department in this subcommittee. With that, Senator Feinstein.

                 STATEMENT OF SENATOR DIANNE FEINSTEIN

    Senator Feinstein. Thank you very much, Madam Chairman. I 
echo your comments. I am delighted to work with you. It has 
been many years, and I do not think we have had a problem yet. 
So that is the good news.
    Additionally, I would ask that you allow me to join you in 
welcoming the lady and gentlemen assembled before us. I 
particularly want to welcome Secretary Nicholson. We look 
forward to working with you in this appropriation effort.
    This is a new chapter for the Military Construction 
Committee because we will be taking on the Veterans Affairs 
matters, and I think between the chairman and me, we represent 
two of the three States with the largest population of veterans 
in America. So we have a very unique opportunity to work on 
these challenges and opportunities.
    That said, I do want to let you know where I am coming 
from. I am very disappointed in the President's fiscal year 
2006 budget request for the Department of Veterans Affairs. 
This budget assumes savings of over $1 billion by doubling 
prescription drug co-payments and imposing a $250 enrollment 
fee on middle income veterans, many of whom are struggling to 
make ends meet as it is on incomes as low as $26,000 a year. 
More than 200,000 veterans would be adversely affected by these 
proposals. I think they are unrealistic assumptions. Congress 
has rejected them in the past and I hope we will continue to 
reject them.
    We are a Nation at war. The military has discharged more 
than 244,000 veterans from Iraq and Afghanistan, and the VA has 
already treated nearly 49,000 of those returning troops. Yet, 
this budget turns a blind eye to the increasing demands on the 
VA health care system caused by the influx of new veterans, as 
well as the aging population of veterans from earlier wars. 
Instead of reaching out to veterans, this budget proposes to 
shut more veterans out of the health care system by charging 
enrollment fees, by hiking co-pays on prescription drug 
benefits, and by limiting long-term nursing home care.
    This is not how we should be treating America's veterans. I 
know that money is tight, but the administration should not try 
to balance the books by forcing veterans to shoulder a greater 
share of the burden of health care costs.
    I know these are tough times, Mr. Secretary, but they must 
be addressed. My goal as the ranking member of this 
subcommittee is to do everything in my power to see that we 
keep the promises we made to our veterans and, in so doing, 
make the highest and best use of taxpayer dollars.
    Now, Madam Chairman, I look forward to working with you on 
this aspect of the budget. I also very much look forward to our 
taking over the mantel of the VA/HUD Subcommittee which I think 
did an excellent job in terms of appropriating for veterans and 
veterans affairs. Thank you very much.
    Senator Hutchison. Thank you.
    Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Madam Chairman, thank you. It is a delight 
to join you on this committee.
    Mr. Secretary, it is an honor to be in front of you again. 
We have seen each other I believe on three occasions now. I 
serve on the Veterans Committee, Budget, and Appropriations. I 
appreciate and understand the difficult task that is before 
you.
    Madam Chair, I know that you are short on time because of 
the votes, and I will submit my statement for the record.
    But let me just say this. I share the concerns of Senator 
Feinstein. I do not believe that we have budgeted for the care 
of our soldiers who are returning from war, nor for the ones 
that are already in long waiting lines. You have heard me 
before. You know that I am deeply concerned of the thousands of 
members who are coming home who will be discharged but will not 
have access to health care, particularly our Guard and Reserve 
members. We know that you are talking about community outreach 
clinics, but they are already turning poor patients away in our 
States. So they cannot take up the burden of this.
    Increasing co-pays, enrollment fees, closing our long-term 
care facilities is the wrong thing to be doing at a time when 
we have so many men and women who are serving us overseas.
    So I will submit my statement for the record, but I feel 
very strongly about this and will continue in any way I can to 
help us increase the budget for our veterans because I believe 
it is a promise that we have not kept and we need to follow up 
on.
    Senator Hutchison. Senator Byrd.

                  STATEMENT OF SENATOR ROBERT C. BYRD

    Senator Byrd. Thank you, Madam Chairman, and I thank those 
Senators who have preceded me. I wish to associate myself with 
their remarks.
    Mr. Secretary, during this time of war, few matters could 
be more important than the care that our Nation gives to our 
veterans. West Virginians are extremely proud of our veterans. 
Those men and women who have chosen to serve our Nation are 
owed an enormous debt. It is a moral responsibility that the 
United States carries, as President Lincoln said, ``to care for 
him who shall have borne the battle and for his widow and his 
orphan.''
    But the funding priorities outlined by President Bush in 
his budget undermine our country's commitment to America's 
veterans. The President proposes to double the co-payment for 
prescription drugs, impose a new $250 annual user fee for 
certain veterans, and continue a policy of turning away 
hundreds of thousands of veterans from VA hospitals because 
they are classified as low priority. According to the 
Congressional Research Service, continuing this policy on low-
priority veterans will deny a staggering 522,000 veterans care 
from VA hospitals by the end of this year.
    The American people must be told how many veterans will 
suffer under the President's budget proposal. The more than 
190,000 veterans in West Virginia receiving health care from VA 
medical centers in the Mountain State are threatened by these 
significant hikes in fees and co-payments. The expected wave of 
combat veterans from the Iraq and the Afghanistan wars will add 
to the stress on our VA facilities.
    Yet, instead of strengthening the VA medical system, the 
Bush administration weakens it. The Nation's three largest 
veterans organizations, the American Legion, the Veterans of 
Foreign Wars, and the Disabled American Veterans, have called 
the President's proposals the most tight-fisted, miserly budget 
for veterans programs. And they are right.
    I note that the President's $81.9 billion emergency 
supplemental does not include a single dime for veterans health 
care. Tax cuts and corporate giveaways are helping the super-
rich to get further ahead, but the President's budget leaves 
veterans health care far behind. For this Senator, ``support 
the troops'' means taking care of veterans after they come 
home. Our brave fighting men and women deserve much more from 
the White House than sloganeering and health care on the cheap.
    Thank you, Mr. Secretary. Thank you, Madam Chairman.
    Senator Hutchison. Thank you, Senator Byrd.
    Senator Craig, who is the distinguished chairman of the 
Veterans Affairs Committee and a member of our subcommittee.

                    STATEMENT OF SENATOR LARRY CRAIG

    Senator Craig. Well, thank you, Madam Chairman, and again, 
congratulations on chairing this newly structured committee and 
the authority within. Also, let me congratulate Senator 
Feinstein on her new position as ranking on this structure.
    To all of you from the Veterans Administration, Mr. 
Secretary, welcome before this most important committee. I have 
had the privilege, Madam Chairman, of being in each one of 
these lady's and gentleman's departments. I will go back better 
understanding the operations of the Veterans Administration. It 
is critically important for all of us to understand what it 
does and the role it plays as we work with this very difficult 
budget.
    Just this past week--I have held hearings now with all the 
veterans service organizations. The traditional joint hearings 
between the House and the Senate were obviously well attended 
and we heard from all of these marvelous organizations of their 
concern for veterans and the urgency of much of the service 
provided.
    I think it is also noteworthy that over the last 4 years, 
we have done more to improve veterans services than ever in the 
history of our country, tremendous commitments of resources, a 
9.4 percent average increase on an annualized basis. For that, 
we can all be proud.
    We are now debating a budget that is different than what 
the President proposed by a substantial amount. We have a 
budget before us that does not have any of the co-pays in it, 
does not have any of the new fees in it. In fact, it is a 
straight plus-up of nearly $1 billion without any 
reconciliation instructions in it, Madam Chairman. That is a 
significant improvement that serves the veterans of our country 
the way we would want them to be served.
    Does it serve every veteran who once bore the uniform of a 
service of this country? It does not. Nor can we be expected as 
a country to serve those who are not service-connected, who are 
the 7's and 8's, who may well have their own health care 
insurance, but now, because of the phenomenal work that the 
Veterans Administration has done to improve the quality of 
health care delivery within the system, we have created a 
system that is now sought after by all, in large part because 
if they can gain access through the front door, they gain free 
health care, even though they may be among the most wealthy in 
our country, but they have simply borne the uniform.
    That is a question that we have to ask ourselves in a 
fundamentally and fiscally responsible way, and that is the 
question that is now before us on the floor of the Senate. I do 
believe, Madam Chairman, we are going to be given a budget by 
the Budget Committee and instructions to this subcommittee that 
we can work with, that we can hand them to these administrators 
who sit before us in a way that does meet most, if not all, of 
the challenges, that addresses the concerns of Senator Murray, 
as I have, that we have a lot of new, incoming veterans with 
extraordinary needs because of the character of warfare today 
and because of the character of health on the front lines and 
medicine on the front lines of this war.
    So there are a lot of challenges out there that I trust, 
Madam Chairman, you and the ranking member can work with and 
work with those of us in the authorizing committees to make 
happen in defense of America's veterans. That is our charge. It 
is our responsibility.
    Thank you.
    Senator Hutchison. Thank you, Mr. Chairman.
    And now, Mr. Secretary, we would be pleased to hear from 
you.

             STATEMENT OF THE HONORABLE R. JAMES NICHOLSON

    Secretary Nicholson. Thank you, Madam Chairman and members 
of the committee. Good afternoon.
    Allow me, if you would, to start by introducing those 
experts that I have here and people who are far more 
experienced at the Veterans Affairs Department than I at this 
point. I would like to start on my far left with Tim McClain, 
who is the General Counsel. My immediate left is Dr. Jonathan 
Perlin, who is the Acting Under Secretary for Health. My far 
right is the Acting Under Secretary for Memorial Affairs, Dick 
Wannemacher. In the middle here on this side is Admiral Dan 
Cooper, who is the Under Secretary for Benefits, and my 
immediate right is Ms. Rita Reed, who is the Deputy Assistant 
Secretary for Budget.
    I would ask, Madam Chairman, if I could have my complete, 
comprehensive written statement be submitted for the record, 
but that I would be allowed to offer some highlights here of 
the President's proposal before we take your questions.
    Senator Hutchison. Without objection.
    Secretary Nicholson. Madam Chairman, President Bush is 
requesting a record $70.8 billion for the Department of 
Veterans Affairs in fiscal year 2006: $37.4 billion for 
entitlement programs and $33.4 billion for discretionary 
programs. This total represents a 2.2 percent increase over the 
fiscal year 2005 enacted level. The discretionary funding level 
would represent an increase of $880 million, or 2.7 percent, 
over the enacted level for 2005. The proposed mandatory 
spending level represents a $639 million, or 1.7 percent, 
increase over 2005. This budget represents a total increase of 
47 percent with a 44 percent increase in discretionary funding 
since the beginning of the Bush administration.
    The President's 2006 proposal will allow us to meet the 
health care and benefit needs of all newly separated veterans 
of the conflicts in Iraq and Afghanistan to maintain the high 
standards of health care quality, for which VA is now 
nationally recognized while treating 5.2 million patients. It 
will allow us to follow through on an historic realignment of 
our health care infrastructure through the CARES process, to 
reduce the backlog of disability compensation and pension 
claims, and to continue the largest expansion of the national 
cemetery system since the Civil War.
    In the area of health care, in recent years the 
Department's successes in delivering top-notch health care have 
been stunning. I can brag about this because I had nothing to 
do with it. But this is really a magnificent organization of 
dedicated, competent, compassionate people. The VA exceeds the 
performance of private sector and Medicare providers for key 
health care quality indicators for which comparable data are 
available. A recent RAND Corporation study also shows that 
patients in VA's health care system are significantly more 
likely to receive recommended care than our private sector 
patients.
    This is all the more impressive when you consider the 
explosive growth in VA health care usage. In 2006, the VA will 
treat about 1 million more patients than were treated in 2001. 
The President's budget will ensure there is no slippage in our 
high level of performance, even at these elevated patient 
levels. Ninety-four percent of the primary care appointments 
are scheduled within 30 days of the patient's desired date, and 
93 percent of the specialty care appointments are also 
scheduled within that time frame.
    The President's 2006 budget asks that you enact two 
important provisions affecting only priority 7 and 8 veterans: 
an annual enrollment fee of $250 and an increase in pharmacy 
co-payments from $7 to $15 for a 30-day supply of drugs.
    The proposed enrollment fee is similar to the fee paid by 
career military retirees enrolled in the TRICARE system and 
some would argue even more justified. As you know, most TRICARE 
enrollees have served on active duty for at least 20 years and 
are former enlisted personnel with modest retirement incomes. 
The proposed enrollment fee would apply to those veterans who 
may have served as few as 2 years and who have no service-
connected disability and who do have reasonable incomes.
    In addition, those veterans who are in priority group 8 
have incomes above the HUD geographic means test.
    I would like to turn to long-term care. This budget 
provides all long-term care needs for veterans who are 70 
percent or more service-connected. It also provides for 
patients requiring short-term care subsequent to a hospital 
stay and those needing hospice or respite care and those with 
special needs such as ventilator dependence or spinal cord 
injury.
    To ensure fairness and consistency, the VA proposes similar 
eligibility criteria across all institutional, long-term care 
venues, VA, contract community, and State nursing homes. The 
Department would continue to expand access to non-institutional 
long-term care with an emphasis on community-based and in-home 
care. In many cases this approach allows veterans to receive 
these services in the comfort and familiar settings of their 
homes surrounded by their families.
    In order to be more prepared to care for our veterans 
returning from Iraq and Afghanistan, the VA's 2006 medical care 
request includes $1.2 billion for the prosthetics program, 
which is $100 million over the fiscal year 2005 enacted level. 
This will support the increasing workload associated with the 
purchase and repair of prosthetics and sensory aids to improve 
veterans' quality of life.
    The budget will also provide $2.2 billion, or $100 million 
over the 2005 level, to standardize and further improve access 
to mental health services across the system, including PTSD.
    We are also proposing a number of program enhancements to 
cover out-of-pocket costs for emergency care for eligible 
veterans in non-VA facilities, to exempt former POW's from co-
payments for VA extended care and exempt veterans from co-
payments for hospice care delivered in hospitals or at home.
    We have projected increased health care management 
efficiencies of 2 percent in 2006 which will yield about $600 
million in savings.
    The $750 million requested for CARES in 2006 brings the 
total 3-year investment to $2.15 billion. At its core CARES 
means greater access to higher quality care for more veterans 
closer to where they live. Its impact is already being felt in 
Chicago where the proceeds from an enhanced use lease of VA's 
Lakeside Hospital property are being reinvested at VA's 
Westside facility. This will lead to a new modern bed tower for 
Chicago's veterans.
    Finally, the $786 million proposed in support of VA's 
medical and prosthetic research program would fund about 2,700 
high-priority research projects to expand knowledge in areas 
critical to veterans health care needs. The combination of VA 
appropriations and funding from other sources would bring our 
2006 research budget to nearly $1.7 billion.
    Veterans benefits. The President's request includes $37.4 
billion for the entitlement costs associated with all benefits. 
Our request includes $1.26 billion for the management of the 
Department's benefits program, which is 6.6 percent over the 
2005 level. Veterans Benefits will continue to address an 
increased volume of compensation claims from separating service 
members and older veterans who had not previously submitted 
claims and from current recipients.
    The VA has made significant improvements to the claims 
decision process, but clearly more must still be done. VA takes 
seriously its obligation that every veterans claim must be 
treated fairly and equitably, regardless of the locality. We 
will and must be consistent. To address the issue of 
consistency, the IG is performing an independent system-wide 
review.
    Also, Veterans Benefits leadership is looking at training, 
medical exams, and other aspects of the system to ensure we 
clearly are working toward a consistent, fair, and equitable 
case-decision process for all veterans.
    The President's request would also permit us to continue 
the Benefits Delivery at discharge program. This program 
enables active duty service members to file disability 
compensation claims with VA staff at military bases, complete 
physical exams, and have their claims evaluated before their 
military separations or soon thereafter.
    Burial benefits. The 2006 budget includes $290 million in 
discretionary funding for VA's burial program, including 
operating and maintenance expenses for the National Cemetery 
Administration, capital programs, the administration of 
mandatory burial benefits, and the State cemetery grants 
program. This total is nearly $17 million, or 6.4 percent, over 
the 2005 level.
    It includes $90 million for cemetery construction projects. 
We are requesting $41 million in major construction funding for 
land acquisition for six new national cemeteries and $32 
million for the State cemetery grants program. These resources 
would enable us to increase to 82 percent, the percentage of 
veterans having a veterans cemetery burial option within 75 
miles of their homes.
    Madam Chairman, I would be remiss if I did not note that 
last year's VA National Cemetery Administration earned the 
highest rating ever achieved by a public or private 
organization in the 2004 American Customer Satisfaction Index, 
a rating of 95 on a scale of 100.

                           PREPARED STATEMENT

    So in closing, Madam Chairman, despite the many competing 
demands for Federal funding, the President continues to make 
veterans benefits and services a top priority of his 
administration. Our veterans deserve no less.
    We are now prepared to take your questions. Thank you.
    [The statement follows:]

                Prepared Statement of R. James Nicholson

    Madam Chairman and members of the Committee, good afternoon. I am 
happy to be here and I am deeply honored that the President has given 
me the opportunity to serve as Secretary of Veterans Affairs. My 
service in the United States Army was the defining experience of my 
life and instilled me with a strong sense of duty and esteem for my 
fellow veterans. I look forward to working with you and the thousands 
of dedicated employees who are carrying out the compelling mission of 
the Department of Veterans Affairs (VA) by ensuring the timely delivery 
of high-quality benefits and services to those veterans in need of same 
earned through their sacrifice and service in defense of freedom.
    In his February 2 State of the Union Address, the President 
underscored the need for America to restrain spending in order to 
sustain our economic prosperity. As part of this restraint, it is 
important that total discretionary and non-security spending be held to 
levels proposed in the 2006 budget. The budget savings and reforms in 
the budget are important components of achieving the President's goal 
of cutting the budget deficit in half by 2009. This budget gives VA 
what it needs to accomplish our priority mission and we urge the 
Congress to support it. The 2006 budget includes more than 150 
reductions, reforms, and terminations in non-defense discretionary 
programs. The Department wants to work with the Congress to achieve 
these savings.
    I am pleased to be here today to present the President's 2006 
budget proposal for VA. The request totals $70.8 billion--$37.4 billion 
for entitlement programs and $33.4 billion for discretionary programs. 
Our budget request for discretionary funds represents an increase of 
$880 million, or 2.7 percent, over the enacted level for 2005, and a 47 
percent increase since the beginning of the Bush Administration.
    With the resources requested for VA in the 2006 budget, we aim to 
build upon many of the Department's achievements that have dramatically 
improved benefits and services to veterans and their families since the 
President came to office. The most noteworthy accomplishments are that 
VA:
  --provides health care to about 1 million more patients
  --improved the quality of patient care that sets the national 
        standard of excellence for the health care industry
  --dramatically lowered the backlog of rating claims for disability 
        compensation and pension from a high of 432,000 to 321,000 (for 
        all claims the backlog peaked at over 600,000)
  --reduced the average length of time to process compensation and 
        pension claims from a high of 230 days to approximately 160 
        days
  --continued the largest expansion of the national cemetery system 
        since the Civil War to honor veterans with a final resting 
        place and lasting memorial that commemorates their service to 
        our country.
    With strong support from the President, VA has made excellent 
progress in sharpening its focus on more effectively meeting the needs 
of those veterans who count on us the most--veterans with service-
connected disabilities, those with lower incomes, and veterans with 
special health care needs. I fully support this strategy and am 
committed to ensuring that our health care resources continue to be 
concentrated on care for veterans most in need of the Department's 
services. As an integral part of this focused strategy, we will make it 
a top priority to provide ongoing benefits and services to the 
servicemen and women who served in Operation Enduring Freedom and 
Operation Iraqi Freedom. VA's goal is to ensure that every seriously 
injured or ill serviceman or woman returning from combat receives 
priority treatment and consideration. We will continue to work closely 
with the Department of Defense (DOD) to develop ways by which to move 
records more efficiently between the two agencies, share critical 
medical information electronically, protect the health of troops 
stationed in areas where environmental hazards pose threats, process 
benefit claims as one shared system, and in every way possible, ease 
their transition from active duty to civilian life.

                              MEDICAL CARE

    The President's 2006 request includes total budgetary resources of 
$30.7 billion (including $750 million for construction and $2.6 billion 
in collections) for the medical care program, an increase of 2.5 
percent over the enacted level for 2005, and more than 47 percent above 
the 2001 level. The $750 million in construction will be devoted to the 
Capital Asset Realignment for Enhanced Services (CARES) program, 
bringing the total Department investment to $2.15 billion over 3 years.
    Given the current fiscal environment, it is more important than 
ever that VA concentrate its resources, policies, and strategies on 
those veterans identified by Congress as high priority. The President's 
2006 budget request includes policies and strategies used successfully 
during the last few years to focus VA health care resources on veterans 
with service-connected disabilities, those with lower incomes, and 
veterans needing our specialized services. In particular, this budget 
assumes continued suspension of enrollment of new Priority 8 veterans, 
as this has proven to be the most effective vehicle through which to 
focus our health care resources on our highest priority patients.
    But maintaining the current enrollment policy will not in itself 
ensure us sufficient resources for the care of those who need us the 
most. The President's 2006 budget asks that you enact two important 
legislative proposals--an annual enrollment fee of $250 and an increase 
in pharmacy co-payments from $7 to $15 for a 30-day supply of drugs, 
both pertaining to only Priority 7 and 8 veterans. This fee and the 
increase in co-payments pertain only to veterans who have no 
compensable service-connected disabilities and do have the means to 
contribute modestly to the cost of their care. This budget asks these 
veterans to assume a small share of the cost so that we may adequately 
care for high-priority veterans.
    The proposed enrollment fee is very similar to the fee the law 
requires retired career service members to pay in order to participate 
in TRICARE, and is arguably even more justified. As you know, TRICARE 
enrollees generally must have served on active duty for at least 20 
years, and many of them are former enlisted personnel with modest 
retirement incomes. The proposed enrollment fee would apply to those 
veterans who may have served as few as 2 years and who have no service-
connected disability. In addition, some of these veterans (those in 
Priority Group 8) have incomes above the HUD geographic means test.
    I recognize that Congress has not supported either of these 
proposals during the past 2 years. However, these two legislative 
proposals are consistent with the priority health care structure 
Congress enacted several years ago, and will help us meet the needs of 
our highest priority veterans. In addition, past utilization of VA's 
health care services has demonstrated that veterans with higher incomes 
(Priority 7 and 8 veterans) rely less on VA for delivering their health 
care and usually have other health care options, including third party 
insurance coverage and Medicare. An annual enrollment fee of $250 and 
an increase in co-payments for pharmacy benefits from $7 to $15 would 
give higher income, non-disabled Priority 7 and 8 veterans the option 
of sharing a small portion of the cost of their care or utilizing other 
health care options. Our high-priority patients typically do not have 
other health care options, so we must act decisively to protect their 
interests by making sure that sufficient resources are available to 
handle their health care needs.
    With medical care resources of $30.7 billion, we project that we 
will treat more than 5.2 million patients. Those in Priorities 1 to 6 
will comprise 78 percent of the total number of veteran patients in 
2006. This will represent the third consecutive year during which our 
high-priority veterans will increase as a percentage of all veterans 
treated. In addition, about 9 of every 10 medical care dollars in 2006 
will be devoted to meeting the health care needs of those veterans who 
count on us the most.
    Even with an increasing patient workload among our highest priority 
veterans, we will continue our steadfast commitment to providing high-
quality and accessible health care that sets the national standard of 
excellence for the health care industry. Our two primary measures of 
health care quality--clinical practice guidelines index and prevention 
index--focus on the degree to which VA follows nationally recognized 
guidelines and standards of care that the medical literature has proven 
to be directly linked with improved health outcomes for patients and 
more efficient care. Our performance on the clinical practice 
guidelines index, which focuses on high-prevalence and high-risk 
diseases that have a significant impact on veterans' overall health 
status, is expected to hold steady at the current high performance 
level of 77 percent. As an indicator aimed at primary prevention and 
early detection recommendations dealing with immunizations and 
screenings, the prevention index is projected to remain at its existing 
high rate of performance of 88 percent. VA continues to exceed the 
performance of private sector and Medicare providers for all 15 key 
health care quality indicators for which comparable data are available. 
These indicators include cancer screening for early detection, and 
immunization for influenza and pneumonia. In addition, they cover 
disease management measures such as compliance with accepted clinical 
guidelines in managing diabetes, heart disease, hypertensive disease, 
and mental health.
    The Department has greatly improved access to our health care 
services during the last few years by opening additional outpatient 
clinics, applying information technology strategies to streamline 
administrative, business, and care delivery processes, and implementing 
pay policies and human resource management practices to facilitate 
hiring and retain sufficient health care workers to meet capacity 
demands across the full continuum of care. These initiatives have 
helped VA raise the percent of primary care appointments scheduled 
within 30 days of the patient's desired date to 94 percent and the 
percent of specialty care appointments scheduled within 30 days of the 
patient's desired date to 93 percent. By continuing these types of 
strategies, improving clinical efficiencies, and effectively utilizing 
the resources requested in our 2006 budget, VA will maintain these high 
performance levels.
    The Department's record of success in health care delivery is 
substantiated by the results of the 2004 American Customer Satisfaction 
Index (ACSI). Conducted by the National Quality Research Center at the 
University of Michigan Business School, the most recent ACSI survey 
found that customer satisfaction with VA's health care system was 
markedly above the satisfaction level for Federal Government services 
as a whole. Results released in December 2004 revealed that inpatients 
at VA medical centers recorded a satisfaction level of 84 out of a 
possible 100 points, while outpatients at VA clinics registered a 
satisfaction score of 83. Both of these are well above the government 
average of 72.
    While VA is excelling compared to its private sector counterparts, 
we are committed to doing even better in the future. The results of a 
recent study conducted by the RAND Corporation revealed that patients 
in VA's health care system were more likely to receive recommended care 
than private-sector patients. Quality of care was better for VA 
patients on all measures except acute care, for which care was similar 
for both patient groups. RAND researchers examined the medical records 
of nearly 600 VA patients and about 1,000 non-VA patients with similar 
health problems. They compared the treatment received by both groups to 
well-established standards for medical care for 26 conditions. They 
found that 67 percent of VA patients received care that met the latest 
standards of the health care profession compared with 51 percent of 
non-VA patients. For preventive care, such as vaccination, cancer 
screening, and early disease detection and treatment, 64 percent of VA 
patients received the appropriate care compared to only 44 percent in 
the private sector. The RAND researchers attributed the difference in 
patient care to technological innovations, such as VA's computerized 
patient records, and to performance measurement policies holding top 
managers accountable for standards in preventive care and the treatment 
of long-term conditions.
    As another means by which to ensure sufficient resources are 
available to address the health care needs of those veterans who count 
on us the most, VA is proposing to revise the eligibility criteria for 
long-term care services to focus on the following groups of veterans:
  --those injured or disabled while on active duty, including veterans 
        who served in Operation Enduring Freedom and Operation Iraqi 
        Freedom
  --those catastrophically disabled
  --patients requiring short-term care subsequent to a hospital stay
  --those needing hospice or respite care.
    These eligibility criteria would be applied to VA-sponsored long-
term care services, including VA, community, and State nursing homes. 
This long-term care strategy will save approximately $496 million that 
will be redirected toward meeting the health care needs of veterans 
with service-connected disabilities, those with lower incomes, and 
veterans with special health care needs.
    In 2006 the Department will continue to expand access to non-
institutional long-term care services to all enrolled veterans with an 
emphasis on community-based and in-home care. In many cases this 
approach allows VA to provide these services to veterans where they 
live and to care for them in the comfort and familiar setting of their 
home surrounded by their family. During 2006 VA will increase the 
number of patients receiving non-institutional long-term care, as 
measured by the average daily census, to about 35,500. This total is 
over 50 percent above the number of patients receiving this type of 
care in 2001. Funding for non-institutional long-term care in 2006 will 
be about 67 percent higher than the resource level devoted to this type 
of health care service in 2001.
    VA's 2006 medical care request includes $1.2 billion ($100 million 
over the 2005 enacted level) to support the increasing workload 
associated with the purchase and repair of prosthetics and sensory aids 
to improve veterans' quality of life. VA is already providing 
prosthetics and sensory aids to many military personnel who served in 
Operation Enduring Freedom and Operation Iraqi Freedom and the 
Department will continue to provide them as needed.
    The President's 2006 budget includes $2.2 billion ($100 million 
over the 2005 level) to continue our effort to improve access to mental 
health services across the country. These funds will help ensure VA 
provides standardized and equitable access throughout the Nation to a 
full continuum of care for veterans with mental health disorders. The 
Department will place particular emphasis on providing care to those 
suffering from post-traumatic stress disorder as a result of their 
service in Operation Enduring Freedom and Operation Iraqi Freedom.
    We have included a management efficiency rate of 2 percent which 
will yield about $600 million in 2006. We continue to monitor and 
emphasize the need for performance that results in minimizing unit 
costs where possible, and eliminating inefficiency in the provision of 
quality health care. To that end, we have included within this savings 
target, $150 million that will be achieved through implementation of 
improved contracting practices with medical schools and other VA 
affiliates for scarce medical specialties. This is a long-standing 
issue for which the Department is aggressively implementing management 
changes to ensure fair pricing for the services provided by our 
affiliates.
    As a result of continual improvements in our medical collections 
processes and the policy changes presented in this budget request, we 
expect to collect about $2.6 billion in 2006 that will substantially 
supplement the resources available from appropriated sources. This 
figure is $635 million (or 32.5 percent) above the 2005 estimate, with 
two-thirds of the increase due to the two important legislative 
proposals (the $250 enrollment fee and the increase in pharmacy co-
payments), and is more than 48 percent higher than the 2004 collections 
total. VA has an expanded revenue improvement strategy that focuses on 
modeling industry best performance by establishing industry-based 
performance and operational metrics, developing technological 
enhancements, and integrating industry-proven business approaches, 
including the establishment of centralized revenue operation centers. 
There are two electronic data initiatives underway that will add 
efficiencies to the billing and collections processes. The electronic 
and 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 this 
electronic data exchange. We are pursuing enhancements which will 
provide additional insurance information stored by other government 
agencies. Our second initiative will result in electronic outpatient 
pharmacy claims processing to provide real-time claims adjudication.
        capital asset realignment for enhanced services (cares)
    The President's budget request includes $750 million in 2006 to 
continue the CARES program that renovates and modernizes VA's health 
care infrastructure and provides greater access to higher quality care 
for more veterans, closer to where they live. About $50 million of this 
total relates to the sale of assets and enhanced use proceeds of the 
Lakeside hospital in Chicago. The budget request provides a 3-year 
(2004-2006) investment total of $2.15 billion committed to this 
historic transformation of our health care system. These resources will 
be used to address our prioritized list of major capital investments. 
The proposed projects for 2006 will advance the CARES program by 
providing construction funding for five projects for which design work 
has already started, as well as two additional projects to be initiated 
in 2006. All of these capital projects support the recommendations 
included in the CARES Decision report. About half of the CARES funding 
requested for 2006 will be devoted to three major construction 
projects:
  --Las Vegas, Nevada, New Medical Facility--$199 million to complete 
        phase two construction, providing up to 90 inpatient beds, a 
        120-bed nursing home care unit, ambulatory care center, and 
        administrative and support functions, all of which will expand 
        capacity and increase the scope of health care services 
        available; VA is working with DOD to ensure mutual needs are 
        met
  --Cleveland, Ohio, Cleveland-Brecksville Consolidation--$87.3 million 
        to complete phase two construction; this project will 
        consolidate and co-locate all clinical and administrative 
        functions of a two-division medical center at the Wade Park VA 
        Medical Center, leading to annual cost savings of more than $23 
        million and enhancing the quality of care
  --Pittsburgh, Pennsylvania, Consolidation of Campuses--$82.5 million 
        to complete phase two construction; this project will 
        consolidate a three-division health care delivery system into 
        two divisions which will improve patient care by providing a 
        state-of-the-art health care environment and reducing operating 
        expenses.
    Our capital investment planning process and methodology involve a 
Department-wide approach for the use of capital funds and ensure all 
major investments are based upon sound economic principles and are 
fully linked to strategic planning, budget, and performance measures 
and targets. All CARES projects have been reviewed using a consistent 
set of evaluation criteria that address service delivery enhancements, 
safeguarding assets, support of special emphasis programs and services, 
capital portfolio goals, alignment with the President's Management 
Agenda, and financial priorities.

                    MEDICAL AND PROSTHETIC RESEARCH

    The President's 2006 budget includes $786 million to support VA's 
medical and prosthetic research program. This resource level will fund 
nearly 2,700 high-priority research projects to expand knowledge in 
areas critical to veterans' health care needs, most notably research in 
the areas of aging, acute and traumatic injury, the effects of military 
and environmental exposures, mental illness, substance abuse, cancer, 
and heart disease.
    The requested level of 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:
  --development of an artificial nerve system that enables a patient 
        with upper-limb paralysis to grasp objects
  --creation of a new collaborative model for treating depression in 
        older adults, the application of which potentially saves lives, 
        reduces patients' level of pain, and improves their overall 
        functioning
  --the finding that proper intake of cereal fiber and vitamin D are 
        among the best ways to prevent serious colon polyps that may 
        lead to colorectal cancer
  --development of an oral drug that halts the deadly action of the 
        smallpox virus.
    In addition to VA appropriations, VA researchers compete and 
receive funds from other Federal and non-Federal sources. Funding from 
external sources is expected to continue to increase in 2006. Through a 
combination of VA resources and funds from outside sources, the total 
research budget in 2006 will be nearly $1.7 billion.

                           VETERANS' BENEFITS

    The Department's 2006 budget request includes $37.4 billion for the 
entitlement costs mainly associated with all benefits administered by 
the Veterans Benefits Administration (VBA). This total includes an 
additional $812 million for disability compensation payments to 
veterans and their survivors for disabilities or diseases incurred or 
aggravated while on active duty. Recipients of these compensation 
benefits are projected to increase to 3 million in 2006 (2.7 million 
veterans and 0.3 million survivors, or 400,000 more than when the 
President came to office).
    The President's budget request includes $1.26 billion for the 
management of the following benefits programs--disability compensation; 
pension; education; vocational rehabilitation and employment; housing; 
and life insurance. This is $77 million, or 6.6 percent, over the 2005 
level. As a result of the enactment of the Consolidated Appropriations 
Act, 2005 (Public Law 108-447), an additional $125 million will be made 
available to VBA (through a transfer of funds from medical care) for 
disability benefits claims processing. Of this total, $75 million will 
be used during 2005 and the remaining $50 million will be used in 2006. 
The overwhelming majority of these funds will be used to address the 
increased volume of compensation claims from both separating service 
members and older veterans who had not previously submitted claims.
    As a Presidential initiative, improving the timeliness and accuracy 
of claims processing remains the Department's top priority associated 
with our benefits programs. Last year the timeliness of our 
compensation and pension claims processing improved by 9 percent (from 
182 days in 2003 to 166 days in 2004). While we were successful in 
reducing the time it takes to process claims for compensation and 
pension benefits, we were not able to improve timeliness as much as we 
had projected at the beginning of the year. Entering 2004, VA was well 
positioned to meet our performance goals pertaining to the timeliness 
of processing claims. However, a September 2003 decision by the Federal 
Circuit Court in the case of the Paralyzed Veterans of America et. al. 
v. the Secretary of Veterans Affairs required VA to keep veterans' 
claims open for 1 year before making a decision to deny a claim. As a 
result, decisions on over 62,000 claims were deferred, many for as much 
as 90 days. While the President signed correcting legislation in 
December 2003, the impact of the court decision in the early portion of 
2004 was substantial, as the number of pending claims had grown 
dramatically. VA made significant progress during the last half of the 
year, but we were not able to fully overcome the negative effects from 
this court decision on our claims processing timeliness.
    We have had to revise our claims processing timeliness goals for 
the next 2 years due, in part, to the lingering effect of the Federal 
Circuit Court decision. Also having an impact on the timeliness of 
processing is the increasing volume of disability claims and the 
complexity of the claims. In addition, VA will continue to face the 
retirement of staff members highly experienced in processing claims. 
While we have established a sound succession plan, the new employees we 
are hiring will require both extensive training and substantial claims 
processing experience in order for them to reach the productivity level 
of those leaving the Department.
    During 2005 we expect to reduce the average number of days to 
process compensation and pension claims to 145 days, an improvement of 
12.7 percent from the 2004 performance level. With the resources 
requested in the 2006 budget, we will be able to maintain this improved 
timeliness in support of this Presidential initiative. In addition, we 
will reduce the number of pending claims for compensation and pension 
benefits to 283,000 by the end of 2006, a reduction of 12 percent from 
the total at the close of 2004.
    We will increase our efforts to ensure the consistency of our 
disability evaluations from one regional office to another. VA has made 
significant improvements in both the accuracy and consistency of its 
benefit entitlement decisions due to increased quality assurance 
efforts and more focused training of claims adjudicators. However, more 
must be done to ensure the Department meets its commitment to treating 
every veteran's claim fairly and equitably regardless of locality. A 
system-wide review of the rating program for disability compensation is 
underway. In addition to this independent review, the Veterans' 
Disability Benefits Commission has been established to carry out a 
study of the statutory benefits that are provided to compensate and 
assist veterans and their survivors for disabilities and deaths 
attributable to military service. This commission is expected to 
examine and make recommendations concerning the appropriateness of 
these statutory benefits, the appropriateness of the level of the 
benefits, and the appropriate standard or standards for determining 
whether a disability or death of a veteran should be compensated. VA's 
efforts to improve the consistency of disability evaluations are 
supported in the 2006 budget by a request for $1.2 million for skills 
certification testing and $2.6 million for continued development of 
computer-based training tools. These initiatives will complement other 
ongoing efforts supported by our budget that address the issue of 
consistency and accuracy. Among these are:
  --revision of all of the regulations that govern the compensation and 
        pension programs in plain language to ensure that the rules can 
        be applied consistently and fairly
  --in-depth data analysis of benefit decisions to identify potential 
        areas of inconsistency, increasingly possible with our new 
        information technology applications and tools
  --centralized processing of appeals remanded by the Board of 
        Veterans' Appeals, and ongoing quality reviews of appealed 
        claims decisions.
    An important and successful component of VA's vision for providing 
a seamless transition for service members separating from active duty 
is the Benefits Delivery at Discharge (BDD) program. The BDD program 
enables active duty 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 dates. Transitioning service members benefit 
greatly from the BDD program, which has been a vital part of the 
Department's strategy for improving timeliness and accuracy of 
disability compensation claims processing.
    We believe the BDD program provides opportunities to not only 
benefit transitioning service members through timely and accurate 
claims processing, but also to bring new processing improvements and 
efficiencies to the system through consolidation of claims evaluation 
activities. An initiative is currently underway to consolidate 
disability compensation rating and authorization actions on all BDD 
claims to two sites nationwide. VA staff will continue work with 
transitioning service members at military bases to establish claims and 
arrange for timely medical exams, thereby retaining these successful 
aspects of the BDD program.
    In support of the education program, the 2006 budget proposes $7.8 
million for continued development and implementation of the Education 
Expert System. The requested funds will be used to first transition 
education processing to VBA's corporate environment, followed by the 
development and deployment of a processing system that receives 
application and enrollment information electronically and processes 
that information in the new corporate environment without human 
intervention. While it will be a number of years before this system is 
fully deployed, it will ultimately lead to substantial improvements in 
education claims processing timeliness.
    In April 2004 the Department's Vocational Rehabilitation and 
Employment Task Force released its report containing more than 100 
recommendations on how to improve service to disabled veterans. The 
focus of the report was on development and implementation of a new, 
integrated service delivery system based on an employment-driven 
process. In response to the task force's recommendations, VA is 
including $4.4 million in the 2006 resource request to be used for 
establishing a job resource lab in each regional office. These labs 
will include all of the necessary equipment, supplies, and resource 
materials to aid VA staff and veterans in conducting comprehensive 
analyses of local and national job outlooks, developing job search 
plans, preparing for interviews, developing resumes, and conducting 
thorough job searches. These self-service job resource labs will assist 
veterans in acquiring suitable employment through the use of a 
comprehensive on-line employment preparation and job-seeking tool.
    In order to make the delivery of VA benefits and services more 
convenient for veterans and more efficient for the Department, we are 
requesting $4.4 million for the collocation and relocation of some 
regional offices. This effort may involve collocations using enhanced-
use authority, which entails an agreement with a private developer to 
construct a facility on Department-owned grounds and then leasing all 
or part of it back to VA. At the end of these long-term lease 
agreements, the land and all improvements revert to VA ownership.

                                 BURIAL

    The President's 2006 budget includes $290 million in discretionary 
funding for VA's burial program, which includes operating and 
maintenance expenses for the National Cemetery Administration, capital 
programs, the administration of mandatory burial benefits, and the 
State Cemetery Grants program. This total is nearly $17 million, or 6.4 
percent, over the 2005 enacted level.
    The 2006 request includes $167 million in administrative funding 
for VA's burial program, an increase of $7.3 million (or 4.6 percent) 
from the 2005 enacted level. Within this total, $156 million is for the 
operations and maintenance of VA's national cemeteries and $11 million 
is for the administrative processing of claims for burial benefits. The 
additional funding will be used to meet the growing workload at 
existing cemeteries, primarily by increasing staffing and contract 
maintenance. The growth in workload is a direct result of the aging of 
the veteran population. The annual number of veteran deaths continues 
to rise and VA projects an increase in interments of about 4 percent a 
year for the next several years.
    Our budget request for the burial program includes $90 million for 
construction projects. Of this total, $65 million is for major projects 
and $25 million is for minor projects. Consistent with the provisions 
of the National Cemetery Expansion Act of 2003, we are requesting $41 
million in major construction funding for land acquisition for six new 
national cemeteries in the areas of Bakersfield, California; 
Birmingham, Alabama; Columbia-Greenville, South Carolina; Jacksonville, 
Florida; Sarasota, Florida; and southeastern Pennsylvania. The 2006 
request also includes funding to develop an annex for the expansion of 
Fort Rosecrans National Cemetery in Miramar, California. In addition, 
this budget provides $32 million for the State Cemetery Grants program.
    Our resource investments in the burial program produce positive 
results in service delivery to veterans and their families. We will 
expand access by increasing the percent of veterans served by a burial 
option within 75 miles of their residence to 82.2 percent in 2006, 
which is 6.9 percentage points above the 2004 figure. While our 2004 
performance was extremely high in several key areas, we will continue 
to improve our performance in 2006. We have established the following 
performance goals for 2006:
  --increase to 96 percent (from 94 percent in 2004) those who rate the 
        quality of service provided by the national cemeteries as 
        excellent
  --increase to 99 percent (from 98 percent in 2004) those who rate 
        national cemetery appearance as excellent
  --increase to 89 percent (from 87 percent in 2004) the proportion of 
        graves in national cemeteries marked within 60 days of 
        interment.
    These performance improvements will further enhance the outstanding 
reputation of VA's National Cemetery Administration which, in 2004, 
earned the highest rating ever achieved by a public or private 
organization in the American Customer Satisfaction Index (ACSI). These 
results demonstrated that the Department's national cemeteries produced 
a customer satisfaction rating of 95 out of a possible 100 points. This 
is two points higher than the last survey conducted in 2001 when VA's 
national cemeteries also ranked number one among Federal agencies in 
customer satisfaction.

                        MANAGEMENT IMPROVEMENTS

    VA continues to aggressively pursue a variety of initiatives aimed 
at ensuring we apply sound business principles to all of the 
Department's operations. Two of our most successful management 
improvement efforts during the last year focus on the strategic 
management of human capital and capital asset management.
    As an integral component of our succession planning activities, we 
released a state-of-the-art ``VA Recruitment'' CD-ROM in September 2004 
promoting the Department as an employer of choice. We distributed this 
to colleges and universities, military transition centers, veterans 
organizations, and VA vocational rehabilitation centers, offices, and 
medical centers. This initiative creates a corporate recruitment 
marketing approach that will give VA a competitive edge in attracting 
highly-qualified career applicants. The CD-ROM uses graphics and video 
streaming to present a wide spectrum of career opportunities and 
describes VA's goals and services, occupations, and the benefits of 
working for the Department. We will continue to focus on creative 
marketing initiatives and outreach to prospective applicants.
    VA has also launched a Capital Asset Management System (CAMS) which 
is an integrated, Department-wide system that enables us to establish, 
analyze, monitor, and manage our portfolio of diverse capital assets 
through their entire lifecycle from formulation through disposal. CAMS 
provides a strategic view of existing, in-process, and proposed asset 
investments across all VA program offices and capital asset types. All 
offices now use this shared system to collect and monitor real property 
and capital asset information. In addition, VA has been approached by 
numerous agencies, including the Departments of Defense, Homeland 
Security, Commerce, and Interior to explore the replication of CAMS in 
their organizations.
    VA's progress in this area places it in the forefront of other 
Federal agencies in terms of its ability to meet the real property 
performance measures and guidelines that were recently finalized by the 
newly created Federal Real Property Council.
    We are currently in the process of fully evaluating all of the 
information gathered during the operational tests of the Core Financial 
and Logistics System (CoreFLS) conducted last year. This year we will 
complete a comprehensive analysis of the product and any existing 
configuration gaps, examine lessons learned from the pilot tests, and 
reevaluate our business processes. This will provide us with the 
information needed to refine the system as well as develop improved 
change management, training, and implementation procedures that are 
critical to successful deployment. In anticipation of an enhanced 
financial management system moving forward to full deployment at VA 
facilities nationwide, the Department's 2006 budget includes $70.1 
million for this project.
    In support of one of the primary electronic government initiatives 
for improving internal efficiencies and effectiveness, the Department's 
2006 budget provides $8 million to continue the migration of VA's 
payroll services to the Defense Finance and Accounting Service (DFAS). 
This initiative will consolidate 26 Federal payroll systems down to 2 
Federal payroll provider partnerships. VA is working with DFAS on all 
required tasks to ensure successful migration.

                                CLOSING

    In summary, Madam Chairman, our 2006 budget request of $70.8 
billion will provide the resources necessary for VA to:
  --provide timely, high-quality health care to more than 5.2 million 
        patients; 78 percent of all veteran patients will be veterans 
        with service-connected disabilities, those with lower incomes, 
        or veterans with special health care needs
  --maintain the 2005 performance level of 145 days, on average, to 
        process compensation and pension claims
  --increase access to our burial program by ensuring that more than 82 
        percent of veterans will be served by a burial option 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.
    That concludes my formal remarks. My staff and I will be pleased to 
answer any questions.

    Senator Hutchison. Thank you very much, Mr. Secretary.
    I would like to have a 5-minute round. Each of us can have 
one round and then we will definitely have a second and maybe a 
third.
    First of all, Mr. Secretary, I certainly agree with the 
Veterans Administration's principle that we should focus on 
care for priority 1 through 6 veterans. I think everyone would 
agree that that should be our highest priority. Do you agree 
that we must have full funding for those priority 1 through 6 
veterans, whatever else happens?
    Secretary Nicholson. Yes, Madam Chairman. This budget 
reflects that. We have a mandate to take care of those veterans 
who need us the most, and that is those veterans who have been 
injured as a result of their service or become ill, including 
mental illness as a result of that service, those that are down 
and out, the poor, indigent, and those in need of unique, 
special care, and that is those categories.
    Senator Hutchison. This is my question. If the policy 
provisions regarding 7's and 8's with the added enrollment fees 
and co-payments were not enacted, would there still be full 
funding in this budget for priorities 1 through 6?
    Secretary Nicholson. Yes, Madam Chairman, there would. We 
would still be able to take care of those priorities.
    Senator Hutchison. Thank you.

                        THIRD PARTY COLLECTIONS

    Along that line, I understand that you have the authority 
to collect payments from private health insurance for the cost 
of treating veterans' non-service-connected disabilities. So 
when we are looking at the priority 7's and 8's, which have 
become really the growth area for the medical care for 
veterans, according to the GAO your present collection rate is 
only 41 percent and your fiscal year 2006 budget submission 
sets a target of only 41 percent. I wondered why this 
collection target seems low and if you are looking at trying to 
improve that collection rate and perhaps a different way to get 
more income from the 7's and 8's to make sure that we are doing 
the best we can with what we have.
    Secretary Nicholson. Let me respond in part, Madam 
Chairman, and then I am going to ask Dr. Perlin to comment. It 
is 6 weeks today that I have been Secretary, so there are just 
one or two things that I do not know yet.
    Senator Hutchison. We understand totally and we are not 
expecting perfection until next year.
    Secretary Nicholson. It is a very important question. You 
will note that in this budget proposal it shows collections 
being up by 15 percent over last year. I will say that I think 
the VA has shown a commendable transformation in its culture, 
going from virtually no collections, a no-collection culture 
habit mandate, to in a very short time, collecting a 
significant amount of money. But it is still a work in process. 
It is very important.
    I will ask Dr. Perlin if he would comment further.
    Senator Hutchison. Dr. Perlin.
    Dr. Perlin. Thank you, Madam Chairman. The Secretary is 
absolutely right in terms of our Veterans Health Administration 
learning how to collect, and the progress has been substantial. 
In fact, in 2001, our collections were on the order of $700 
million. Today they will approach in the 2006 budget on the 
order of $2.1 billion. That budget builds in an 11 percent 
increase, or collections of $211 million additional.
    I think the 41 percent is important because we need to keep 
moving up, but I would note that it is unadjusted for Medicare. 
As you know, we cannot collect for Medicare, but the figure 
actually reflects the funds that we are not able to collect. So 
actually it is artificially deflated. We do benchmark against 
private sector, and we have been using gross days revenue 
outstanding, and I am pleased to say that we are closing in on 
setting aggressive targets. But your point is well taken. We 
will continue to push the aggressive collections.
    [The information follows:]

    The Department of Veterans Affairs (VA) is not allowed (by law) to 
bill and collect from Medicare. The unadjusted billing to collection 
ratio of 41 percent reflects the large number of over-65, Medicare-
eligible population that VA serves which cannot be billed or collected. 
VA maintains an adjusted billing to collection ratio which accounts for 
the Medicare-eligible population and this ratio has been in the 75 
percent range for fiscal year 2004 and fiscal year 2005 and provides a 
more realistic measure of performance.
    To improve the collections to billings Medicare-adjusted ratio, VA 
is taking the following actions:
  --Metric Calculation.--Collections to billings calculation attempts 
        to quantify net billings by projecting net amounts due from 
        third parties and secondary payors. The current calculation 
        utilizes national data and does not fully reflect VISN 
        differences in population compositions (veterans older and 
        younger than 65) and Health Maintenance Organization (HMO) 
        penetration that impacts this performance metric.
    --Action.--The Veterans Health Administration (VHA) is working to 
            enhance the metric calculation for fiscal year 2006 to 
            incorporate population variations and HMO penetration 
            differences that could impact overall results. Also, full 
            implementation of the e-MRA (Medicare-equivalent remittance 
            advice) system throughout VHA will improve the specificity 
            of predicting these net realizable amounts.
  --Denial-Management Tracking System.--The private sector approaches 
        aggressively the identification, tracking, and resolution of 
        third-party denials. VHA is presently establishing several 
        best-practice denial-management initiatives at the Veterans 
        Integrated Service Network (VISN) level.
    --Action.--VHA is working to compile the best practices from the 
            VISN pilots and roll out a comprehensive national denial-
            management strategy in the upcoming months.
  --Formalized Managed-Care Contracts.--The private sector has the 
        ability to project net billings with great specificity due to 
        established contract rates with managed-care payors, which can 
        easily be loaded into their systems to track deviations due to 
        over- and under-payments.
    --Action.--VHA has established a National Payor Compliance Office 
            (NPCO) to assist VISNs in addressing negotiations 
            strategically with managed-care payors. As this process 
            matures, VHA will be able to track expected reimbursements 
            better, similar to the private sector.
  --Enhanced Development of Revenue-Cycle Productivity Tools.--The 
        private sector has invested considerable time and effort to 
        ensure that the necessary staff and resources are dedicated to 
        the revenue cycle. VHA actively monitors monthly performance of 
        its facilities though use of a web-based system (POWER) that 
        reports performance using a stop-light color-coded approach. 
        This system is considered a best practice when compared to 
        private-industry standards. The VISNs have also adopted 
        monitoring tools to measure productivity and to ensure that 
        appropriate resources are dedicated to the revenue-cycle 
        collection process.
    --Action.--VHA is taking a leadership role to extend nationally the 
            best practices identified at the VISN level to improve 
            overall effectiveness in the collection process.

    Senator Hutchison. I guess that would be my point. Would 
you continue to look for ways where there is an outside 
insurer, a private insurer, that we would make as many of those 
collections as absolutely possible to offset costs?
    My time is up, and I would like to give my colleagues a 
chance to have a first round of questions before this vote 
starts. Senator Feinstein.
    Senator Feinstein. Thanks very much, Madam Chairman. I 
appreciate that.

               GRANTS FOR STATE EXTENDED CARE FACILITIES

    Mr. Nicholson, the President's fiscal year 2006 budget 
request for the VA suspends grants for the State extended care 
facilities. Could you explain to us why it is necessary to 
impose a 1-year moratorium on grants for construction of long-
term extended care facilities when there is such a need for VA 
homes throughout this Nation? How would this affect the current 
priorities list for funding under this program? Do you 
anticipate altering this list in fiscal year 2007?
    California, my State, with three homes and 2.3 million 
veterans is one of two States classified under great need in 
regard to home funding. The State plans to request $125 million 
in fiscal year 2007 under this grant program to fund its 
largest project to date which is the greater Los Angeles, 
Ventura County home which includes three separate facilities. 
How would the 1-year moratorium impact funding for this 
project?
    So there are essentially three questions in one. If you 
want me to go one by one, I will.
    Secretary Nicholson. Thank you, Senator. It is an important 
area. Let me address the suspension of the grants. In this 
budget, I think it would reflect a reduction of just over $100 
million for this coming fiscal year 2006. I am going to ask Dr. 
Perlin if he would address the specifics as to California.
    Dr. Perlin. Thank you, Senator. Let me start with the piece 
of the question you asked about the 2005 commitments. The 
commitments are proceeding as was planned. I would have to get 
back to you with the specific information on California.
    Senator Feinstein. And how will this affect 2007?
    Dr. Perlin. I think I would be unable to speculate in terms 
of the future.
    Senator Feinstein. All right. So what you are telling me 
then is you do not know about California. You do not know about 
the future, and it is a 1-year moratorium essentially.
    Could you tell me what the rationale for a 1-year 
moratorium is when the needs are so great?
    [The information follows:]

    The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of 
extended care facilities. This will permit VA to complete an 
assessment of its nationwide institutional long-term care 
infrastructure and ensure that future construction aligns with 
the areas of greatest projected need. Grants that have already 
been awarded will not be affected by the 1-year moratorium.
    VA has already committed to all planned fiscal year 2005 
projects on the current Priority List. The States are currently 
completing the requirements for fiscal year 2005 grant awards. 
VA has committed the maximum fiscal year 2005 appropriations 
and the remaining fiscal year 2004 carryover funds to these 
projects.
    The Priority List is revised annually, as of August 15th. 
All new and existing pending projects are ranked and included 
in the annual list. Once approved by the Secretary, the list is 
used to identify ranked projects and commit funding for 
projects for that fiscal year award or to finalize 
conditionally approved projects. For fiscal year 2007, VA would 
follow the same procedures and commit funds available at that 
time to the projects in rank order. VA cannot predict at this 
time how the California project will be ranked in fiscal year 
2007 or whether there will be sufficient appropriations to fund 
it.

    Secretary Nicholson. Well, I can address the issue in 
brief, Senator. If you take a look at the VA as a whole, it has 
gone through a major transformation from being a hospital-
centered medical care provider to a clinical-centered provider 
and more outreach and moving out more to where the veterans 
are.
    The same philosophy is operating in extended care. We are 
finding that it is very often both more efficient and effective 
to treat institutional care people or what used to be 
institutionalized people in a non-institutionalized setting 
using the new tools that are available of telemedicine, 
telehealth, social workers, people being allowed to remain in 
their homes or closer to their homes.
    Senator Feinstein. I think I see where you are going, and 
correct me if I am wrong. Is this then an effort to begin to 
phase out long-term care for veterans and sort of go to an 
outpatient treatment process?
    Secretary Nicholson. Well, I think there are certainly some 
people that will need long-term care. There are some people who 
are not candidates for the new capabilities that we have for 
extended non-institutionalized care. So no, I do not think it 
is a path toward the end of them, but it is a trend and one 
that is finding a lot of satisfaction among the people being 
treated that remain at home. They have a social worker come 
there and provide them with care and bathing. With the 
electronics that we have now, we can take blood pressure, get 
their blood sugar, and all that on-line daily with a medical 
mentor talking to them in their home. If they need care, we can 
then move them.
    Senator Feinstein. Let me just, if I might, say a word on 
behalf of the 2.2 million veterans in my State. California is a 
very high cost-of-living State. The extended care facilities 
are very expensive for the most part, particularly if an 
individual does not have Medicaid or Medicare. I guess what I 
hope is that this is just not an effort to absolve us of the 
Federal responsibility to take care of veterans in later years 
who cannot take care of themselves and push it onto the State 
because I think the veterans are not then going to be well 
cared for. So I will leave you with that.
    Senator Craig.
    Senator Craig. Well, thank you very much. I think we are 
going to run out of time rapidly here, Senator Feinstein, as it 
relates to a vote that is now underway.
    Mr. Secretary, from my initial visit with you and our 
initial hearing on your budget, we have proposed a variety of 
changes, somewhat different from what you proposed, which we 
think will offer a little more flexibility in funding and still 
meet all of the needs that you have projected are out there and 
the savings that you have projected are out there.

                 PER DIEM PAYMENT POLICY TO STATE HOMES

    There are many that concern me and I think concern all of 
us, but the State home program, by most accounts, has been a 
very successful partnership between the Federal and State 
governments for the care of aging veterans, and yet VA proposed 
to modify this past per diem payment policy, a change in policy 
the VA says would reduce the number of State beds by more than 
50 percent. We have, obviously, disagreed on that and are 
proposing not to do so.
    Why does VA want the States to reduce the number of State 
home beds? I guess that would be the first question. Even if VA 
does not want to provide institutional care for the non-
service-connected, why does it want to discourage States from 
attempting to meet that need?
    Secretary Nicholson. Well, one of the things operating 
here, Senator Craig, is a goal of getting in uniform 
conformance with the law from the VA's perspective, which is 
that those people eligible for long-term institutional care are 
those that are 70 percent disabled or more. The goal, as I have 
stated to Senator Feinstein, of--you know, realizing the 
benefits of the care more in the community where the people 
are.
    I am not sure that the VA is desirous of the States getting 
out of the long-term institutional care.
    Senator Craig. I guess then the question, does VA believe 
that it has the legal authority to simply stop paying per diem 
payments to the States for the care of veterans VA does not 
define as a priority?
    Secretary Nicholson. No, I do not think so. I think there 
would be a legislative piece needed. I could also say that this 
budget does not contemplate that a veteran that is in a 
facility who really needs to be there would be moved from that 
bed.
    Senator Craig [presiding]. Well, I am going to run out of 
time, and I need to go vote. So I am going to put the committee 
at recess until the chairman returns. So with that, the 
committee will stand in recess.
    Thank you all very much for being here today.
    Senator Hutchison [presiding]. I am going to call the 
committee back to order. We will try to finish the questions.

              TRANSITIONAL PHARMACY BENEFIT PILOT PROGRAM

    Let me ask you about the transitional pharmacy benefit 
pilot program. Last year the Department implemented the 
transitional pharmacy benefit pilot program to allow veterans 
on the waiting list to have their privately written 
prescriptions filled at the VA without seeing a VA physician. I 
think this makes great sense, and tying up VA doctors just to 
write a prescription when someone can get one outside probably 
is not the best use of their time.
    I understand the pilot did achieve its goal of improving 
access to VA prescription drugs, but there were implementation 
errors reported by the Inspector General. I am concerned that 
maybe the errors did not give an accurate assessment of whether 
this type of program should be continued. So I wanted to ask 
you what is the status of that pilot program and is it 
something that you are going to implement as a policy?
    Secretary Nicholson. Madam Chairman, this budget does not 
contemplate that. There was that pilot program and it 
encompassed 48,000 people. What was most notable I think about 
that was that approximately half of those prescriptions that 
were presented for filling by the VA pharmacies were requesting 
pharmaceuticals that did not meet the formulary inventory of 
the VA. So it caused difficulties for people on both sides of 
that transaction, as well as the need then for VA functionaries 
who were very dutiful to call the prescriber, if they could 
find them, to see if they could prescribe a comparable for the 
patient that was in our formulary holding.
    I will ask Dr. Perlin, who was there and has been through 
that test, if he would like to elaborate.
    Dr. Perlin. Madam Chairman, thank you for your interest in 
this area. I know it has been positive that the substitution of 
the ability to fill pharmaceuticals might relieve some of the 
waiting when, in fact, a patient wants just a prescription.
    By way of disclosure, I would need to indicate that we have 
learned from the transition pharmacy benefit a few facts. As 
Secretary Nicholson said, almost half of the prescriptions were 
off of our formulary. Even with negotiation, it was still a 
much, much higher rate of non-formulary, which meant that we 
did not achieve some of the efficiencies in terms of cost of 
the prescription that we would in our normal course of 
practice. So it is something that I think deserves further 
consideration, and I would want to consult with the Secretary 
in terms of his future thoughts on the topic.
    Senator Hutchison. Well, I understand the point that was 
being made that perhaps it ends up not being a good tradeoff. 
You save the doctor's time, but you make it harder for the 
pharmacies and maybe more expensive. So I would like for you to 
look at it again just to see if it is worth continuing a pilot 
or if you determine that the good does not outweigh the bad. It 
just seemed like a good concept.
    Secretary Nicholson. So noted, Madam Chairman. It is 
something that we have discussed quite a bit actually in the 
few weeks that I have been there because on its face it does 
seem to have a lot of appeal, especially some of those 
prescribers have been Medicare paid doctors so the public is 
already paying for that service.

                      MEDICAL PROSTHETIC RESEARCH

    Senator Hutchison. Let me ask you a question on the 
research budget. The budget request proposes a $9.3 million cut 
to the medical and prosthetic research account. But I wanted to 
ask you if you feel that that is going to be enough.
    Further, Secretary Principi had made a commitment of $15 
million a year for the Gulf War Syndrome research for a 4-year 
period for a total of $60 million. That is something that is 
very important to me because I think our veterans got very 
short-changed when they came home with these symptoms, that in 
a previous administration, were sort of swept aside as, well, 
it was post-traumatic stress syndrome type thing, and it turns 
out that there is a causal connection between brain damage and 
exposure to chemicals. We, through the Veterans Administration 
under Secretary Principi, were on the road to making that a 
larger study, with the long-term goal of, of course, getting 
antidotes for that or trying to determine if someone is 
predisposed because of a brain deficiency--an enzyme 
deficiency, that is--to not send someone to an area where there 
might be chemical weapons.
    My question is does this cut in the budget give you enough 
funding for your Department to do all of the things that are a 
priority and is Gulf War Syndrome research still going to get 
the full $60 million commitment, in $15 million increments, 
that Secretary Principi had said he would do?
    Secretary Nicholson. Madam Chairman, this budget is 
$1,653,000,000 for research in total. We are asking for an 
appropriation of $786 million. That is sufficient to underwrite 
something like 2,700 different research projects.
    As to your question, is there sufficient funding in here 
approved for the current year Gulf War illness research of $15 
million, the answer is yes.
    We have had some discussion about the $60 million, the 4-
year program, and counsel to me is that it is not a hard 
commitment. That has been discussed. What I will say to you is 
that the $15 million is absolutely in here, and the subsequent 
years, as I get more familiar with it, I will take a very 
serious look at this. But we will probably be back to you in 
discussion with this.
    I think the answer to your question overall is that there 
is enough in this to do the research that we think should be 
done.
    There is a $100 million in this budget for prosthetics, and 
there is an increase of $100 million for PTSD research and 
application.
    Senator Hutchison. Could you clarify? You are saying that 
the $60 million over the 4 years is not a commitment. So are 
you saying that $15 million is in for this year but you are not 
making a commitment for future years?
    Secretary Nicholson. Well, I am going to first ask the 
general counsel if he would address that from his perspective, 
and then I will respond.
    Mr. McClain. Madam Chairman, we do have $15 million in 
additional research funding for the Gulf War illnesses. That is 
for this particular year in unspecified projects but they will 
go toward Gulf War research. As far as future years, we really 
cannot speculate as to what might come out in future years for 
research dollars, but certainly we have been committed over 
several years now to putting additional resources toward Gulf 
War research.
    Senator Hutchison. Mr. Secretary, do you consider that the 
Gulf War Syndrome is a legitimate area for research?
    Secretary Nicholson. Yes, I do. I know something about 
that. I have been briefed by a team of doctors on that, and I 
think that is a very legitimate area to try to understand. So 
that is not an issue for me, but we have to do it legally.
    I would like to ask Dr. Perlin, if I could, Madam Chairman, 
if he would comment a bit on the current status of the 
research.
    Dr. Perlin. Madam Chairman, this is an absolutely critical 
area. Right now we have 146 separate projects on environmental 
exposures at a cost of about $35 million in the 2006 budget 
proposed.
    In the area of Gulf War illnesses, VA has funded 111 
projects since 1991 and currently there are 48 ongoing. VA's 
commitment to date has been $73 million. The Federal commitment 
has been in excess of $300 million. Of that $15 million, I can 
tell you that right now $5 million have been executed late this 
spring. There is a request for applications to make sure that 
we have the best research in that area.
    I think one of the most promising endeavors this year, 
something that we worked hard with the Research Advisory 
Committee on Gulf War Illnesses to develop is a new center for 
the study of promising treatments for Gulf War illness. While 
we may not have full insight into the mechanisms of what causes 
these unexplained symptoms, we passionately feel the obligation 
to care for these veterans to treat their symptoms. This new 
center promises to help us align our best tools to understand 
what treatments may be promising.
    Senator Hutchison. So you are not in any way saying it is 
not a priority. You will be saying that it is a priority. Is 
that what you are saying?
    Secretary Nicholson. Yes, exactly.

                        DALLAS VA MEDICAL CENTER

    Senator Hutchison. I wanted to talk about a couple of local 
issues. First of all, in November of 2004, your own Department 
ranked the Dallas Veterans Affairs Medical Center the worst VA 
hospital in the country. Of course, that was a revelation to 
many people in the Dallas area. I know improvements have been 
made. I know that the head of that hospital is no longer there. 
But I just wanted to ask you, Mr. Secretary, if you are 
satisfied that the changes being made there are bringing that 
VA hospital up to your standards.
    Secretary Nicholson. Yes. That has been problematic. I 
noted that as soon as I began getting briefed for this job. As 
you noted, some of the key management personnel have been 
replaced. There have been several reviews made of that 
internal. An accrediting association has looked at that. They 
found some deficiencies and have given recommendations to us to 
institute. I am satisfied that those corrective measures are 
underway. We have some good new people in place, but it is 
something that is very important and we are keeping an eye on.
    Senator Hutchison. That is what I was going to follow up 
and ask. Is there a mechanism by which, when you have a 
hospital that gets this low a rating, you would go in and check 
more carefully and more frequently to assure that the changes 
are being implemented?
    Secretary Nicholson. I am going to ask Dr. Perlin to answer 
that.
    Dr. Perlin. Thank you, Mr. Secretary.
    Madam Chairman, absolutely. We are following up with 
objective evidence of improvement. We have the performance 
measurement system throughout the VHA. As our Inspector General 
noted, the performance was not where the citizens of Texas and 
Dallas deserved. That is changing already objectively on the 
basis of data. We can demonstrate that there is significant 
improvement.
    In addition to a new director, Betty Brown, there is also a 
new associate director, Dan Heers, a new chief of staff, a new 
chief nursing executive. And my own calls to individuals down 
there tell me that the progress has been light-speed.
    I would note to you that I plan to make a visit to Dallas 
in April to assure myself that what I am seeing on paper is 
actually represented as the best improvements.
    I think it is important to note that while there have been 
some individuals who have been problematic, that part of my job 
is to encourage the 90 percent of the staff that really go 
above and beyond to give their best for the veterans. So I want 
to make sure that the message is complete, that we sanction and 
improve and hold accountable where we need to, but that we also 
encourage and support those individuals who really do give our 
veterans their best.

                    WACO AND BIG SPRING, TEXAS SITES

    Senator Hutchison. Thank you. I would be very interested, 
after your visit, in hearing what your findings are.
    There are two veterans sites that are in the 18 in the 
CARES plan that are cited as needing more study. One is in 
Waco. I have discussed this with you, Mr. Secretary.
    The Waco facility is a campus. It is a beautiful campus. It 
is under-utilized, that is for sure. The care that it gives is 
excellent. The mental health care, from everything that we 
could tell, did a very solid, good job. But the plan now is for 
there to be a master plan for the Waco facility that is 
supposed to be put together with the city leaders in Waco and 
the consultants from the VA. I just wanted to ask you if we can 
expect that you would continue the commitment to look for a 
master plan for that site so that it can be efficiently used.
    One of the things that I did not quite understand in the 
CARES Commission report is that they closed two smaller clinics 
and recommended that there be a VA clinic built in Waco. It 
just seemed to me that with the facility there being under-
utilized that perhaps having the clinic move to the long-term 
care facility that there might be an added benefit there and be 
the right thing for the veterans in the area as well as for the 
efficient operation that you would be seeking.
    So do you have any status report on that, or can you just 
at least say that we will have the master plan moving forward 
and that the Department will work with the community leaders 
for that plan?
    Secretary Nicholson. Absolutely I can say that, Madam 
Chairman. In fact, I am planning to go to Waco myself hopefully 
in April. I want to go down there and get on the ground and see 
the facilities, not to preempt the process but so that I know 
and have a feeling myself for the physical assets that are 
there. I know that the continued process out of the CARES 
process is underway, and I think that will run its course and 
have great community involvement. We are very committed and 
interested in that.
    Senator Hutchison. Well, I certainly am pleased that you 
are going there. I hope I can join you. So I would like to call 
your office and see if we can do that together.
    Secretary Nicholson. We will try to coordinate.
    Senator Hutchison. There is a second facility at Big 
Spring. It is a hospital that I visited a few months ago. It is 
in a central location which is 40 miles from Midland, 60 miles 
from Odessa, 87 miles from San Angelo, and 110 miles from 
Abilene. The next closest VA hospital is 200 miles from any of 
those locations.
    I had asked Secretary Principi to consider a public/private 
partnership between the Big Spring VA and Scenic Mountain 
Medical Center to increase the services to the veterans in that 
area. It is the area that all of those communities support the 
VA hospital because it is the most centrally located. As you 
know, we have two Air Force bases, one in Abilene and one in 
San Angelo, that feed into that veterans hospital, plus Midland 
and Odessa feeding in. And if you put it in any of the other 
places, it would be much farther from other population centers.
    So I would ask that you also visit that one--it might be a 
good day to go to both of those at the same time--and look at 
the possibilities of, again, making your service more efficient 
but keeping it at the Big Spring facility where you already 
have a major investment.
    Secretary Nicholson. I will try to do that, Madam Chairman. 
I am committed to Waco. I will see if we can make it work at 
Big Spring. I would like to. I can tell you, as you probably 
know, I think the first open forum of that advisory board for 
Big Spring is scheduled to meet, I think, April 7 for the first 
time with our consultant, Price Waterhouse.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Hutchison. Well, I know this is all pretty 
overwhelming and you have only been there a short time. But I 
would look forward to working with you to assure that the 
community has its input and that we can do the best for the 
veterans in the area. I think you will be pleased when you see 
both of those facilities.
    [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

                       MAJOR CHALLENGES AND GOALS

    Questions. I recognize you have been in office only a few weeks, 
but I would like to hear your preliminary observations about the 
Department.
    Specifically, what do you see as the Department's main challenges?
    As VA Secretary, what are the main goals you would like to achieve 
before the end of your tenure?
    Answers.
Challenges
    VA is a very large, multi-business organization requiring diverse 
management service delivery skills. More than 220,000 dedicated VA 
employees operate its 157 hospitals, 134 nursing homes, 860 outpatient 
clinics, 57 regional benefit offices, and 120 national cemeteries and 
receive pre-discharge claims for disability benefits at 139 military 
sites. They strive to provide world- class service to America's 
deserving veterans who seek (1) health care; (2) the benefits they have 
earned to restore their capability and ensure a smooth transition from 
active military service to civilian life; and (3) honor and fitting 
memorials in death.
    Our single greatest challenge is making sure our veterans receive 
the highest return on the taxpayers' dollar. To do that, VA needs to 
make sure it operates with only the best business practices in place. 
This alone, will make it easier for our veterans to access the quality 
care and services we provide. We must continually improve our business 
practices, maximize sharing opportunities with DOD and others and focus 
our services on those most in need. I look forward to tackling the 
challenges of ensuring best practices in all areas of VA endeavor and 
building on today's successes for even greater achievements in the 
future.
Goals
  --I want to ensure that timely access to medical care continues to 
        improve for those who depend on VA the most, and I want to 
        ensure that significant improvements in both accuracy and 
        consistency of benefit entitlement decisions are a primary 
        focus across regional offices.
  --I want to achieve the right balance of informed, centralized policy 
        decision-making with appropriate, responsible decentralized 
        implementation at levels closest to the provision of day-to-day 
        services to our veterans.
  --I want to lead VA to the forefront of integrating accountability 
        systems based on results. VA provides essential, life-saving 
        and life-enhancing services for America's veterans, and I want 
        the Department to be able to articulate, based on solid 
        metrics, the incredible results that are achieved on an on-
        going basis for veterans, their dependents and survivors.
  --I want to continue to build on the objective measures currently 
        being used to assess maximum resource-allocation efficiency so 
        that every dollar is invested wisely toward the outcome of 
        improving veterans' lives.
  --I want to sharpen this organization's focuses on improved 
        information and knowledge management and human-capital 
        development.
    Madam Chairman, there is so much more I could address, but first 
and foremost, I want to ensure that all 220,000 employees of this 
Department strive every day to improve the lot of those heroic, 
selfless Americans we are privileged to serve--our Nation's veterans.

              VETERANS RETURNING FROM IRAQ AND AFGHANISTAN

    Question. There are concerns about VA's ability and capacity to 
treat all returning service members from Operations Enduring Freedom 
and Iraqi Freedom (OEF/OIF). Further, there have been media reports of 
some returning veterans who are falling through the cracks and 
experiencing such things as delayed benefits and medical care and 
homelessness.
    For the record, do you have enough resources to meet the needs of 
all returning veterans from Iraq and Afghanistan for this current 
fiscal year 2005?
    Answer.
    Dr. Perlin. Yes, VA has the necessary resources in fiscal year 2005 
to continue meeting the needs of all returning veterans from Iraq and 
Afghanistan.
    Admiral Cooper. VA has the resources, capacity, and systems in 
place to provide priority care and claims processing for all seriously 
injured veterans of Iraq and Afghanistan. We have the resources 
available to continue our highly successful Benefits Delivery at 
Discharge (BDD) program, through which service members are able to file 
disability compensation claims prior to their separation from service. 
Their claims are then processed expeditiously immediately upon the 
service members' separation from service. Last year claims filed 
through the BDD program were processed in an average of 55 days, 
compared to the national average for all disability determinations of 
165 days. We have the resources to conduct briefings for separating 
members of the active components and specialized outreach to 
demobilized reserve component forces. In fiscal year 2004 we conducted 
benefit briefings for more than 88,000 members of the Guard and 
Reserve. VA will continue to meet its responsibilities to America's 
current returning war veterans while working to lower inventories, 
reduce claims processing times, and deal with high claims activity by 
veterans from earlier service periods.
    Question. Does the budget request for fiscal year 2006 provide 
adequate funding to meet the needs of all returning OEF and OIF 
veterans?
    Answer.
    Dr. Perlin. Yes, VA requested the necessary resources in fiscal 
year 2006 to continue meeting the needs of all veterans who have 
suffered injuries or diseases as a result of the conflicts in Iraq and 
Afghanistan.
    Admiral Cooper. The funding request for 2006 is adequate and will 
enable us to continue the efforts described in the previous response.
    Question. Has the VA exhausted all means to reach service members 
who may separate from active duty? Has the VA used public service 
announcements?
    Answer. While there is always more that could be done to reach 
veterans and their families, VA has extensive outreach programs for 
returning service personnel, including Reserve/National Guard members.
    News Releases.--Last year, VA produced a 30-second public service 
video entitled ``Our Turn to Serve'' which was distributed to domestic 
viewing markets near or at major military transition and separation 
bases. It was placed as a streaming video file on the VA Internet Web 
site and marketed electronically to other domestic TV station 
programmers in markets with large military populations. It is now about 
to run on AFRTS outlets serving military based overseas. A new VA 
outreach video program, ``The American Veteran,'' is airing on the 
Pentagon Channel, which reaches military audiences at Department of 
Defense (DOD) installations, communities, and sites in this country and 
around the world. It is a half-hour video magazine featuring stories 
and information of interest to military personnel and veterans that 
focuses on their benefits and how they can access and use them. This is 
a continuing series of monthly programs that will be marketed 
domestically to cable systems, PBS stations, and community access 
cable.
    Transition Assistance Program (TAP) and Other Military Services 
Briefings.--From October 2002 through January 2005, VBA military 
services coordinators conducted transition briefings and related 
personal interviews in the United States as reflected in the chart 
below. These briefings include pre- and post-deployment briefings for 
Reserve and National Guard members.

                                                OVERALL BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................           5,368         197,082          97,352
2004............................................................           7,210         261,391         115,576
2005 \1\........................................................           2,263          79,105          34,106
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    In addition to military services briefings in the U.S., VBA 
representatives conduct briefings overseas under arrangement with DOD. 
VBA provides two tours each year with 6 to 7 VBA representatives 
providing this service for each tour. Each is home-based at a major 
military site and provides services at the site and surrounding areas. 
The countries serviced are England, Germany, Japan, and Italy. Korea is 
serviced by staff from the Benefits Delivery at Discharge office in 
Yong San. A representative from the St. Petersburg Regional Office 
provides that service for Guantanamo Bay. We were recently requested by 
DOD to add Bahrain to our overseas schedule beginning with the May 2005 
tour. The following chart reflects statistics regarding overseas 
briefings:

                                               OVERSEAS BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................             472          12,943          12,947
2004............................................................             624          15,183           6,544
2005 \1\........................................................              36           1,278             464
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard 
members is part of the overall VBA outreach program. In peacetime, this 
outreach is generally accomplished on an ``on call'' or ``as 
requested'' basis. With the activation and deployment of large numbers 
of Reserve/Guard members following the September 11, 2001, attack on 
America, and the onset of OEF/OIF, VBA outreach to this group has been 
greatly expanded. National and local contacts have been made with 
Reserve/Guard officials to schedule pre- and post-mobilization 
briefings for their members. Returning Reserve/Guard members can also 
elect to attend the formal three-day TAP workshops. The following data 
on Reserve/Guard briefings is a subset of the Overall Briefings data 
provided in the first chart:

                         RESERVE/GUARD BRIEFINGS
------------------------------------------------------------------------
               Fiscal year                   Briefings     No. attendees
------------------------------------------------------------------------
2003....................................             821          46,675
2004....................................           1,399          88,366
2005 \1\................................             531          32,448
------------------------------------------------------------------------
\1\Through January 2005.

    Briefings Aboard Ships.--VA provided TAP briefings aboard the USS 
Constellation, the USS Enterprise, and the USS George Washington on 
their return from the Persian Gulf to the United States. VBA will 
continue to support requests from the Department of the Navy for TAP 
workshops aboard ships.

Seamless Transition--Military Treatment Facilities (MTFs)
    In 2003, VA began placing Veterans Service Representatives at key 
military treatment facilities (MTFs) where severely wounded service 
members from OEF/OIF are frequently sent. Representatives of the VBA 
Benefits Delivery at Discharge office in Germany work closely with the 
staff at the Landstuhl Army Medical Center to assist returning injured 
service members who are patients at that facility and family members 
temporarily residing at the Fischer House.
    Since March 2003, a VBA OEF/OIF coordinator is assigned for each 
MTF. Full time staff is assigned to the Walter Reed Army Medical Center 
in Washington, D.C., and the Bethesda Naval Medical Center in Maryland. 
Similar teams work with patients and family members at three other MTFs 
serving as key medical centers for seriously wounded returning troops: 
Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service 
is conducted at all other major military treatment facilities. As of 
January 2005, over 4,500 hospitalized returning service members were 
assisted through this program at Walter Reed, Bethesda, Eisenhower, 
Brooke, and Madigan. Since March 2003, each claim from a seriously 
disabled OEF/OIF veteran has been case managed for seamless and 
expeditious processing.
    Web Page.--As part of the Seamless Transition effort, VBA created a 
new web page for OEF/OIF, directly accessible from the VA homepage. 
Information specific to Reserve/Guard members who were activated is 
included, as well as links to other Federal benefits of interest to 
returning service members. The web page has been accessed over 340,000 
times since its activation in December 2003.
    Benefits Delivery at Discharge (BDD).--VA's BDD program operates in 
concert with the military services outreach program. Under BDD, service 
members can apply for disability compensation within 180 days before 
discharge. The required physical examinations are conducted and service 
medical records are reviewed prior to discharge. The goal is to 
adjudicate claims within 30 days following discharge. Upon receipt of 
the claimant's DD Form 214 (Report of Release from Active Military 
Service), benefits are immediately authorized so that the recently 
separated veteran can receive his/her first disability check the month 
following the month of discharge or shortly thereafter. Currently, 141 
military installations worldwide participate in this program, including 
two sites in Germany and three in Korea. Approximately 26,000 BDD 
claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004; 
and 12,000 in fiscal year 2005 to date.

Recently-Separated Veterans
    Veterans Assistance at Discharge System (VADS).--All separating and 
retiring service members (including Reserve/Guard members) receive a 
``Welcome Home Package'' that includes a letter from the Secretary, a 
copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
0501, Veterans Benefits Timetable, through VADS. Similar information is 
again mailed with a 6-month follow-up letter.
    Secretary's Outreach Letter to Returning Service Members.--Outreach 
letters from the Secretary of Veterans Affairs have been sent to 
approximately 240,000 returning service members who have separated/
retired from active duty. Enclosed with the letters are copies of VA 
Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of 
VA Benefits for National Guard and Reserve Personnel.

                       PRIORITY 7 AND 8 VETERANS

    Question. Clearly, we must ensure full funding for Priority 1 
through 6 veterans, but I am also concerned about our Priority 7 and 8 
veterans.
    Given the escalating costs of private health care insurance and 
cuts to other publicly funded programs, what is going to happen to the 
tens of thousands of uninsured Priority 7 and 8 veterans? Has the VA 
performed any analysis to project the outcomes of these veterans? Does 
the VA have a good understanding of who these veterans are, 
demographically, and what resources they may have in the event VA 
medical care is not available to them?
    Answer. VA has health insurance coverage data on veterans from the 
fiscal year 2001 Survey of Veterans. VA also obtains health insurance 
coverage data for VA health care enrollees from the annual VHA Enrollee 
Survey. VA has also considered the impact of its proposed policies on 
uninsured veterans. For example, the cost-sharing policies (annual 
enrollment fee and increased pharmacy co-payments) in the fiscal year 
2006 President's budget will enable uninsured Priority 7 and 8 enrolled 
veterans to continue to have access to the VA health care system for a 
very modest amount of cost sharing. We expect that Priority 7 and 8 
enrollees who are uninsured will pay the enrollment fee, while many 
Priority 7 and 8 enrollees who have other health care coverage are not 
expected to enroll because of their alternative sources of care.

                        MANAGEMENT EFFICIENCIES

    Question. This year's request estimates savings of some $1.8 
billion in management efficiencies--an increase of some $590 million 
over the fiscal year 2005 level. I support efforts by the Department to 
improve its management practices, and clearly the Inspector General's 
office has identified a number of areas where savings could be 
achieved. But we haven't seen a lot of detail or reliable data to back 
up these savings projections.
    For example, the budget projects saving $150 million through 
improved contracting practices with medical schools and other VA 
affiliates for scarce medical specialties. Can you explain exactly how 
you will achieve this $150 million in savings?
    Answer. VA anticipates that $150 million in savings will result 
from improved contracting practices. A new directive is about to be 
issued that encourages competitive contracting for services and 
provides contracting officers specific guidance on appropriate costs to 
include in a sole-source contract, when that vehicle is appropriate. In 
addition, there will be increased Office of Inspector General audits of 
sole source contracts with VA's affiliates, which will result in 
further savings from originally negotiated rates.
    Question. Can you provide the committee with details on how the 
Department will achieve its overall management savings goal of $1.8 
billion for fiscal year 2006?
    Answer. The $1.8 billion in management efficiencies is composed of 
recurring and anticipated new efficiencies in standardization of 
pharmaceuticals and supplies; inventory management; productivity; and 
administrative/clinical consolidations and VA/DOD sharing.

                              HOMELESSNESS

    Question. By some accounts, homeless veterans number around 
200,000; even some veterans returning from Iraq and Afghanistan are 
experiencing homelessness.
    Can you explain why there continues to be such a large number of 
homeless veterans in this country?
    Answer. While homeless veterans tend to be older and better 
educated than their non-veteran counterparts, they face the same 
vulnerabilities that increase their risk of homelessness. These 
liabilities include mental illness and substance use disorders, lack of 
adequate social supports, disadvantages associated with past histories 
of incarceration, and poor employment prospects.
    VA estimates that there may be 200,000 homeless veterans living on 
the streets or in shelters on any given day. Data from the National 
Survey of Homeless Service Providers and Clients conducted in 1996 
indicates that the proportion of veterans among homeless men declined 
to 23 percent from an estimate of 34 percent identified in a similar 
study conducted in the mid 1980s. We believe that VA, working together 
with community-based and faith-based organizations, has put in place a 
wide range of services to address the needs of homeless veterans and 
this system of services is helping veterans move out of homelessness to 
independence and self sufficiency.
    Question. Why are some of our OEF and OIF veterans experiencing 
homelessness?
    Answer. From August through December of 2004, VA has reached out to 
128 homeless OEF and OIF veterans, about 1 percent of all homeless 
veterans contacted through outreach during those months. Review of 
intake assessment information about these veterans suggests that, for 
the most part, these homeless veterans have problems similar to those 
of homeless veterans from other eras and periods of service. However, 
homeless OEF/OIF veterans are younger and appear to have fewer problems 
with substance abuse and they seem to have more short-term situational 
problems such as changes in family status (e.g. separation or divorce). 
These veterans are less likely to be chronically homeless, which gives 
us hope that they can return more easily to self sufficiency.

                             VISN STRUCTURE

    Question. The President's Task Force (PTF) found that the VA's 
veterans integrated systems network (VISN) structure ``resulted in the 
growth of disparate business procedures and practices.'' Further, the 
PTF's report stated that the ``VISN structure alters the ability to 
provide consistent, uniform national program guidance in the clinical 
arena, the loss of which affects opportunities for improved quality, 
access, and cost effectiveness.'' Due to these findings, the PTF 
recommended ``the structure and processes of VHA should be reviewed.''
    Do you agree with the PTF's findings? If so, what are your thoughts 
on altering the VISN structure? If not, what alternatives do you offer?
    Answer. There is always a tension between centralization and 
decentralization, such as we find in the current VA network structure. 
A system that is too centralized is grossly ineffective and 
inefficient. On the other hand, a system that is too decentralized 
loses the integration and cohesiveness that defines it as a ``system.'' 
Achieving the proper balance to avoid both too much centralization and 
too much decentralization requires continual monitoring and refinement 
where necessary. So to that extent, we agree that the structure and 
processes of the VISN structure require continual review. But continual 
review does not necessarily entail significant alterations. Nor is it 
clear that the VISN structure has impaired VA's ability to provide 
consistent, uniform national clinical guidance.
    VA operates a large, integrated health care system that functions 
both efficiently and effectively. Improvements in quality, access, 
veteran satisfaction, and efficiency are measurable and have been 
widely recognized. Health care policy is established centrally in 
Washington and is expected to be executed uniformly throughout all 21 
VISNs. I expect the VISNs to address the unique challenges of their 
respective environments, and we will hold management at all levels 
accountable for implementing national policy consistently. I am a firm 
believer in the benefits of performance measurement, and I will hold 
all VISN directors accountable for the same set of performance measures 
and goals. The individual means to achieve the goals set may vary 
somewhat from VISN to VISN, depending on their individual 
circumstances, but the requirement for implementation of overall 
national health care policies is immutable.

                        STATE HOME CONSTRUCTION

    Question. The budget request proposes a 1-year moratorium on 
providing grants for construction of State nursing homes until the VA 
has completed a review of its long-term care needs.
    Since State veterans' nursing homes account for more than half of 
VA's nursing home workload, to what extent will the moratorium impact 
veterans access to long term-care?
    Answer. The proposed 1-year moratorium on grants for construction 
of State nursing homes will have a minimal effect on veterans' access 
to long-term care. Nationally, State Veterans Homes operate at 
approximately 85 percent capacity; consequently the existing capacity 
can accommodate additional veterans. Moreover, construction projects 
that are already underway are anticipated to add more than 1,600 
additional State Home beds nationally over the next 3-4 years.
    Question. Are there State nursing home projects with established 
and documented need that will be delayed because of the funding 
moratorium?
    Answer. There are nursing home projects for which the States have 
committed matching funds that will be delayed by the moratorium for 1 
year. Because the Priority List is revised annually, VA cannot predict 
how many or which specific projects will be delayed. All new and 
existing pending projects are ranked as of August 15 and included in 
the annual list.

                          VA-DOD COLLABORATION

    Question. For several years, there have been numerous efforts to 
promote health care collaboration between the Department of Defense and 
the VA. The fiscal year 2003 National Defense Authorization Act 
directed DOD and VA to establish a joint program to identify and 
provide incentives to implement, fund, and evaluate creative health 
care coordination and sharing initiatives between the two departments.
    Can you give us a status and any initial findings on this new 
program?
    Answer. Section 721 of Public Law 107-314, the fiscal year 2003 
National Defense Authorization Act, requires that DOD and VA establish 
a joint incentives program through the creation of a DOD-VA Health Care 
Sharing Incentive Fund. The intent of the program is to identify, fund, 
and evaluate creative local, regional, and national sharing 
initiatives.
    A DOD-VA Memorandum of Agreement (MOA), signed on July 8, 2004, 
assigned VA as administrator of the fund under the direction of the VA-
DOD Health Executive Council (HEC). The HEC appointed the Financial 
Management Work Group to issue the calls for proposals, recommend the 
proposals to be funded, and monitor the projects selected. There is a 
minimum contribution of $15 million by each Department ($30 million 
total per year) each year for 4 years (fiscal year 2004-fiscal year 
2007).
    In fiscal year 2004, 12 proposals were approved. Those proposals 
require $37.5 million in funding over 2 years. Approved proposals 
involve a wide range of services including various tele-health 
projects, women's health services, a joint cardiac catheterization lab, 
a joint dialysis unit, and a joint clinic.
    In fiscal year 2005, 56 proposals have been submitted, and they 
will compete for $22.5 million in funding for the first year. VA and 
DOD are currently reviewing the projects submitted for the fiscal year 
2005 awards cycle.
    There has been a high level of interest by VA and DOD in submitting 
projects for funding. There have been many lessons learned in 
administering the program, such as allowing sufficient time to permit 
review up the chains of commands within both VA and DOD; the need for 
information technology projects to be consistent with the national 
level solutions being developed; and the need for projects to clearly 
identify a benefit to both Departments. The projects selected for 
funding in fiscal year 2004 have not been operational long enough to 
provide an individual project assessment of the results.
                                 ______
                                 

               Questions Submitted by Senator Larry Craig

                                SERVICES

    Question. The 116th Calvary Brigade Combat Team of the Idaho Army 
National Guard are now stationed overseas in Iraq and fighting in 
Operation Iraqi Freedom. Like all National Guardsmen, when they return 
from active duty they will resume their duties of working under the 
command of the Governor of Idaho.
    What will their eligibility be for VA services, including health 
care and benefits, when they separate from active duty service?
    Answer. Army National Guard personnel activated by Federal 
declaration and who served on active duty in a theater of combat 
operations which includes Operation Iraqi Freedom are eligible for 
hospital care, medical services, and nursing home care. Public Law 105-
368 amended title 38, United States Code, to authorize VA to provide 
combat veterans with care for conditions potentially related to their 
combat service for a 2 year period following discharge. Care is cost-
free for conditions that cannot be disassociated from combat service. 
Care for other conditions is subject to applicable copayments. Veterans 
who enroll with VA under this authority retain enrollment eligibility, 
regardless of any enrollment restriction that may be in effect after 
this 2-year post discharge period. Combat veterans who choose not to 
enroll with VA during the 2-year period would be able to enroll in the 
future only if they are otherwise eligible to enroll.
    In addition to health care benefits, they are also eligible for a 
full array of benefits offered through the Veterans Benefits 
Administration (VBA) to include:
  --Disability Benefits
  --Education and Training Benefits
  --Vocational Rehabilitation and Employment
  --Home Loans
  --Life Insurance
  --Burial Benefits
  --Dependents' and Survivors' Benefits
    Question. Does the Department have any programs in place that will 
continue to follow these Guardsmen after their completion of their 
combat mission and they return home to a civilian life?
    Answer. Under 38 U.S.C.  1710(e)(1)(D) and  1710(e)(3)(C), OIF/
OEF veterans may enroll in the VA health care system and, for a 2-year 
period following the date of their separation from active duty, receive 
VA health care without co-payment requirements for conditions that are 
or may be related to their combat service. After the end of the 2-year 
period, they may continue their enrollment but may be subject to any 
applicable co-payment requirements. For OIF/OEF veterans who do not 
enroll with VA during the 2-year post-discharge period, eligibility for 
enrollment and subsequent health care is, of course, subject to such 
factors as a service connected disability rating, VA pension status, 
catastrophic disability determination, or financial circumstances.
    OIF and OEF veterans have sought VA health care for a wide-variety 
of physical and psychological problems. The most common health problems 
have been musculoskeletal ailments (principally joint and back 
disorders); diseases of the digestive system (with teeth and gum 
problems predominating); and mental disorders (predominantly adjustment 
reactions). The medical issues we have seen to date are those we would 
expect to see in young, active, military populations, and no particular 
health problem stands out among these veterans at present. We will 
continue to monitor the health status of recent OIF and OEF veterans to 
ensure that VA aligns its health care programs to meet their needs.
    Following is a brief description of VA initiatives that have been 
developed in response to the service needs of veterans from Operations 
Iraqi Freedom (OIF) and Enduring Freedom (OEF). Many of these are brand 
new programs that were developed to meet these needs. All of them 
represent ``lessons learned'' from VA's experiences responding to the 
health care and other benefits needs of veterans returning from the 
1991 Gulf War and from the Vietnam War before that.
    Immediate Health Care Needs for Combat Veterans.--In response to 
immediate health concerns for OIF and OEF veterans, on March 26 and 27, 
2003, VA developed a program called ``Caring for the War Wounded,'' 
which was broadcast over the VA Knowledge Network satellite broadcast 
system. This program provided timely and relevant information about the 
anticipated health care needs of veterans of the current conflict in 
Iraq, included VA experts on treatments for traumatic injuries; 
chemical warfare agent health effects; infectious diseases; 
radiological health effects; and post-deployment readjustment health 
concerns, and was converted into a new Veterans Health Initiative (VHI) 
health care provider independent study guide, called ``Caring for the 
War Wounded,'' which is available online at vaww.va.gov/VHI/and on the 
Internet at http://www.appc1.va.gov/vhi/.
    New Clinical Guidelines for Combat Veteran Health Care.--In 
collaboration with DOD, VA developed two Clinical Practice Guidelines 
on combat veteran health issues, including one general guideline to 
post-deployment health, and a second dealing with unexplained pain and 
fatigue. The new clinical guidelines give our health care providers the 
best medical evidence for diagnoses and treatment. VA highly recommends 
these for the evaluation and care of all returning combat veterans, 
including veterans from OIF and OEF. The value of the guidelines in 
providing care to returning veterans is described in a video ``The Epic 
of Gilgamesh: Clinical Practice Guidelines for Post-Deployment Health 
Evaluation and Management,'' at www.va.gov/Gilgamesh.
    New Specialized Combat Veteran Health Care Program.--In 2001, VA 
established two new War Related Illness and Injury Study Centers 
(WRIISCs) at the Washington, DC, and East Orange, NJ, VAMCs. Today, the 
WRIISCs are providing specialized health care for combat veterans from 
all deployments who experience difficult to diagnose but disabling 
illnesses. Concerns about unexplained illness are seen after all 
deployments including OIF/OEF, but VA is building on our understand of 
these illnesses. More information is available online at www.va.gov/
environagents under the heading ``WRIISC Referral Eligibility 
Information.''
    Expanded Education on Combat Health Care for VA Providers.--In 
addition to the programs already described, VA has developed several 
Veterans Health Initiative (VHI) Independent Study Guides relevant to 
veterans returning from Iraq and Afghanistan:
  --``A Guide to Gulf War Veterans Health'' was originally on health 
        care for combat veterans from the 1991 Gulf War. The product, 
        written for clinicians, veterans and their families, remains 
        very relevant for OIF and OEF combat veterans because many of 
        the hazardous exposures are the same.
  --``Endemic Infectious Diseases of Southwest Asia'' provides 
        information for health care providers about the infectious 
        disease risks in Southwest Asia, particularly in Afghanistan 
        and Iraq. The emphasis is on diseases not typically seen in 
        North America.
  --``Health Effects from Chemical, Biological and Radiological 
        Weapons'' was developed to improve recognition of health issues 
        related to chemical, biological and radiological weapons and 
        agents.
  --``Military Sexual Trauma'' was developed to improve recognitions 
        and treatment of health problems related to military sexual 
        trauma, including sexual assault and harassment.
  --``Post-Traumatic Stress Disorder: Implications for Primary Care'' 
        is an introduction to PTSD diagnosis, treatment, referrals, 
        support and education, as well as awareness and understanding 
        of veterans who suffer from this illness.
  --``Traumatic Amputation and Prosthetics'' includes information about 
        patients who experience traumatic amputation during military 
        service, their rehabilitation, primary and long-term care, 
        prosthetic, clinical and administrative issues.
  --``Traumatic Brain Injury'' presents an overview of TBI issues that 
        primary care practitioners may encounter when providing care to 
        veterans and active duty military personnel.
    All are available in print, CD ROM, and on the web at www.va.gov/
VHI.
    Outreach to Combat Veterans.--VA has many new products to offer 
combat veterans and their families.
  --The Secretary of Veterans Affairs sends a letter to every newly 
        separated OIF and OEF veteran, based on records for these 
        veterans provided to VA by DOD. The letter thanks the veteran 
        for their service, welcomes them home, and provides basic 
        information about health care and other benefits provided by 
        VA.
  --In collaboration with DOD, VA published and distributed one million 
        copies of a new short brochure called ``A Summary of VA 
        Benefits for National Guard and Reservists Personnel.'' The new 
        brochure does a tremendous job of summarizing health care and 
        other benefits available to this special population of combat 
        veterans upon their return to civilian life (also available 
        online at www.va.gov/EnvironAgents).
  --``Health Care and Assistance for U.S. Veterans of Operation Iraqi 
        Freedom'' is a new brochure on basic health issues for that 
        deployment (also at www.va.gov/EnvironAgents).
  --``OIF and OEF Review'' is a new newsletter mailed to all separated 
        OIF and OEF veterans and their families, on VA health care and 
        assistance programs for these newest veterans (online at 
        www.va.gov/EnvironAgents).
  --``VA Health Care and Benefits Information for Veterans'' is a new 
        wallet care that succinctly summarizes all VA health and other 
        benefits for veterans, along with contact information, in a 
        single, wallet-sized card for easy reference (also at 
        www.va.gov/EnvironAgents).
    Special Depleted Uranium (DU) Program.--OIF veterans concerned 
about possible exposure to depleted uranium can be evaluated using a 
special DU exposure protocol that VA began after the 1991 Gulf War. 
This program offers free DU urine screening tests by referral from VA 
primary care physicians to veterans who have concerns about their 
possible exposure to this agent.
    Combat Veteran Health Status Surveillance.--Today, we can monitor 
the overall health status of combat veterans very efficiently by using 
VA's electronic inpatient and outpatient medical records. This 
surveillance summarizes every single visit by a combat veteran 
including all medical diagnoses. VA has developed a new Clinical 
Reminder (part of VA's computerized reminder system) to assist VA 
primary care clinicians in providing timely and appropriate care to new 
combat veterans.
    Question. What resources are being devoted this year to put into 
effect the co-location of the Boise VA Medical Center and Regional 
Office? What are projected for next year?
    Answer. In fiscal year 2005, staff resources in VBA will accomplish 
the following:
  --Secure a letter from the GSA initiating the transfer of the 2.13 
        acre parcel to VA and get VA Secretary's signature accepting 
        transfer and control of the property.
  --Complete a concept paper for the business case for a project to 
        construct a new office building for the Boise Regional Office 
        on the subject property.
  --Complete an Exhibit 300 business case application for a project to 
        construct a new office building for the Boise Regional Office 
        on the subject property.
  --Select an Architect/Engineer (A/E) firm to prepare a preliminary 
        design and a Request for Proposals (RFP) for a Design-Build 
        contract for the construction of the new office building. Funds 
        from the Minor Construction program will be allocated to this 
        contract.
  --Begin the preliminary design for the new office building.
    In fiscal year 2006, staff resources in VBA will accomplish the 
following:
  --Complete the preliminary design and the RFP for the Design-Build 
        contract.
  --Work with the VHA contracting officer to prepare the solicitation 
        for the Design-Build contract.
  --Advertise the project in the FedBizOps for a contract award in 
        early fiscal year 2007.
  --Identify the necessary minor construction funds in the fiscal year 
        2007 budget for the construction contract.

                           PRESCRIPTION DRUGS

    Question. Last year, Congress enacted the Medicare Modernization 
Act which, for the first time, provides Medicare beneficiaries with 
prescription drug coverage.
    Has VA conducted any assessments of the impact this legislation 
will have on the number of veterans who rely on VA health care to 
provide prescription drug coverage? If so, what has this assessment 
shown?
    Answer. Milliman, Inc., the private-sector actuarial firm that 
develops projections of veteran demand for VA health care, has advised 
VA that the impact of the new Medicare drug benefit on VA enrollment, 
utilization, and expenditures is expected to be minimal. The biggest 
impact is expected to come from reductions in employer-based 
prescription drug coverage. However, the impact may not become 
significant until as late as 2016 since the most recent cutbacks have 
been for future retirees only; those eligible for retirement (over age 
55) have been grandfathered into employer's current plan. Based on 
recent estimates of retirees who could lose benefits, enrollment in VA 
health care could increase by an estimated 35,000 within the 10-15 year 
period following the start of the Medicare prescription drug benefit. 
VA currently treats about 5.2 million veterans per year.
    Question. Does VA believe that there is a way VA can work in 
concert with Medicare on the provisions of prescription medications for 
Medicare-eligible veterans? If so, has VA leadership approached the 
leadership of the Centers for Medicare and Medicaid Services to discuss 
and proposals?
    Answer. VA believes that VA and the Department of Health and Human 
Services' Centers for Medicare and Medicaid Services (CMS) can work 
together so that beneficiaries who chose to use both VA and CMS 
prescription benefits do so in a safe and cost-effective manner.
    To that end, VA Pharmacy Benefits Management staff and staff from 
the Centers for Medicare and Medicaid Services (CMS) have had 
preliminary discussions about potential VA /CMS patient safety and 
electronic prescribing initiatives.
    VA will continue to provide prescription medications to enrolled 
veteran patients who are also eligible for Medicare. VA will continue 
to provide this prescription coverage to Medicare eligible veterans who 
chose VA as their health care provider, even after Medicare Part D is 
fully implemented.

                     STATE HOME PER DIEM PROPOSALS

    Question. The State Home program, by most accounts, has been a 
successful partnership between the Federal and State governments for 
the care of aging veterans. Yet VA proposes to modify its past per diem 
payment policies--a change in policy that VA says will reduce the 
number of State home beds by more than 50 percent.
    Why does VA want the States to reduce the number of State home 
beds? Even if VA does not want to provide institutional care to the 
non-service-connected, why does it want to discourage States from 
meeting that need?
    Answer. VA is not proposing that the States reduce the number of 
State Home beds. State Veterans Homes are owned, operated, and financed 
by the States. VA provides limited financial assistance to the States 
in the form of per diem payments for nursing home, hospital, 
domiciliary, and adult day healthcare. Only the nursing home per diem 
is affected by the fiscal year 2006 budget proposal. The cost of care 
in State Veterans Homes varies from State to State, as does the amount 
of assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. State Homes will continue 
operations to the extent that individual States discharge their fiscal 
responsibility for the operation and management of the Homes. VA does 
not have information on the plans of individual States to respond to 
the change in VA policy.
    The average daily census in State Veterans Homes on whose behalf VA 
pays a per diem payment would decrease from 17,328 to 7,217 from fiscal 
year 2004 to fiscal year 2006. Over the same period, however, VA is 
projecting a substantial increase in both workload and funding for the 
non-institutional programs it supports. The average daily census in 
these home and community-based care (HCBC) programs is projected to 
rise from 25,523 in fiscal year 2004 to 35,540 in fiscal year 2006 (a 
39 percent increase). Funding is projected to increase from $287.3 
million in fiscal year 2004 to over $400 million in fiscal year 2006 
(also a 39 percent increase). The projected increases in HCBC programs 
will serve to offset some of the reductions in nursing home care. VA 
believes the proposals on long-term care in this budget provide an 
appropriate balance between congressionally mandated nursing home 
services and the national trend toward increased use of non-
institutional home and community-based services in preference to 
nursing home care. HCBC is preferred by most patients and their 
families and is more cost effective than inpatient care.
    Question. Does VA assume bed closures will occur when payments for 
non-priority veterans (those without a service-connection) cease? Does 
VA believe that it has the legal authority to simply stop paying per 
diem payments to States for the care of veterans VA doesn't define as a 
priority?
    Answer. VA is seeking legislative authority to align VA per diem 
payments to State veterans homes with VA's revised long-term care 
eligibility policy. Enactment of this proposal would ensure fairness 
and consistency in how VA treats veterans needing long-term care across 
all venues, including VA nursing homes, community nursing homes, and 
State nursing homes. We are unable to comment on how the individual 
States would respond to this change in policy.
    Question. It seems to me that VA encouraged the States to build 
long-term care capacity by offering them construction subsidies. Would 
a change in the ``rules of the game'' after these State homes have been 
built not break the bargain that the Federal Government has struck with 
the States?
    Answer. The VA State Home Construction Grant Program assists States 
in construction and renovation costs for nursing homes, domiciliary 
facilities and adult day healthcare. The program does not require the 
state to participate in the State Veteran Home Per Diem Grant Program, 
or guarantee the ongoing subsidy of per diem payments. The law is 
separate for each of the programs.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

             STATE EXTENDED CARE FACILITIES GRANTS PROGRAM

    Question. Today I asked about the decision to impose a 1-year 
moratorium on funding for the State Extended Care Facilities Grants 
program. Specifically, I asked for the rationale behind the decision 
and if he could explain its impact on States, such as California, which 
critically need additional veterans homes. I also inquired about 
whether the moratorium was really a plan to ultimately phase out 
funding for State veterans homes.
    Can you explain to this committee why it is necessary to impose a 
1-year moratorium on grants for construction of long-term extended care 
facilities when there is such a need for VA homes throughout this 
Nation?
    Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of extended 
care facilities. This will permit VA to complete an assessment of its 
nationwide institutional long-term care infrastructure and ensure that 
future construction aligns with the areas of greatest projected need. 
Grants that have already been awarded will not be affected by the 1-
year moratorium.
    Question. How would this moratorium affect the current priorities 
list for funding under this program?
    Answer. VA has already committed to all planned fiscal year 2005 
projects on the current Priority List. The States are currently 
completing the requirements for fiscal year 2005 grant awards. VA has 
committed the maximum fiscal year 2005 appropriations and the remaining 
fiscal year 2004 carryover funds to these projects.
    Question. Do you anticipate altering this priorities list for 
fiscal year 2007?
    Answer. The Priority List is revised annually, as of August 15th. 
All new and existing pending projects are ranked and included in the 
annual list. Once approved by the Secretary, the list is used to 
identify ranked projects and commit funding for projects for that 
fiscal year award or to finalize conditionally approved projects. For 
fiscal year 2007, VA would follow the same procedures and commit funds 
available at that time to the projects in rank order.
    Question. Can you provide this committee a better sense of your 
plans going forward and how it would affect funding for future State 
veterans home projects?
    Answer. VA will complete its assessment for our nationwide long-
term care infrastructure and assess the construction grants program 
priority during the fiscal year 2007 budget deliberations.
    Question. Is the Administration considering a plan to phase out 
grant funding for State veterans homes?
    Answer. The Administration will reevaluate the funding for the 
State Extended Care Facilities Grant program during the fiscal year 
2007 budget deliberations.
    Question. I also know that the State of California plans to request 
$125 million in fiscal year 2007 under this grant program to fund its 
largest project to date, the Greater Los Angeles-Ventura County Home, 
which includes 3 separate facilities. How would the 1-year moratorium 
impact funding for this project?
    Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium 
on new grants to States for construction and renovation of extended 
care facilities. This will permit VA to complete an assessment of its 
nationwide institutional long-term care infrastructure and ensure that 
future construction aligns with the areas of greatest projected need. 
Grants that have already been awarded will not be affected by the 1-
year moratorium.
    VA has already committed to all planned fiscal year 2005 projects 
on the current Priority List. The states are currently completing the 
requirements for fiscal year 2005 grant awards. VA has committed the 
maximum fiscal year 2005 appropriations and the remaining fiscal year 
2004 carryover funds to these projects.
    The Priority List is revised annually, as of August 15th. All new 
and existing pending projects are ranked and included in the annual 
list. Once approved by the Secretary, the list is used to identify 
ranked projects and commit funding for projects for that fiscal year 
award or to finalize conditionally approved projects. For fiscal year 
2007, VA would follow the same procedures and commit funds available at 
that time to the projects in rank order. VA cannot predict at this time 
how the California project will be ranked in fiscal year 2007 or 
whether there will be sufficient appropriations to fund it.

                         MEDICAL CARE PROGRAMS

    Question. The Administration's overall request for Medical Care 
Programs is $30.8 billion. However, if you discount the collections 
that you anticipate through the Medical Care Collections Fund, as well 
as the new fees that would be imposed on thousands of veterans, you are 
left with a base appropriation request for Medical Care Programs of 
$28.2 billion. Which is only 0.4 percent increase over last year's 
enacted level. This falls well below the standard compounded medical 
inflation rate of 3.9 percent.
    Do you believe that this is sufficient funding given the number of 
veterans returning home from the Middle East?
    Answer. Yes, VA requested the necessary resources in fiscal year 
2006 to continue meeting the needs of all veterans who have suffered 
injuries or diseases as a result of the conflicts in Iraq and 
Afghanistan.

                    MEDICAL AND PROSTHETIC RESEARCH

    Question. I am happy to see the fiscal year 2006 budget calling for 
$1.2 billion for prosthetics and sensory aids, a $100 million increase 
over fiscal year 2005, however, I am concerned about the cut to Medical 
and Prosthetic Research (from $402 million in fiscal year 2005 to $393 
million in fiscal year 2006). As you know, 11,000 men and women of our 
Armed Forces have suffered injuries in Iraq and Afghanistan and to many 
of them functional and efficient prosthetics will make all the 
difference in the world. The VA has made tremendous progress in 
developing new, state-of-the-art prosthetics, but we should not stop 
there. We should continue to fund a robust prosthetic research program. 
None of us ever wants to have to explain to one of our soldiers who has 
lost a leg, that more could have been done.
    Can you please explain why the fiscal year 2006 budget reduces 
money in this area?
    Answer. The VA research program is funded by three funding 
sources--direct appropriation, private grant funding, and Federal grant 
funding. The overall estimated funding is expected to rise in fiscal 
year 2006 by $49 million or 3.1 percent to $1.7 billion. The total 
research program level of effort and number of projects for veterans 
will be at a similar level to that of fiscal year 2005. VA, like other 
Departments across Government, must be a responsible partner in 
assisting to achieve many important, competing priorities. Reducing the 
deficit for the current and long-term strength of this country is very 
important. Therefore, tough choices had to be made in maximizing 
resource impact in a slower growth environment. Medical care for those 
who need VA the most and timely, consistent benefits delivery are also 
crucial services for veterans. A balanced approach in wisely investing 
resources was a guiding principle in the development of this budget. 
Research that enhances veterans' lives continues to be an important 
priority of the VA.
    In terms of prosthetics research, VA is expanding its support of 
multidisciplinary research approaches and examination of enabling 
technologies that aim to ease the physical and psychological pain of 
veterans. The VA Office of Research and Development (ORD) is 
collaborating with clinical services to evaluate the delivery of care 
and help identify optimal utilization of all patient services including 
durable medical equipment for veterans. VA is also dedicated to the 
generation of the rigorous data required to formulate policy and 
establish clinical care guidelines.
    In addition to evaluating existing practices, VA is expanding upon 
its longstanding support for advances in surgical approaches to primary 
amputation to include operative revision and limb lengthening 
procedures that can potentially aid in fitting prostheses and enhance 
function beyond what is now possible. VA is also aggressively examining 
other techniques such as osseointegration, a procedure that replaces 
missing limbs with titanium rods inserted directly into residual bone.
    Examples of ongoing projects include:
  --partnerships with the Department of Defense and Walter Reed Army 
        Medical Center to investigate immediate concerns of returning 
        Operation Enduring Freedom (OEF) and Operation Iraqi Freedom 
        (OIF) veterans;
  --trials of current prosthetic designs and improvements for future 
        designs;
  --use of telerehabilitation to prevent complications resulting from 
        amputation;
  --bio-hybrid limb projects using regenerated tissue, lengthened bone, 
        internal and external titanium implants, and sensors that allow 
        amputees to use brain signals and residual limb musculature to 
        move their prostheses;
  --new uses for sensory and implanted control devices and biological 
        sensors for the detection of health and function including 
        microelectro-mechanical or nanotechnologies;
  --evaluation and updates of rehabilitation strategies; and
  --examination of how best to implement research results and develop 
        best practices across VHA.

                        MEFLOQUINE (LARIAM) USE

    Question. As you may be aware, I have been concerned about the 
Department of Defense's (DOD) use of the anti-malarial drug mefloquine 
(Lariam) and its impact on our service members. In June 2004, I wrote 
your predecessor Secretary Principi with my concerns about the use of 
this drug, especially after hearing that several service members had 
been diagnosed with permanent brainstem and vestibular damage from 
mefloquine toxicity. Shortly thereafter, the Veterans Health 
Administration issued an Information Letter outlining the potential for 
serious complications associated with mefloquine.
    The VA's health care system is likely to be the first line of 
treatment for service members who have returned from active duty. And 
the VA will bear much of the cost and burden of treatment and 
rehabilitation for service members with mefloquine toxicity.
    Knowing that mefloquine was issued to active duty military in the 
wars in Afghanistan and Iraq, will you take steps to actively monitor 
the impact this drug has on these veterans' health conditions?
    Answer. VA is actively monitoring the DOD studies of possible 
adverse effects of mefloquine and is following the medical literature 
and reported studies. At DOD's invitation, VA participated in a special 
meeting of DOD's Armed Forces Epidemiology Board that DOD charged with 
helping to plan studies on long-term health effects among OIF and OEF 
veterans from mefloquine. VA regularly participates in DOD briefings on 
the status of DOD's studies on this health issue. In addition, VA 
developed an Under Secretary for Health Information Letter that 
reviewed medical and scientific literature on known health effects from 
taking mefloquine (IL 10-2004-007), ``Possible Long-Term Health Effects 
From The Malarial Prophylaxis Mefloquine (Lariam),'' June 23, 2004). 
This information letter alerts VA health care providers to the range of 
possible long-term health effects from taking mefloquine. It is 
important to note that mefloquine is an FDA approved drug that is 
widely used in the civilian community and not just in the military.
    Question. In the past, I have suggested that it is necessary for 
the Department of Defense (DOD) to immediately implement a program that 
will allow soldiers to report side effects and be evaluated, diagnosed 
and treated without fear of reprisal and that reporting such side 
effects not negatively affect their military service or careers. Would 
you be willing to implement such a program at the Department of 
Veterans' Affairs and will you work with DOD on such a program?
    Answer. Mefloquine side effects begin while a person is actually 
taking the drug--in this case, while they were still on active duty. 
Side effects appearing while a service member was still on active duty 
may be recorded by DOD health care providers. Few if any veterans are 
still taking malaria prophylaxis after leaving active military duty and 
then enrolling for VA health care. VA's Information Letter on 
mefloquine side effects (IL 10-2004-007) is intended to alert VA health 
care providers to any side effects that may persist in veterans after 
they have separated from military service. Any relevant findings then 
may be entered into the veteran's health record. Moreover, no health 
problem identified by the VA would result in reprisals or harm to a 
veterans' career because of the strict confidentiality and 
professionalism within the VA health care system.
    Question. As you may know, DOD is undertaking an investigation of 
the impact of mefloquine use by service members. What has the VA's role 
been in this investigation and has the Department participated in DOD's 
investigation?
    Answer. VA has been briefed on this study and actively supports 
DOD's efforts. VA is actively monitoring the DOD studies of possible 
adverse effects of mefloquine and is following the medical literature 
and reported studies. At DOD's invitation, VA participated in a special 
meeting of DOD's Armed Forces Epidemiology Board that DOD charged with 
helping to plan studies on long-term health effects among OIF and OEF 
veterans from mefloquine. VA regularly participates in briefings on the 
status of various DOD studies on this topic.

                            ENROLLMENT FEES

    Question. The budget submission assumes a $250 enrollment fee on 
Priority 7 and 8 veterans.
    How many veterans will have to pay the $250 enrollment fee? How 
many veterans will leave VA if they have to pay this premium? AND How 
does the VA plan to collect this fee from veterans?
    Answer. In 2006, 1.26 million Priority 7 and 8 veterans are 
expected to pay the $250 annual enrollment fee. This policy is expected 
to reduce enrollment for Priority 7 and 8 veterans by 1.1 million and 
reduce the number of Priority 7 and 8 unique patients by 213,000.
    VA will notify all Priority 7 and 8 enrolled veterans of the 
requirement to pay the enrollment fee by letter with appropriate 
payment guidance. Veterans will be provided a specified period of time 
to pay the entire fee or to agree to a quarterly payment schedule with 
payment of the first quarterly payment by a specified date. Payments 
will be processed through a central ``lockbox'' utility separate from, 
but similar to, existing processes used for receipt of veteran co-
payments.

                        PHARMACY CO-PAY INCREASE

    Question. The budget includes an assumption that the pharmacy co-
payments for certain veterans will increase from $7 to $15.
    How did VA choose $15 as the amount for the prescription drug co-
payment?
    Answer. This and the other proposed policies in VA's 2006 
President's budget were designed to ensure that VA is able to fulfill 
its core mission--providing timely access to high-quality health care 
to veterans with serviced connected disabilities, low incomes, and 
those with special needs. The $15 pharmacy co-payment proposal and 
other cost-sharing proposals would only affect higher income, better-
insured veterans in the lowest priorities and have been strategically 
priced to refocus the VA system on those veterans who need us most. The 
$15 drug co-pay would more closely align VA with other private and 
public health care plans.

                            RETURNING TROOPS

    Question. There are new challenges arising to ensure that returning 
troops are receiving their entitled benefits and services as veterans. 
The new challenges include reaching every veteran.
    What steps is the VA taking to reach out to all of our returning 
troops from Iraq and Afghanistan?
    Answer. Returning troops are provided information about VA benefits 
and services and assistance in applying for these benefits through the 
following VA outreach programs.
    Transition Assistance Program (TAP) and Other Military Services 
Briefings.--From October 2002 through January 2005, VBA military 
services coordinators conducted transition briefings and related 
personal interviews in the United States as reflected in the chart 
below. These briefings include pre- and post-deployment briefings for 
Reserve and National Guard members.

                                                OVERALL BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................           5,368         197,082          97,352
2004............................................................           7,210         261,391         115,576
2005 \1\........................................................           2,263          79,105          34,106
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    In addition to military services briefings in the United States, 
VBA representatives conduct briefings overseas under arrangement with 
the Department of Defense (DOD). VBA provides two tours each year with 
6 to 7 VBA representatives providing this service for each tour. Each 
is home-based at a major military site and provides services at the 
site and surrounding areas. The countries serviced are England, 
Germany, Japan, and Italy. Korea is serviced by staff from the Benefits 
Delivery at Discharge office in Yong San. A representative from the St. 
Petersburg Regional Office provides that service for Guantanamo Bay. We 
were recently requested by DOD to add Bahrain to our overseas schedule 
beginning with the May 2005 tour. The following chart reflects 
statistics regarding overseas briefings:

                                               OVERSEAS BRIEFINGS
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                               Briefings     No. attendees  No. interviews
----------------------------------------------------------------------------------------------------------------
2003............................................................             472          12,943          12,947
2004............................................................             624          15,183           6,544
2005 \1\........................................................              36           1,278             464
----------------------------------------------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard 
members is part of the overall VBA outreach program. In peacetime, this 
outreach is generally accomplished on an ``on call'' or ``as 
requested'' basis. With the activation and deployment of large numbers 
of Reserve/Guard members following the September 11, 2001, attack on 
America, and the onset of Operations Enduring Freedom and Iraqi Freedom 
(OEF/OIF), VBA outreach to this group has been greatly expanded. 
National and local contacts have been made with Reserve/Guard officials 
to schedule pre- and post-mobilization briefings for their members. 
Returning Reserve/Guard members can also elect to attend the formal 3-
day TAP workshops. The following data on Reserve/Guard briefings is a 
subset of the overall briefings data provided in the first chart:

                         RESERVE/GUARD BRIEFINGS
------------------------------------------------------------------------
               Fiscal year                   Briefings     No. attendees
------------------------------------------------------------------------
2003....................................             821          46,675
2004....................................           1,399          88,366
2005 \1\................................             531          32,448
------------------------------------------------------------------------
\1\ Through January 2005.

    Briefings Aboard Ships.--VA provided TAP briefings aboard the USS 
Constellation, the USS Enterprise, and the USS George Washington on 
their return from the Persian Gulf to the United States. VBA will 
continue to support requests from the Department of the Navy for TAP 
workshops aboard ships.

Seamless Transition--Military Treatment Facilities (MTFs)
    In 2003, VA began placing Veterans Service Representatives at key 
military treatment facilities (MTFs) where severely wounded service 
members from OEF/OIF are frequently sent. Representatives of the VBA 
Benefits Delivery at Discharge office in Germany work closely with the 
staff at the Landstuhl Army Medical Center to assist returning injured 
service members who are patients at that facility and family members 
temporarily residing at the Fisher House.
    Since March 2003, a VBA OEF/OIF coordinator is assigned for each 
MTF. Full time staff is assigned to the Walter Reed Army Medical Center 
in Washington, D.C., and the Bethesda Naval Medical Center in Maryland. 
Similar teams work with patients and family members at three other MTFs 
serving as key medical centers for seriously wounded returning troops: 
Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service 
is conducted at all other major military treatment facilities. As of 
January 2005, over 4,500 hospitalized returning service members were 
assisted through this program at Walter Reed, Bethesda, Eisenhower, 
Brooke, and Madigan. Since March 2003, each claim from a seriously 
disabled OEF/OIF veteran has been case managed for seamless and 
expeditious processing.
    Web Page.--As part of the Seamless Transition effort, VBA created a 
new web page for OEF/OIF, directly accessible from the VA homepage. 
Information specific to Reserve/Guard members who were activated is 
included, as well as links to other Federal benefits of interest to 
returning service members. The web page has been accessed over 340,000 
times since its activation in December 2003.
    Benefits Delivery at Discharge (BDD).--VA's BDD program operates in 
concert with the military services outreach program. Under BDD, service 
members can apply for disability compensation within 180 days before 
discharge. The required physical examinations are conducted and service 
medical records are reviewed prior to discharge. The goal is to 
adjudicate claims within 30 days following discharge. Upon receipt of 
the claimant's DD Form 214 (Report of Release from Active Military 
Service), benefits are immediately authorized so that the recently 
separated veteran can receive his/her first disability check the month 
following the month of discharge or shortly thereafter. Currently, 141 
military installations worldwide participate in this program, including 
two sites in Germany and three in Korea. Approximately 26,000 BDD 
claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004; 
and 12,000 in fiscal year 2005 to date.

Recently-Separated Veterans
    Veterans Assistance at Discharge System (VADS).--All separating and 
retiring service members (including Reserve/Guard members) receive a 
``Welcome Home Package'' that includes a letter from the Secretary, a 
copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
0501, Veterans Benefits Timetable, through VADS. Similar information is 
again mailed with a 6-month follow-up letter.
    Secretary's Outreach Letter to Returning Service Members.--Outreach 
letters from the Secretary of Veterans Affairs have been sent to 
approximately 240,000 returning service members who have separated/
retired from active duty. Enclosed with the letters are copies of VA 
Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of 
VA Benefits for National Guard and Reserve Personnel.
    Question. It is imperative for the Department of Defense and the 
Veterans Administration to work closely to ensure that troops returning 
from Iraq and Afghanistan receive the benefits and assistance to which 
they are entitled.
    How do the VA and Department of Defense coordinate information on 
returning troops? Is the VA getting timely and accurate information 
from the Department of Defense on returning troops? In what manner is 
information on returning troops transmitted to the VA from DOD?
    Answer. VA's Office of the General Counsel continues to negotiate 
with DOD to obtain the complete range of returning service member data 
VA needs for identification, tracking, and statistical/reporting 
purposes. A formal Memorandum of Agreement (MOA) between VA and DOD is 
still pending.
    However, a preliminary agreement has been reached that will allow 
VA to receive a flow of basic data from DOD on a regular basis, thus 
facilitating a seamless transition of seriously disabled service 
members into the VA system. As part of this agreement, VA will begin 
receiving data on those disabled service members who are entering the 
Physical Evaluation Board process.
    Question. What is VA doing to reach out to reservists and national 
guardsmen that were activated and deployed who are now returning home 
and are entitled to benefits?
    Answer. See the response above to the question concerning outreach 
to all of our returning troops from Iraq and Afghanistan. Outreach to 
reservists and National Guard members is addressed in that response.

                           COLORECTAL CANCER

    Question. Colorectal cancer is the second leading cause of cancer 
deaths in the United States, yet survival rates are greater than 90 
percent among those whose cancer is detected early.
    Roughly, what percentage of patients who receive their health care 
at a Veterans Administration facility undergoes routine screening for 
colon cancer?
    Answer. Screening for colorectal cancer in the VA has increased 
significantly. In fiscal year 2004, 74 percent of the established 
veterans (those who received care from VA in the past 12 months) 
requiring colorectal screening received it. The percentage of veterans 
requiring colorectal screening has been increasing. In fiscal year 
1996, the percentage was 34 percent; in fiscal year 2001, 60 percent; 
in fiscal year 2002, 64 percent; and in fiscal year 2003, 67 percent.
    Question. Many patients resist colon cancer screening tests due to 
the anticipated discomfort and inconvenience. On the other hand, those 
who choose to be screened by colonoscopy--the most accurate of the 
current modalities--must often wait months for access to a surgical 
suite and trained gastroenterologist. On average, how long must 
veterans wait for a screening colonoscopy at veterans' hospitals and 
clinics?
    Answer. Diagnostic colonoscopies (for patients with symptoms or 
positive findings) are scheduled as soon as possible with an average 
wait time of 32 days. Screening colonoscopies (for asymptomatic 
patients) are scheduled for the next available appointment. VA does not 
measure specifically for screening colonoscopies, but we are providing 
the following waiting time information for diagnostic colonoscopies and 
GI clinics (which includes upper endoscopies and colonoscopies).
    VHA has completed 20,186 diagnostic colonoscopies for the first 4 
months of fiscal year 2005 with an average wait time from the patient's 
desired appointment date (from the date appointment created if a new 
patient) of 32 days. Half the appointments were completed within 17 
days (median wait time was 17 days).
    VHA completed 55,933 appointments for the GI Endoscopy Clinic for 
the first 4 months of fiscal year 2005. The average wait time from the 
patient's desired appointment date (or the date the appointment created 
if a new patient) was 31 days. Half were completed within 7 days 
(median wait time was 7 days).
    Question. In the fiscal year 2004 Omnibus Appropriation, Congress 
urged the VA to pursue aggressively new technologies available for 
diagnosing colorectal cancer that are less invasive, less expensive and 
provide equal or better evaluations than older methods. What has the 
Administration done in response?
    Answer. VA is committed to improving the colorectal screening 
methods and overall percentage of screened veterans. In general, VA 
follows the evidence-based review of the U.S. Preventive Services Task 
Force (USPSTF) in screening for colon cancer, which is found online at 
http://www.ahrq.gov/clinic/uspstf/uspscolo.htm. As noted in their 
conclusion, ``It is unclear whether the increased accuracy of 
colonoscopy compared with alternative screening methods (for example, 
the identification of lesions that FOBT [fecal occult blood test] and 
flexible sigmoidoscopy would not detect) offsets the procedure's 
additional complications, inconvenience, and costs.'' However, the Task 
Force also found insufficient evidence that newer screening 
technologies (for example, computed tomographic colography) are 
effective in improving health outcomes. VA is still looking for 
evidence to show benefit of the newer technologies and works closely 
with USPSTF.
    VA offers screening for colon cancer using all recognized effective 
modalities. If a patient experiences symptoms or has positive findings 
on a screening by any other modality than colonoscopy, then a 
diagnostic colonoscopy is scheduled.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                          MEDICAL HEALTH CARE

    Question. Recently, I introduced the Assured Funding for Veterans 
Health Care Act (S. 331). This bill would ensure adequate veterans 
health care funding is available by making VA medical care mandatory 
spending. This legislation has been endorsed by all of the leading 
veterans organizations.
    Do you support this legislation, and if not, why?
    Answer. An analysis of your proposed legislation would need to be 
made in light of the President's fiscal year 2006 budget submission and 
overall guidance on the budget.
    That said, however, VA has not supported similar legislation 
introduced in previous Congresses. While mandatory funding may appear 
to be an interesting approach to provide resources to America's 
veterans, VA has some serious concerns about its applicability to a 
very complex, highly dynamic and sophisticated health care delivery 
system such as the VA. A mandatory funding approach could inhibit VA's 
ability to appropriately react to rapid advances in medical science and 
technology and the development of new drugs and equipment have 
dramatically changed treatment modalities and the manner in which 
health care is delivered over the last decade. It could also fail to 
keep up with the demographic or health status changes among veterans 
and possibly create a false impression that VA would have full funding 
to enroll all veterans. Therefore, a mandatory funding system based 
upon static or untimely fixed indices may not be the best way to ensure 
that adequate resources are available to maintain the high quality of 
care that VA has become renowned for to care for our Nation's veterans.
    Former VA Secretary Principi testified that the VA needs at least a 
13 percent-14 percent increase in medical funding each year just to 
maintain current health care services for veterans. The Bush 
Administration's fiscal year 2006 budget request for VA medical care 
does not include such an increase in funding.
    Question. If the Administration's proposed VA health care funding 
levels were enacted would there be a decrease in any veterans health 
care services or was Secretary Principi incorrect in his analysis?
    Answer. The Veterans Health Administration has received record 
budget increases over the last 4 years. With this budget proposal, the 
President, working in partnership with Congress, will have increased 
health care funding for veterans by more than 47 percent since fiscal 
year 2001.
    In fiscal year 2006, VA plans to operate within the level of the 
President's Budget request of $30.7 billion (including $750 million for 
construction and $2.6 billion for collections) for the medical care 
program, an increase of 2.5 percent over the enacted level of fiscal 
year 2005. With this funding level, VA will be able to treat more than 
5.2 million patients and VA will focus its health care resources on 
veterans with service-connected disabled conditions, those with lower 
incomes, and veterans needing our specialized services. In 2006, nearly 
80 percent of veteran patients are expected to be high priority--those 
veterans who count on VA the most.
    The President's Task Force to Improve Health Care Delivery for Our 
Nation's Veterans--a 15-member panel that was assembled to study the 
health care needs of our Nation's veterans--released their 
recommendations in a report on May 28, 2003. The report stated clearly 
that the most pressing problem facing the VA health system is that 
funding is not keeping pace with the need for care. While the panel 
encouraged greater cooperation between the VA and the Department of 
Defense's health care system, they recognized this would not address 
the fundamental problem. Instead, the panel recommended two solutions 
to the VA's funding problems: create an independent board which will 
set the level of VA health care spending each year, or establish a 
formula and provide a mandatory amount of funding for VA medical care.
    Question. Do you plan to endorse or act on either of these 
recommendations from the President's Task Force to Improve Health Care 
Delivery for Our Nation's Veterans?
    Answer. Thank you for your question regarding the endorsement of 
mandatory health care funding for the Department of Veterans Affairs. 
We are most appreciative of your interest and concern to ensure that 
sufficient resources are available to provide high-quality health care 
to our Nation's veterans.
    The discretionary legislative process currently in place has 
provided for substantial increases for the Department of Veterans 
Affairs health care budget over the past several years, nearly a 47 
percent increase since 2001.
    While mandatory funding may appear to be an interesting approach to 
provide resources to America's veterans, VA has some serious concerns 
about its applicability to a very complex, highly dynamic and 
sophisticated health care delivery system such as the VA. A mandatory 
funding approach could inhibit VA's ability to appropriately react to 
rapid advances in medical science and technology and the development of 
new drugs and equipment have dramatically changed treatment modalities 
and the manner in which health care is delivered over the last decade. 
It could also fail to keep up with the demographic or health status 
changes among veterans and possibly create a false impression that VA 
would have full funding to enroll all veterans. Therefore, a mandatory 
funding system based upon static or untimely fixed indices may not be 
the best way to ensure that adequate resources are available to 
maintain the high quality of care that VA has become renowned for to 
care for our Nation's veterans.
    Since 2001 VA has been utilizing a professional actuarial model as 
a basis for the formulation of the budget. These actuarial forecasts 
also have been integrated into the VHA's capital and strategic planning 
processes. This demand model has contributed significantly to the 
achievement of VA's strategic goals and performance measures to provide 
enrolled veterans with access to timely, quality care. This has allowed 
decision makers to ensure that resources are available to meet the 
expected demand or develop policies to address any gap between the 
expected demand and available resources. This professional, 
businesslike approach to forecasting is similar to that employed by 
many large private-sector organizations such as major insurance 
corporations throughout our country. The model utilized is highly 
sophisticated and is capable of predicting patient utilization, 
reliance, morbidity, etc. We continue to revise and update the model in 
order to assure that future projections will be as accurate as 
possible.
    VA therefore strongly believes that the utilization of a highly 
professional, scientific, actuarial model is a much more professional, 
effective, and businesslike approach for budget formulation and 
forecasting than those like mandatory funding.
                                 ______
                                 

            Questions Submitted by Senator Mary L. Landrieu

    Question. In May 2001, President George W. Bush signed Executive 
Order 13214 creating the President's Task Force to Improve Health Care 
Delivery for Our Nation's Veterans. The PTF Task Force. This task force 
was charged to identify ways to improve health care delivery to VA and 
Department of Defense beneficiaries. One important recommendation of 
this task force was recently addressed in a letter sent to the VA 
Secretary and to Defense Secretary Rumsfeld. This recommendation 
directed the VA to develop electronic medical records that are 
interoperable and bi-directional, allowing for a two-way electronic 
exchange of health information and occupational and environment 
exposure data. These electronic medical records should also include an 
easily transferable electronic DD214 forwarded from the DOD to the VA. 
This would allow the VA to expedite the claims process and give the 
service member faster access to health care and benefits.
    What progress has been made towards accomplishing this task which 
is necessary in order to ensure that servicemen and women have a 
seamless transition from military to civilian life?
    Answer. The Defense Personnel Records Image Retrieval System 
(DPRIS) is currently operational between the Department of Veterans 
Affairs, Veterans Benefits Administration (over 3,000 users) and the 
Official Military Personnel File systems of the Army, Navy, and Marine 
Corps. DPRIS connects to the VA Personnel Information Exchange System 
(PIES) and allows VA users to electronically request and receive 
official military personnel documentation. The interface with the Air 
Force will be completed in June 2005, and the VA will be able to 
retrieve imaged copies of military personnel records from the Air Force 
by September 2005. All of these systems contain the DD214 and many 
additional military personnel documents that VA uses. The most commonly 
requested form is the DD214, and although the performance parameter for 
DPRIS is to return the requested documents to VA within 48 hours, it is 
currently operating in near real time. In addition to the interagency 
collaboration on DPRIS, DOD and VA are also collaborating on VA access 
to military personnel information that will be stored as data in the 
Defense Integrated Military Human Resources System (DIMHRS). VA 
requirements for military information have been an integral and on-
going part of the requirements collection for DIMHRS, and the two 
departments are now moving into the technical integration phase which 
will determine the most efficient and expeditious way for VA to access 
information in DIMHRS when it comes on line in 2006. The electronic 
exchange of DD214 information will be fully implemented with DIMHRS.
    Question. According to a New England Journal of Medicine study 
published on July 1, 2004, dealing with Mental Health Problems and 
Barriers to Care with respect to Service Members Returning From Combat 
Duty in Iraq and Afghanistan, 82 percent of veterans acknowledged a 
need for mental health treatment, however only 24 percent reported ever 
receiving any mental health treatment within 1 year after returning 
from combat. Among the concerns veterans reported after returning from 
combat, were depression, anxiety, post traumatic stress disorder and 
almost one third reported the misuse of alcohol. With thousands of 
service members returning from Iraq and Afghanistan this year, these 
numbers will increase significantly. As you know, often times symptoms 
of post traumatic stress do not manifest themselves for months or even 
years after returning from combat.
    Given the importance of mental health issues and the impact that 
these concerns will have on not only the service member's entire 
quality of life, as well as the quality of life of his or her family 
and community, what programs has the VA in place at present to deal 
with these matters and what plans do you have to deal with the 
increased numbers who will require this type of health care?
    Answer. Meeting the needs of our returning veterans and their 
families is among VA's highest priorities. VA has indeed anticipated 
and prepared for the increased numbers of those requiring mental health 
services. VA's approach toward the returning troops and their families 
emphasizes health promotion and preventive care principles. This 
approach is designed to identify and resolve problems in readjustment 
to civilian life, before they progress to problems requiring more 
intensive clinical interaction. For those that require clinical 
interaction, VA provides state-of-the-art psychotherapy and 
psychopharmacology treatments.
    Based on VA's experience and research we do not expect that a great 
majority of Operation Enduring Freedom and Operation Iraqi Freedom 
(OEF/OIF) veterans will suffer long-term consequences of their war zone 
experience. However, many likely will have some short-term reactions to 
the horrors of war. Of those who do develop mental/emotional problems, 
PTSD will not be the only problem to be addressed. VA provides 
comprehensive care for veterans with mental disorders through a 
continuum of services designed to meet patients' changing needs.
    Major depression and substance abuse are two problems that can be 
anticipated, and these disorders carry with them significant risk for 
dangerous behaviors such as suicide and family violence. VA provides 
care through 144 specialized PTSD programs throughout the country along 
with 206 (soon to be 207) Readjustment Counseling Centers (RCS), often 
called Vet Centers. In addition, Outpatient Clinical PTSD Teams, 
Specialized Inpatient PTSD Programs, and Residential Treatment Programs 
are located across the Nation. There are PTSD programs in all States. 
VA's ongoing PTSD program evaluation indicates improvements in PTSD 
symptoms and functioning in patients treated by VA for PTSD. In fiscal 
year 2004, VA spent more than $3 billion on the provision of treatment 
services (medical and psychiatric) to veterans with a mental illness.
    The tasks for these teams are those of outreach, health promotion, 
consultation, and liaison. The working title for these programs is: 
Returning Veterans Outreach, Education and Care programs and there will 
be at least one program in every Veterans Integrated Service Network. 
VA's National Center for PTSD is creating an educational program 
entitled ``PTSD 101'' specifically for clinicians who will be hired 
into the new PTSD programs. There will be basic and advanced care 
modules. Linked to the concepts of the PTSD Clinical Practice Guideline 
and the Iraq Clinician War Guide, it will ensure the provision of the 
latest evidence-based care to veterans with PTSD and associated mental 
disorders.
    Analysis of DOD data as of December 2004 shows that 244,054 troops 
had returned from Iraq, with 20 percent (48,733) receiving care in a VA 
medical center. Of those returned troops, 12,422 had a mental health 
diagnosis: 4,783 were previously diagnosed with PTSD, and 3,500 were 
diagnosed with a depressive disorder. An additional 2,082 veterans were 
diagnosed with PTSD at Vet Centers.
    Readjustment Counseling Service takes the lead in providing 
outreach and counseling services through the 206 (soon to be 207) 
community-based centers throughout the United States. Fifty additional 
Global War on Terrorism counselors have been added to these centers to 
meet this need. In addition the Secretary has assigned authority to RCS 
to deliver bereavement counseling to those in need.
    To position VA for future needs, we have allocated $100 million in 
fiscal year 2005 to implement initiatives contained in the Department's 
Mental Health Strategic Plan. The President's fiscal year 2006 budget 
submission proposes an additional $100 million for mental health 
initiatives in fiscal year 2006. These initiatives will benefit all 
veterans receiving mental health care from VA and include OEF/OIF 
outreach programs designed to provide preventive health services that 
should, in many instances, identify problems and address them before 
they require more extensive clinical intervention. These enhancements 
will also address increased clinical needs of returning veterans and 
existing veterans who come to VA for PTSD care.
    Question. A core mission of the Department of Veterans Affairs is 
the provision of benefits to relieve the economic effects of disability 
upon veterans and their families. For those benefits to effectively 
fulfill their intended purpose the VA must process and adjudicate 
claims in a timely and accurate fashion. Rather than making headway and 
overcoming the chronic claims backlog and consequent protracted delays 
in claims disposition, the VA has lost ground to the problem, with the 
backlog of pending claims growing substantially larger. Historically, 
many underlying causes acted in concert to bring on this intractable 
problem. These dynamics acting in concert have been thoroughly detailed 
in several studies into the problem. While the problem has been 
exacerbated by lack of appropriate and decisive action, most of the 
causes can be directly or indirectly associated with inadequate 
resources.
    What steps does the Veterans Administration plan to take by virtue 
of this recommended budget in order to improve the quality, 
proficiency, and efficiency within the Veterans Administration with 
respect to claims processing and adjudication?
    Answer. The focus of the 2006 budget is to continue progress, in 
support of the President's initiative, to improve the timeliness and 
accuracy of claims processing. Recipients of compensation and pension 
benefits are projected to increase from 2.62 million in 2001 to 3.02 
million in 2006, a 15.3 percent increase. The projected increase is due 
to a number of factors, including the current record levels of DOD 
active duty end strength resulting from the large number of activated 
reserve units.
  --We continue to receive increasing numbers of claims. Between 2000 
        and 2004, the number of disability claims received annually 
        rose from 674,000 to 771,000, or more than 14 percent. This 
        budget conservatively estimates a 3 percent increase for 2005 
        and another 3 percent for 2006 in claims receipts. This 
        increase is due to both the high active duty levels mentioned 
        above, as well as an increase in the number of reopened claims 
        due to various changes, including the addition of 
        cardiovascular disease and residuals of stroke to the 
        presumptive list for former Prisoners of War.
  --To address projected workload increases, this budget continues to 
        ensure a sufficient workforce in our compensation and pension 
        programs to meet our targets. The FTE in the compensation and 
        pension programs will increase by 128 in 2006.
    This budget also continues VBA's goal to improve organizational 
designs and information technology investments to process claims as 
efficiently and accurately as possible. For example:
  --In 2005 VBA will begin the consolidation of the disability 
        determination aspects of the Benefits Delivery at Discharge 
        Program into two rating activities located in Salt Lake City 
        and Winston-Salem.
  --In 2006 VBA will complete implementation of the Cooperative 
        Separation Process/Examination initiative at the local level. 
        This is a joint VA and DOD initiative that streamlines the 
        military discharge process for separating servicemembers with 
        disabilities.
  --Funds are provided to continue reorganizing our field financial 
        functions to reduce overhead and realign critical resources to 
        our business processes directly serving veterans.
  --$4.4 million is provided to begin implementation of the Vocational 
        Rehabilitation & Employment Task Force recommendations to 
        establish self-service job resource labs at each regional 
        office to aid VR&E staff and veterans in comprehensive analyses 
        of employment opportunities.
  --Over $15 million has been allocated to support our highest priority 
        IT initiative--VETSNET--and continue efforts in C&P, Education, 
        and VR&E to move off the existing Benefits Delivery Network to 
        the new corporate environment. VETSNET, when fully deployed, 
        will greatly expand the information available to decision 
        makers, reduce the number of times data must be entered both 
        increasing efficiency and insuring that the same data is 
        available throughout the Department.
    In addition, the 2006 budget submission will enable VA to continue 
its efforts in skill certification. Skill certification is a core 
initiative of the Department to insure that claims processors in 
regional offices have tested and validated competencies in the 
essential aspects of their positions. We believe that skill 
certification directly addresses quality and proficiency.
    VA will also continue its Benefit Delivery at Discharge (BDD) 
program. That program greatly simplifies the claims process and 
significantly reduces the amount of time required to process a claim.
    Question. There are 119 State Veterans Homes in 48 States and 
Puerto Rico. For more than 100 years the Federal Government has 
provided support for our State Veteran's Homes in partnership with 
State governments. The Federal Department of Veteran's Affairs budget 
for fiscal year 2006 would change the eligibility for Federal support 
excluding for the first time whole priority groups of deserving 
veterans. As a result, up to 80 percent of veterans in many States may 
no longer qualify for partial Federal support through per diem 
payments. Budget assumptions reduce the VA Per Diem grant by $293 
million. The budget would also place a moratorium on Federal 
construction grants for renovations and new construction of State 
Veterans Homes. After decades of partnership with the States--during 
which State taxpayers across the country have contributed millions of 
dollars to build and maintain the State Veterans Homes--the President's 
budget reneges on this commitment to our State homes, State taxpayers, 
and worst of all, our honored veterans. The impact of the proposal 
would be devastating for the residents of the State Veterans Homes. Of 
veterans currently residing in the Homes, approximately 20 percent 
would continue to receive the Federal per diem payments.
    What suggestions does the VA have for veterans who cannot afford to 
pick up these additional payments as a result of the per diem change 
and what plan do you have for Louisiana Veterans Homes which will be 
unable to meet their operating costs as a result of this massive blow?
    Answer. State Veterans Homes are owned, operated, and financed by 
the States. VA provides limited financial assistance to the States in 
the form of per diem grants for nursing home, hospital, domiciliary, 
and adult day healthcare. Only the nursing home per diem is affected by 
the fiscal year 2006 budget proposal. The cost of care in State 
Veterans Homes varies from State to State, as does the amount of 
assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. State Homes will continue 
operations to the extent that individual States discharge their fiscal 
responsibility for the operation and management of the Homes. VA does 
not have information on the plans of individual States to respond to 
the change in VA policy.
                                 ______
                                 

             Questions Submitted by Senator Robert C. Byrd

    Question. According to the Congressional Research Service, the 2003 
decision by the Administration to suspend health care enrollments for 
the lowest priority veterans called Category 8 veterans will affect 
522,000 veterans by the end of the current fiscal year.
    Secretary Nicholson, how many Category 8 veterans in West Virginia 
are no longer eligible to enroll in the VA health care as a result of 
the 2003 decision?
    Answer. As of the end of fiscal year 2004, VA estimates there were 
78,688 veterans in West Virginia who were Priority 8 of which 24,649 
were enrolled. VA projects there were 54,039 Priority 8 veterans in 
West Virginia who were not eligible to enroll with VA for health care.
    Question. If this policy continues, as your budget proposes, how 
many Category 8 veterans in West Virginia will be affected in fiscal 
year 2006 and beyond? How many veterans will be affected nationally?
    Answer. VA projects there are 9,818 Priority 8 enrollees residing 
in West Virginia who will pay the enrollment fee in fiscal year 2006 
and another 8,789 who will choose not to pay. At the national level, 
642,772 Priority 8 enrollees would pay the enrollment fee and 579,929 
would not. These new collections will allow VA to continue to refocus 
resources on veterans that fall under VA's core medical care mission 
(those with service-related disabilities, lower incomes, and special 
health needs). The fees are more closely aligned with other public and 
private health plans.

            PROPOSED BECKLEY VA MEDICAL CENTER NURSING HOME

    Question. Mr. Secretary, I made your predecessors acutely aware of 
my very strong support for the construction of the proposed Beckley VA 
Medical Center Nursing Home, and I want to take this opportunity to 
familiarize you of my interest in this project, as well. The nursing 
home was authorized by the Veterans Programs Enhancement Act of 2000, 
with the sponsorship of Senator John D. Rockefeller, IV. The project 
was originally authorized at $9.5 million. However, after further 
consultation with VA Headquarters officials, the estimates were 
reformulated, with a new total cost of approximately $18 million for a 
120-bed, 71,300 gross-square foot facility.
    I have been supportive of this project since its inception. To aid 
in its development, I added $1 million to the fiscal year 2001 VA-HUD 
Appropriations bill for the design of such a nursing home on thirteen 
acres of available space owned by the Beckley VA Medical Center, a site 
for which I secured $100,000 several years ago in anticipation of 
increased demand for nursing home care in Southern West Virginia. 
Further, I have included language in the Senate reports accompanying 
the fiscal year 2002, 2003, 2004, and 2005 VA-HUD Appropriations bills 
to encourage that funds for the project be included in subsequent 
Administration budgets.
    I understand that the project has undergone the Capital Asset 
Realignment for Enhanced Services (CARES) review process and that it 
has been included in the February 2005 VA Five-Year Capital Plan, 2005-
2010, which lists the VA's highest priority major medical facility 
construction requirements over the next 5 years. While I am pleased 
that the proposed nursing home is on this list, I am disappointed that 
it is ranked #46 (out of 48 projects).
    Mr. Secretary, is the VA adhering to its capital investment 
methodology by funding construction projects in priority order? Have 
there been any exceptions made? What are they?
    Answer. The Department has adhered to the capital investment 
methodology when funding CARES projects. VA has only allowed projects 
to be funded out of order in extremely limited situations, based upon 
funding allocations, as described below.
    The only exception being:
  --To Allow for Maximizing of the Utilization of Major Construction 
        Funds.--In fiscal year 2005 #29 San Diego, CA, $48.3 million 
        was funded prior to #28 Dallas, TX. Clinical expansion at San 
        Diego was funded since it was less expensive and within VA's 
        funding allowance. This occurred again in fiscal year 2006 when 
        the design for #6 project in Fayetteville, AR, was funded prior 
        to other higher ranking projects because of the availability of 
        funding.
    Question. At the current level of funding and the current rank of 
the Beckley VAMC Nursing Home, when do you anticipate that funds will 
be included in the President's Budget for this project? What can be 
done to move Beckley up the list?
    Answer. When Beckley will be included in the President's budget 
cannot be determined at this time as new projects are added (and some 
may drop out) to the review process each year. For example, for fiscal 
year 2006 two additional projects were reviewed as compared to the 
previous year. Existing projects which have not received CARES funding 
and new projects are rescored each year. Split funded projects that 
have received previous CARES funds (because of their higher score) 
retain their ranking.
    Based on the current capital decision criteria, it will be 
difficult for a project like Beckley to compete with other medical 
projects that clearly provide more access to care, or have a life-
safety component (such as seismic) and/or provide for special 
disability services (spinal cord injury). How well a project addresses 
these criteria leads to an improved score.
    Question. Will the VA's highest major construction priorities be 
reevaulated in the future, providing an opportunity for the proposed 
Beckley Nursing Home to move up on the list?
    Answer. The Department rescores and ranks major projects every 
year. In the next few months, VA will again review and rank major 
construction projects. The highest ranking will be included in the 
congressional budget submission for fiscal year 2007.
    Question. Since the proposed Beckley Nursing Home has already been 
designed with funds that I added in fiscal year 2001 and the land is 
already owned by the VA, why can't this project be moved up on the list 
since it is ready to go to construction?
    Answer. The ranked list of projects are developed based on how well 
each project specifically addresses each of the main criteria and sub-
criterion used for ranking CARES projects. It would not be equitable 
for the Department to move a project up this list simply based on the 
fact that it is designed. Our capital investment planning process and 
methodology involve a Department-wide approach for the use of capital 
funds and ensure all major investments are based upon sound economic 
principles and are fully linked to strategic planning, budget, and 
performance measures and targets. All CARES projects have been reviewed 
using a consistent set of evaluation criteria that address service 
delivery enhancements, safeguarding assets, support of special emphasis 
programs and services, capital portfolio goals, alignment with the 
President's Management Agenda, and financial priorities.
    Question. What level of funding for the VA's major construction 
program will be required annually and for what period of time to 
complete all of the projects listed in the VA's Five-Year Capital Plan, 
2005-2010?
    Answer. VA will need to reexamine its needs each year and determine 
the appropriate breakout between major and minor construction. The 
Department is unable to determine for what period of time it would take 
to complete all the projects listed in our Five-Year Capital Plan 
because the plan is a dynamic document which is updated each year based 
on competing new projects and priorities. In addition, VA is still 
developing cost estimates for the 70 outyear projects that are listed 
in the plan. Most of these conceptual projects require further 
refinement and development. To date, VA has committed $2.15 billion to 
implementing CARES plans, and additional funding will be requested in 
the outyears as specific capital plans are designed.
    Question. How many design awards has the Department made to date 
and for which projects? How many land purchases and for which projects? 
How many construction awards have been made and for which projects?
    Answer. There have been 16 design awards and 2 construction awards. 
There were no land purchases.
    Design Awards:
  --Atlanta, GA--Modernize Patient Wards--6/04
  --Chicago Westside, IL--Modernize Inpatient Space--11/02
  --Columbus, OH--Outpatient Clinic--8/04
  --Des Moines, IA--Extended Care Building--7/04
  --Durham, NC--Renovate Patient Wards--9/04
  --Las Vegas, NV--New Medical Facility--2/05
  --North Chicago, IL--Surgical Suite/Emergency--11/03
  --Pensacola, FL--Outpatient Clinic--1/04
  --Pittsburgh, PA--Medical Center Consolidation--12/04
  --San Antonio, TX--Ward Upgrades and Expansion--1/05
  --San Diego, CA--Seismic Corrections--1/05
  --San Francisco, CA--Seismic Corrections--12/03
  --Tampa, FL--SCI--10/04
  --Tampa, FL--Upgrade Electrical--10/04
  --Tucson, AZ--Mental Health Clinic--8/04
  --Wes Los Angeles, CA--Seismic Corrections--3/03
    Construction Awards:
  --Chicago Westside, IL--Modernize Inpatient Space--9/04
  --North Chicago, IL--Surgical Suite Emergency--9/04
  --Pensacola, FL--Outpatient Clinic--3/05
                                 ______
                                 

              Questions Submitted by Senator Patty Murray

                       REAL HEALTH CARE INCREASE

    Question. This budget cites an increase of $522 million over last 
year; however, the number is much lower in reality--about $100 million. 
As is typical of this Administration, smoke and mirrors are used to 
deflect attention from the real number. Mr. Secretary, let's be 
perfectly clear about what the President is offering as an increase for 
VA health care. Your testimony cites a 2.5 percent increase for medical 
spending. The Majority staff on the Veterans' Affairs Committee 
provided a terrific chart which tries to make sense of the number and 
found that the requested increase is under $80 million. That's only $80 
million more for the nearly 7 million veterans who are enrolled in VA 
healthcare, for the 170 hospitals and hundreds of outpatient clinics, 
for medical inflation, and payroll increases for thousands of VA health 
care workers. Mr. Secretary, Washington state has nearly 700,000 
veterans and the population is growing. The CARES commission and my 
VISN director have told these veterans that two outreach clinics--in 
North Central Washington and Whatcom County--are on the way. But now 
they are on hold because of funding shortages.
    Simply put: help me to understand how an $80 million increase keeps 
our promise to veterans? Set aside the possible increased revenue from 
insurance companies and the spending associated with new veterans' 
fees.
    Answer. The President's 2006 request includes budgetary resources 
of $30.7 billion which will enable VA to provide the high-quality 
health care services that VA has become renowned for to more than 5.2 
million patients in fiscal year 2006.
    Question. The Budget proposes $30.7 billion (including collections) 
for medical care--a $0.8 billion (2.5 percent) increase over the 2005 
enacted level--to treat over 5.2 million patients. The Budget assumes 
that Congress will authorize new authority whereby veterans with higher 
incomes and no military disabilities will pay a $250 annual enrollment 
fee and higher drug co-pays (from $7 to $15). These will still be low 
and more aligned with other public and private health plans.
    What is the amount the President is requesting Congress appropriate 
for VA's hospitals and clinics?
    Answer. VA is requesting the following appropriations in fiscal 
year 2006:

                        [In thousand of dollars]
------------------------------------------------------------------------
                       Description                            Amount
------------------------------------------------------------------------
Medical Services........................................      19,789,141
Medical Care Collections Fund...........................       2,588,000
Medical Administration..................................       4,439,124
Medical Facilities......................................       3,888,469
                                                         ---------------
      Total 2006 Budget Request.........................      30,704,734
------------------------------------------------------------------------

    Question. And again to be clear: what is the amount associated with 
payroll increases and inflation? The amount associated with payroll and 
inflation for VA health care is more than $1 billion, so the 
President's request doesn't even cover inflation.
    Answer. The 2006 budget request reflects an increase of $858.9 
million for payroll increases and an increase of $539.7 million for 
inflation. These increases are offset by a decrease in requested 
appropriations of $1.1 billion from a comprehensive set of legislative 
and regulatory policy proposals and a decrease of $590,000 for 
management efficiencies.

       INCREASED COSTS FOR MIDDLE-INCOME VETS/BAN ON PRIORITY 8S

    Question. This budget includes an increase in the drug co-payment 
and an annual enrollment fee of $250 for Priority 7 and 8 veterans. The 
threshold for Priority 7 is only $25,163 a year, so veterans with 
incomes above this level would be required to pay these new fees. The 
budget also continues the ban on Priority 8 veterans, who in some 
regions of the country can be making as little as $28,000 a year and 
still not be eligible for VA care. The President's co-pay increase and 
new enrollment fee are designed to literally drive veterans out of the 
system. Two years ago, the President had no qualms about prohibiting 
enrollment for new ``middle-income'' veterans. That policy continues 
today. In fact, the testimony touts that the President's enrollment 
decision was the ``most effective'' vehicle to manage health care 
resources. This budget takes a different route, however. The goal is to 
make the cost of coming to VA for health care prohibitively expensive. 
Either way, I have to question the priorities of this Administration. 
As you know, my father returned home from World War II as a disabled 
veteran and during the Viet Nam War, I interned in the Seattle VA 
hospital. I know first-hand the scars and wounds that burden our 
veterans when they come back home.
    Mr. Secretary, our veterans--new and old--are some of our most 
important national security assets. Why not provide sufficient 
resources to care for all veterans?
    Is this care not part of the cost of past wars and the current 
conflicts in which we are engaged?
    Do you agree that VA healthcare for our soldiers returning home is 
a cost of war?
    Answer. In the Eligibility Reform legislation, Congress established 
a priority-based enrollment system and required the VA Secretary, every 
year, to assess veteran demand for VA health care and determine whether 
or not resources are available to provide timely, quality care to all 
enrollees. Using this legislatively mandated system for prioritizing 
care to veterans, VA suspended enrollment in Priority 8 and has 
proposed cost-sharing policies for Priority 7 and 8 enrollees as a 
means of balancing veteran demand for VA health care and available 
resources. These policies also refocus the VA health care system on 
those veterans who need us most. With the implementation of the 
enrollment fee for Priority 7 and 8 enrollees, VA expects that 71 
percent of all those using VA's health care system in 2006 will be 
veterans with service-connected medical conditions, special needs, and 
low incomes, up from 66 percent in 2004. The fees are more closely 
aligned with other public and private health plans.

             REAL EFFECTS OF INCREASING OUT-OF-POCKET COSTS

    Question. The Administration's budget calls for increasing the drug 
co-payment from $7 to $15 per 30-day prescription for Priority 7 and 8 
veterans, as mentioned in an earlier question. It also would require 
these veterans to pay a $250 annual enrollment fee. At the bottom end 
of this spectrum, older veterans on fixed incomes could be making as 
little as $26,000 a year and still be subject to these increases in 
costs.
    I'd like to briefly discuss the potential impact of some of your 
proposals on veterans in the ``middle-income'' bracket. Some of these 
veterans could be making as little as $26,000 a year and still be 
subject to the increases in out-of-pocket costs that are built into 
your budget. And, for a veteran living on a fixed income in a city with 
a high cost of living, like Seattle, this is quite harsh. For example, 
an older veteran on an average of eight medications would see a cost 
increase per year of more than $1,000, just to continue getting his or 
her needed medications and continue enrollment in VA health care.
    How do you reconcile this with VA's mission of providing care to 
all who have served?
    Answer. In the Eligibility Reform legislation, Congress established 
a priority-based enrollment system and required the VA Secretary, every 
year, to assess veteran demand for VA health care and determine whether 
or not resources are available to provide timely, quality care to all 
enrollees. Using this legislatively mandated system for prioritizing 
care to veterans, VA has proposed cost-sharing policies for Priority 7 
and 8 enrollees as a means of balancing veteran demand for VA health 
care and available resources. These policies also refocus the VA health 
care system on those veterans who need us most. With the implementation 
of the enrollment fee for Priority 7 and 8 enrollees, VA expects that 
71 percent of all those using VA's health care system in 2006 will be 
veterans with service-connected medical conditions, special needs, and 
low incomes, up from 66 percent in 2004. The fees are more closely 
aligned with other public and private health plans.

              STATE VETERANS HOMES: ON THE CHOPPING BLOCK

    Question. This budget contains proposals that will severely affect 
the State Veterans Home program. On the one side, the President will be 
seeking authority to restrict who can receive VA funding for care in 
these homes. While 50 percent of the veterans currently being cared for 
in Washington state's three facilities, the State Home Association has 
told me that in many States, 80 percent or more of State Home residents 
will be excluded by this change. According to the VA's average daily 
census for long-term care, there are estimated to be more than 19,000 
individuals in State nursing homes. This budget would slash that figure 
to about 7,000--a 62 percent decline in 1 year.
    Explain to me how you believe these homes will remain viable if 
these proposed policies are accepted?
    Answer. State Veterans Homes are owned, operated, and financed by 
the States. VA provides limited financial assistance to the States in 
the form of per diem grants for nursing home, hospital, domiciliary, 
and adult day healthcare. Only the nursing home per diem is affected by 
the fiscal year 2006 budget proposal. The cost of care in State 
Veterans Homes varies from State to State, as does the amount of 
assistance provided to the Homes by the State. Currently, costs not 
covered by the VA per diem payments are covered from various sources, 
including the veterans themselves and State and Federal programs such 
as Medicare and Medicaid. VA's proposal could increase the share of 
costs borne by the State, depending upon the State's own policies for 
coverage of the costs of State Home care. In addition, VA long-term 
care has shifted from inpatient to outpatient, similar to the private 
sector. This is more convenient to patients and their families, and is 
more cost-effective

              VA NURSING HOMES: ALSO ON THE CHOPPING BLOCK

    Question. The Administration would also like to reduce VA's in-
house capacity by almost 14,000 beds.
    What can you tell me about where VA is in meeting the non-
institutional capacity called for by GAO, and relied upon so heavily in 
your budget, to make up for this loss?
    Answer. Non-institutional home and community-based care (HCBC) is 
part of the medical and extended care benefits package available to all 
enrolled veterans. We recognize that access to these services varies 
across VA's health care system. Last year, VA adopted a policy of 
increasing HCBC capacity by 18 percent annually to meet the full need 
of enrolled veterans by 2011, and established a performance measure for 
Network Directors to meet that goal. Capacity growth is targeted to 
those regions with the greatest current and projected need for services 
in order to reduce variability in access to care. Progress so far has 
been excellent. Capacity growth exceeded 20 percent in fiscal year 2004 
and is at 113 percent of target so far in fiscal year 2005. The number 
of individual programs is also expanding. For example, VA recently 
approved its 100th Home-Based Primary Care Program (up from 77 less 
than 5 years ago), and Care Coordination services have now been 
approved in all 21 VISNs.
    Care Coordination services involve the ongoing monitoring and 
assessment of selected patients using telehealth technologies to 
proactively enable prevention, investigation, and treatment that 
enhances the health of patients and prevents unnecessary and 
inappropriate utilization of resources. Care coordination provides 
patients a continuous connection to clinical services from the 
convenience of their place of residence.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. So with that, we are in our second vote 
and I am going to close this meeting. I thank you very much for 
your patience and look forward to working with all of you. And 
thank you, Dr. Perlin, for your comments as well.
    [Whereupon, at 3:37 p.m., Tuesday, March 15, 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 2006

                              ----------                              


                       WEDNESDAY, MARCH 16, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:08 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Allard, and Feinstein.

                         DEPARTMENT OF DEFENSE

                         Department of the Army

STATEMENT OF GEOFFREY G. PROSCH, PRINCIPAL DEPUTY 
            ASSISTANT SECRETARY OF THE ARMY FOR 
            INSTALLATIONS AND ENVIRONMENT
ACCOMPANIED BY:
        MAJOR GENERAL GEOFFREY D. MILLER, ASSISTANT CHIEF OF STAFF, 
            INSTALLATION MANAGEMENT
        MAJOR GENERAL WALTER F. PUDLOWSKI, SPECIAL ASSISTANT TO THE 
            DIRECTOR, ARMY NATIONAL GUARD
        BRIGADIER GENERAL GARY M. PROFIT, DEPUTY CHIEF, ARMY RESERVE

           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. I'll call this meeting order. I'm very 
pleased to be able to have our second hearing on military 
construction. Last week, we had the first of our hearings, and 
today we are doing Army and Air Force. I want to welcome all of 
you to the Committee. My Ranking Member will be here shortly, 
but I wanted to go ahead and start so we could stay on time.
    This is a dynamic year in military construction, and 
especially for the Army. Surely, the Army is doing more than 
probably we could ever have expected, doing modularity, global 
restationing and BRAC, all at the same time, as we are fighting 
the war in Iraq with heavy Army effort.
    There are many demands on the Army right now, and a tough 
budget environment, but it doesn't change the fact that every 
soldier who is reassigned, restationed, or realigned will need 
a place to eat, sleep, and train, and every family will need 
quality education and healthcare.
    Also, the experience of our military families throughout 
the processes of moving will directly affect morale, readiness, 
and retention of our men and women at a time when we must have 
retention.
    So with all of these moving pieces, it seems to me that the 
Army should be investing heavily in infrastructure in order to 
have adequate facilities in place for its soldiers and their 
families when they arrive at the new post. Yet this year's 
budget request is $1.48 billion, down 16 percent from last 
year's request, 25 percent from last year's enacted levels.
    I brought this up last week at the Defense Appropriations 
hearing, with both the Secretary and with General Schoomaker, 
so I do want everyone to know that I am concerned about the 
Army, the demands we're putting on the Army, and a lower 
military construction budget at the same time.
    Having said that, I do so support where the Army is putting 
its increases, and that is in the Guard and Reserve. They are 
going up 23 and 22 percent, respectively, over their 2005 
requests, and the Reserve request is 15 percent above enacted 
levels. That is, I think, a good thing. We have shortchanged 
Guard and Reserve facilities for many years. So, while we're 
not nearly where we need to be, I do support those increases. 
But I will ask you, as the representative of the Department, 
Mr. Prosch, to take back the message that I really believe we 
are shortchanging the Army in military construction.
    On the Air Force, you have a 61 percent increase over 
fiscal year 2005. And, while the Air Force is not facing quite 
the level of change as the Army in the coming year, it will be 
actively participating in BRAC, global restationing, and the 
global war on terror. So there will be infrastructure needs 
over the next few years as these changes play out.
    The Air Force has significantly boosted its family-housing 
budget request. It's up 18 percent from last year. And, as 
ardent a supporter as I am of housing privatization, I am 
pleased to know that with the budgetary cap on the program 
lifted, the Air Force is now really fully engaged in 
privatization. I am concerned that in our desire to meet the 
fiscal year 2007 goal of eliminating inadequate housing to all 
Services, that we also don't forgo responsible budgeting. I do 
think that the Committee, our Committee, needs to be kept 
apprised of the workings of the privatization, and, in cases 
where MILCON has been appropriated for certain projects that 
are now being converted to privatization, I think we need to be 
kept apprised of that and we need to have input when changes 
like that are made.
    With that, I'm going to turn to Senator Allard to see if he 
has an opening statement. And when Senator Feinstein comes, I 
will certainly recognize her.
    Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Thank you, Madam Chairman. I'd like to 
thank the panel for testifying today. And I'd like to thank 
you. I appreciate the opportunity to welcome our guests from 
both the Army and the Air Force here today.
    Too often, in Congress, we focus on our military's fighting 
units and forget that significant combat-power multipliers are 
Defense installations. If we have the best installations and 
facilities, it will make it that much easier for our soldiers, 
sailors, and the airmen and marines to focus on their mission 
of defending our Nation.
    I'm pleased to welcome our guests here from the Army today. 
I've been impressed by the proactive approach the Army has 
taken to address many of the pressing problems facing its 
military posts, facilities, and training ranges. By thinking 
ahead, I believe the Army is a couple of steps ahead of other 
services, addressing difficult problems, like encroachment and 
shrinking utility of our training ranges.
    And, Madam Chairman, I'll also say that we've got, there at 
Fort Carson--we have some privatization of the housing which 
seems to be working very well. And both Congressman Hefley and 
myself have been following it very closely.
    This praise does not mean the Army doesn't have problems. 
In particular, I am concerned about the redeployment of our 
troops stationed overseas to the continental United States. I 
support this redeployment, as it better addresses our global 
posture, but I am concerned the Army has not thought this 
through. I look forward to asking the witnesses some--from the 
Army some questions on this particular issue, if I'm here. 
Madam Chairman, I've got to leave in about 15 minutes or so.
    Also, we'll be hearing testimony from witnesses from the 
Air Force. And, Madam Chairman, I have serious concerns about 
the way the Air Force has handled the cleanup of one of 
Colorado's former Air Force bases that was closed during a 
prior BRAC round. Once we've gone through BRAC closure, I think 
the follow-up in carrying through your commitments afterwards 
is extremely important. And so, I'll be asking questions in 
regard to the Air Force's lack of effort, and some issues 
regarding a closure that we had in Colorado. I may not be able 
to ask them in person, but, if not, we'll maybe submit 
questions to the Committee. Or perhaps, we'll submit them to 
the Army, and perhaps--maybe they can submit them back to the 
Committee for a response.
    I look forward to working with all of you as we go through 
some difficult priorities setting here on the Committee. And I 
want to thank you, Madam Chairman, for giving me the time to 
say a few words.
    Senator Hutchison. Thank you, Senator Allard.
    We have our first panel today, Mr. Geoffrey Prosch, the 
Principal Deputy Assistant Secretary of the Army for 
Installations and Environment; Major General Geoffrey Miller, 
Assistant Chief of Staff of the Army for Installation 
Management; Major General Walter Pudlowski, Special Assistant 
to the Director of the Army National Guard; and Brigadier 
General Gary Profit, the Deputy Chief of the Army Reserve.
    Mr. Prosch, I'm going to ask you to make your statement, 
but I do want to say how pleased I am with your accessibility. 
I have called on you many times, and you have responded, and I 
appreciate that very, very much. It helps for a very strong 
working relationship.
    So if you--let me just see if my Ranking Member would like 
to make her opening statement now, or would you prefer to wait?
    Senator Feinstein. No statement, Madam Chairman, just to 
welcome everybody. I look forward to their presentations.
    Senator Hutchison. Senator Burns submitted a statement to 
be included in the hearing.
    [The statement follows:]

               Prepared Statement of Senator Conrad Burns

    Thank you, Chairwoman Hutchison. Gentlemen, thank you for coming to 
brief our subcommittee this afternoon. Your service and work is 
critical to the development and maintenance of the facilities for our 
soldiers, sailors, airmen, and marines around the world. Since today, 
we are talking specifically about Air Force and Army military 
construction, I will restrict my remarks to those areas. I intend to 
honor our men and women serving and those who have made the ultimate 
sacrifice for our country by ensuring that our active, reserve, and 
national guard have the resources they need to support the current and 
future requirements with which they have been tasked.
    Our military personnel are based in dangerous areas all around the 
world. It speaks well of the character of our young men and women, who, 
despite these dangers, accept this duty and continue their voluntary 
service to our Nation. We must ensure that we provide the resources 
needed to maintain their installations both at home and overseas.
    I hold firm in my belief that replacing dangerous and outdated 
facilities improves morale for our military forces worldwide, 
contributing to better-trained, more enthusiastic service members who 
can complete the mission more effectively and safely. Investing in 
facilities to support the fielding, training, operations, and quality 
of life of our forces pays dividends. When I chaired this subcommittee 
years ago, I did just that in my State of Montana. Our Air Force and 
Guard facilities were ``vintage 1940'' buildings. Today Montana has 
state of the art facilities and it has made all the difference in the 
world for those men and women. So it is that I really feel our 
commitment to quality of life and modern facilities must not end with 
the active forces. We must continue to support essential infrastructure 
improvements for our National Guard forces, which are fighting 
alongside our active duty forces.
    Part of this quality of life includes physical fitness. It is clear 
that Air Force Chief of Staff, General Jumper, is making fitness a 
priority throughout the Air Force. I think this is a good thing. We are 
desperately in need of a new physical fitness center at Malmstrom Air 
Force Base (AFB), in Great Falls, Montana. Some of you may know that it 
can get a little chilly up in Montana during the year. . . . This, 
combined with the fact that Malmstrom AFB has the youngest average age 
of any Air Force base, has really accelerated the need for expansion of 
the existing facility. I hope you--Secretary Kuhn and Major General 
Fox--will work with me in finding a way to get this project 
accomplished as soon as possible.
    We have also had some problems with Air Force contractors over the 
years at Malmstrom AFB, on various family housing projects. It just 
shouldn't be something that our airmen have to worry about--sinking 
foundations, front steps separating from the rest of the house, etc. 
While most of this is currently in litigation, I do look appreciate 
your willingness to continue discussions on these issues with you, 
should further steps need to be taken.
    Mr. Prosch, I also note with interest a specific initiative the 
Army is undertaking as part of an overall improvement to its facilities 
posture. As we listen to your testimony today, I would like to hear 
more about the Army's ``Range and Training Land Strategy'' and hope we 
can discuss this further. Fort Harrison, in Helena, Montana, is a 
wonderful asset to not only the Montana National Guard, but the entire 
United States military. Various units from across the country love to 
come to Fort Harrison to train. I wonder if Fort Harrison could fit 
into this strategy somehow.
    You will continue to have my strong support in these areas, as we 
invest in training and quality of life measures. It is of utmost 
importance that we do what we can to maintain the proficiency, 
readiness, and morale of these soldiers and airmen, whom this Nation 
relies upon to protect freedom and our way of life.
    Again, I thank you for being here today and look forward to your 
testimony. Thank you, Chairwoman Hutchison.

    Senator Hutchison. Thank you.
    Mr. Prosch.
    Mr. Prosch. Thank you, ma'am.

                    STATEMENT OF GEOFFREY G. PROSCH

    Madam Chairman Hutchison, Ranking Member Feinstein, Senator 
Allard, I'm pleased to appear before you with my Army 
Installation partners, Major General Geoffrey Miller from the 
Active Army, Major General Walt Pudlowski from the Army 
National Guard, and Brigadier General Gary Profit from the Army 
Reserve.
    This is my fourth year to have this distinct honor to 
represent our great Army and to testify before Congress. It is 
wonderful to be here today with friends and Army supporters 
from this Committee. We look forward to the opportunities this 
Committee brings toward leveraging enhanced quality of life for 
our soldiers and families.
    We have provided a written statement for the record that 
provides details on our Army's fiscal year 2006 Military 
Construction budget. On behalf of the Army Installation 
Management team, I would like to comment briefly on the 
highlights of our program.
    We begin by expressing our great appreciation for the 
tremendous support that the Congress has provided to our 
soldiers and their families who are serving our country around 
the world. We are a Nation and an Army at war, and our soldiers 
would not be able to perform their missions so well without 
your support.
    We have submitted a military construction budget of $3.3 
billion that will fund our highest-priority active Army, Army 
National Guard, and Army Reserve facilities, along with our 
family housing requirements. This budget request supports our 
Army vision encompassing current readiness, transformation, and 
people.
    As we are fighting the global war on terrorism, we are 
simultaneously transforming to be a more relevant and ready 
Army. We are on a path with the transformation of installation 
management that will allow us to achieve these objectives. We 
currently have hundreds of thousands of soldiers mobilizing and 
demobilizing, deploying and redeploying. More troops are coming 
and going on our installations than in any era since World War 
II. Our soldiers and installations are on point for the Nation.
    And on a special note I would ask everyone here to keep our 
forward-deployed soldiers in your thoughts and prayers. New 
forces have rotated recently to Iraq. The 3rd Infantry Division 
and the 3rd Armored Cavalry Regiment have returned for their 
second tour of duty. The 42nd Infantry Division, Army National 
Guard, the Rainbow Division, has deployed. Now, they are over 
there. The enemy will test them early on. So keep them in your 
prayers.
    The Army recently identified key focus areas to channel our 
efforts to win the global war on terrorism and to increase the 
relevance and readiness of our Army. One of our focus areas is 
``installations as flagships,'' which enhances the ability of 
our installations to project power and support families. Our 
installations support an expeditionary force, where soldiers 
train, mobilize, and deploy to fight and are sustained as they 
reach back for enhanced support. Soldiers and their families 
who live on and off the installation deserve the same quality 
of life as is afforded the society they are pledged to defend. 
Installations are a key ingredient to combat readiness and 
well-being.
    Our worldwide installations' structure is critically linked 
to Army transformation and the successful fielding of the 
modular force. Military construction is a critical tool to 
ensure that our installations remain relevant and ready.
    Our fiscal year 2006 Military Construction budget will 
provide the resources and facilities necessary for continued 
support of our mission. Let me summarize what this budget will 
provide for our Army: new barracks for 5,190 soldiers, adequate 
on-post housing for 5,800 Army families, increased MILCON 
funding for the Army National Guard and the Army Reserve over 
last year's request, new readiness centers for over 3,300 Army 
National Guard soldiers, new Reserve centers for over 2,700 
Army Reserve soldiers, a $292 million military construction 
investment in training readiness, and facilities support and 
improvements for our Stryker Brigades.
    With the sustained and balanced funding represented by this 
budget, our long-term strategies will be supported. With your 
help, we will continue to improve soldier and family quality of 
life, while remaining focused on our Army's transformation to 
the future force.

                           PREPARED STATEMENT

    In closing, Madam Chairman, we thank you for the 
opportunity to outline our program. As I have visited Army 
installations, I have witnessed progress that has been made, 
and we attribute much of this success directly to the 
longstanding support of this Committee and your able staff. 
With your continued assistance, our Army pledges to use fiscal 
year 2006 MILCON funding to remain responsive to our Nation's 
need.
    Thank you for the opportunity to appear before your 
Subcommittee and answer any questions you may have.
    [The statement follows:]

                Prepared Statement of Geoffrey G. Prosch

                              INTRODUCTION

    Madam Chairman and members of the subcommittee, it is a pleasure to 
appear before you to discuss our Army's Military Construction budget 
for fiscal year 2006. Our request includes initiatives and sustainment 
of programs of critical importance to our Army, the Congress, and the 
Global War on Terrorism, and 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 who serve our Nation around 
the world. Their courage and sacrifices remain the foundation of our 
Army, and they would not be able to perform their global missions so 
successfully without your steadfast support.

                                OVERVIEW

    Installations are the home of combat power--a critical component to 
the Nation's force capabilities. The Department of Defense and our Army 
are working to ensure that we deliver cost-effective, safe, and 
environmentally sound capabilities and capacities to support the 
national defense mission.
    Today, United States forces are engaged worldwide in a war against 
global terror. Operations Enduring Freedom and Iraqi Freedom clearly 
underscore the need for a joint, integrated military force ready to 
defeat all threats to United States interests. To meet the security 
challenges of the 21st Century, we require the right blend of people, 
weapons, and support systems. Regarding support systems, 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 the roles, 
missions, and tasks that safeguard our security at home and overseas.
    The Army's installations framework is multi-purposed. It must 
sustain the regular forward presence of U.S forces as well as their 
emergency deployment in crisis, contingency, and combat. It must have 
the surge capacity to support the mobilization and demobilization of 
our Army reserve component forces. It must also focus 10 to 20 years 
into the future to develop technologically advanced, affordable, and 
effective joint systems and platforms and develop highly qualified and 
committed installation management personnel who will operate and 
maintain them. Our framework must provide a productive, safe, and 
efficient workplace and offer a decent quality of service and 
facilities for our Soldiers and their families (comparable to the 
American citizens off post they are pledged to defend).
    We recognize the enormity of the task to provide the right 
installations framework given the other competing funding programs. We 
are challenged to find the optimum management approach that balances 
the many purposes of our assets. For example, while our installations 
retain their primary military mission to organize, train and equip our 
forces, they also are home to rare species of plants and animals while 
experiencing encroachment from outside civilian communities. Our 
stewardship thus embraces the joint warfighting requirements of the 
Combatant Commanders with environmental management and stewardship of 
our Earth.

                  DEFENSE INSTALLATIONS STRATEGIC PLAN

    In August 2001, the Department of Defense issued the first-ever 
Defense Installations Posture Statement along with the initial Defense 
Facilities Strategic Plan. Those concepts and initiatives have guided 
the Department's programs and budgets and enabled substantial 
improvements in the management and sustainability of our installation 
assets. However, the attacks of September 11, 2001, and the ongoing 
Global War on Terrorism significantly altered our requirement for 
homeland security. The Department of Defense 2004 Installations 
Strategic Plan significantly expands the scope and depth of the initial 
Strategic Plan. The expanded scope reflects the integral relationship 
between natural and manmade assets on our installations. It advances 
the integration of installations and the environmental, safety, and 
occupational health activities to enhance overall support of the 
military mission.
    Our vision is to ensure installation assets and services are 
available when and where needed, with joint capabilities and capacities 
necessary to effectively and efficiently support DOD missions.
    Our mission is to provide, operate, and sustain, in a cost-
effective and environmentally sound manner, the installation assets and 
services necessary to support our military forces--in both peace and 
war.
    Our goals include the following.
    Right Size and Place.--Locate, size, and configure installations 
and installation assets to meet the requirements of both today's and 
tomorrow's force structure.
    Right Quality.--Acquire and maintain joint Army installation assets 
to provide good, safe, and environmentally sound living and working 
places, suitable base services, and effective support for current and 
future missions.
    Right Safety and Security.--Protect Army installation assets from 
threats and unsafe conditions to reduce risk and liabilities.
    Right Resources.--Balance requirements and resources--money, 
people, and equipment--to optimize life-cycle investments and reduce 
budget turbulence.
    Right Tools and Metrics.--Improve portfolio management and planning 
by embracing best business practices, modern asset management 
techniques, and performance assessment metrics.

                             THE WAY AHEAD

    Army installations are the home of U.S. combat power and are an 
inseparable element of the Nation's military readiness and wartime 
effectiveness. From our installations, we generate the combat power 
required today and develop the combat power that will be needed in the 
future. To operate installations effectively and efficiently, we must 
sustain, restore, and modernize all of our installation assets and 
services--all the natural and manmade assets associated with owning, 
managing, and operating an installation, including the facilities, 
people, and internal and external environments.
    Our plan is to deliver a framework of installations, facilities, 
ranges, and other critical assets that is properly distributed, 
efficient, and capable of ensuring that we can successfully carry out 
the roles, missions, and tasks that safeguard our security at home and 
overseas. We have made good progress in many areas, but much remains to 
be done. America's security depends upon installation assets that are 
available when and where needed and with the right capabilities to 
support current and future mission requirements. As the guardians of 
Army installations and environment, we embrace transformation as the 
only way to guarantee these capabilities are delivered--effectively and 
efficiently.

                      ARMY INSTALLATION STRATEGIES

    To improve our Army's facilities posture, we have undertaken 
specific initiatives to focus our resources on the most important 
areas--Barracks, Family Housing, Revitalization/Focused Facilities, 
Range and Training Land Strategy, and Current to Modular Force.
    Barracks Modernization Program.--Our Army is in the 12th year of 
its campaign to modernize barracks to provide 136,000 single enlisted 
permanent party Soldiers with quality living environments. The new 
complexes meet the Department of Defense ``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.
    Army 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 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.
    Revitalization/Focused Facilities.--Building on the successes of 
our housing and barracks programs, we are moving to improve the overall 
condition of Army infrastructure with the Focused Facility Strategy. 
The Installation Status Report is used to determine facilities quality 
ratings of C-1 to C-4 based on their ability to support mission 
requirements.



    We are a C-1 Army living and working in C-3 facilities. Our goal is 
to reach an overall Army average of C-2 quality by concentrating on 
seven types of C-3 and C-4 facilities. These focus facilities are 
general instruction buildings, Army National Guard Readiness Centers, 
Army Reserve Centers, tactical vehicle maintenance shops, training 
barracks, physical fitness centers, and chapels.
    Army Range and Training Land Strategy.--Ranges and training lands 
enable our Army to train and develop its full capabilities to ensure 
our forces are relevant and ready. Our Army Range and Training Land 
Strategy supports the Department of Defense's training transformation 
goals, Army transformation, and our Army's Sustainable Range Program. 
The Strategy identifies priorities for installations requiring 
resources to modernize ranges, mitigate encroachment, and acquire 
training land.
    Current to Modular Force.--The fiscal year 2006 budget includes 
projects to ensure that our ``training battlefields'' continue to meet 
the demands of force structure, weapons systems, and doctrinal 
requirements. As of fiscal year 2005, we have constructed or funded 80 
percent of the Military Construction requirements for the Stryker 
Brigade Combat Teams.
    Leveraging Resources.--Complementary to these budget strategies, 
the Army also seeks ways to leverage scarce resources and reduce our 
requirements for facilities and real property assets. Privatization 
initiatives such as 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 trade 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.
    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 hope to deliver more 
facilities capability at comparable costs and meet our requirements 
faster.

                         MILITARY CONSTRUCTION

    Our Army's fiscal year 2006 budget request includes $3.3 billion 
for Military Construction appropriations and associated new 
authorizations.

----------------------------------------------------------------------------------------------------------------
                                                                                Authorization
                                                              Authorization          of           Appropriation
            Military Construction Appropriation                  Request       Appropriations        Request
                                                                                   Request
----------------------------------------------------------------------------------------------------------------
Miltiary Construction Army (MCA)..........................    $1,262,719,000    $1,479,841,000    $1,479,841,000
Military Construction Army National Guard (MCNG)..........                NA       327,021,000       327,012,000
Military Construction Army Reserve (MCAR).................                NA       106,077,000       106,077,000
Army Family Housing (AFH).................................       549,636,000     1,362,629,000     1,362,629,000
                                                           -----------------------------------------------------
      Total...............................................     1,812,355,000     3,275,559,000     3,275,559,000
----------------------------------------------------------------------------------------------------------------

                   MILITARY CONSTRUCTION, ARMY (MCA)

    The Active Army fiscal year 2006 Military Construction request is 
$1,262,719,000 for authorization and $1,479,841,000 for authorization 
of appropriations and appropriation. As was the case last year, we have 
included only minimal, critical, overseas projects in this year's 
budget. These projects will provide the infrastructure necessary to 
ensure continued Soldier readiness and family well-being that is 
essential throughout any period of transition.
    People Projects.--The well-being of our Soldiers, civilians, and 
families is inextricably linked to our Army's readiness. We are 
requesting $759 million or 51 percent of our MCA budget for projects to 
improve well-being in significant ways.
    Our Army continues to modernize and construct barracks to provide 
enlisted single Soldiers with quality living environments. This year's 
budget includes 19 barracks projects to provide new or improved housing 
for 5,190 Soldiers. With the approval of $716 million for barracks in 
this budget, 85 percent of our requirement will be funded at the 
``1+1'' or equivalent standard. We are making considerable progress at 
installations in the United States, but will only fund high-priority 
projects at enduring installations in Europe and Korea.
    We are requesting full authorization of $331 million for multi-
phased barracks complexes, but requesting only $156 million in 
appropriations for these projects in fiscal year 2006. Our plan is to 
award each complex, subject to subsequent appropriations, as single 
contracts to gain cost efficiencies, expedite construction, and provide 
uniformity in building systems.
    We are also requesting the second increment of funding, $21 million 
for a Basic Combat Training Complex that was fully authorized last 
year. This Complex will house 1,200 basic trainees and provide company 
and battalion headquarters with classrooms and an exterior physical 
fitness training area. The fiscal year 2006 budget also includes a 
physical fitness center for $6.8 million and a child development center 
for $15.2 million.
    Current Readiness Projects.--Projects in our fiscal year 2006 
budget will enhance training and readiness by providing arrival/
departure facilities, maintenance facilities, and the second phase of a 
library and learning center. We will also construct combined arms 
collective training facilities, shoot houses, an infantry platoon 
battle course, a qualification training range, a multipurpose squad 
course, a digital multipurpose training range, urban assault courses, 
and a modified record fire range. These facilities will provide our 
Soldiers realistic, state-of-the-art live fire training. We are 
requesting a total of $424 million for these high priority projects.
    Modular Force Projects.--Our budget supports transformation of the 
Army to a modern, strategically responsive force. Projects include a 
road upgrade, a tactical vehicle wash facility, a battle area complex, 
a modified urban assault course, and a vehicle maintenance facility. 
Our budget contains $115 million for these projects.
    Other Worldwide Support Programs.--The fiscal year 2006 MCA budget 
includes $141 million for planning and design of future projects. As 
executive agent, our Army also provides oversight of design and 
construction for projects funded by host nations. The fiscal year 2006 
budget requests $20 million for oversight of approximately $800 million 
of host nation funded construction in Japan, Korea, and Europe for all 
Services.
    The fiscal year 2006 budget also contains $20 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 (MCNG)

    Our Army National Guard's fiscal year 2006 Military Construction 
request for $327,012,000 (for appropriation and authorization of 
appropriations) is focused on Current Readiness, Modular Force, and 
other worldwide and unspecified programs.
    Current Readiness Projects.--In fiscal year 2006, our Army National 
Guard has requested $71.6 million for six projects to support current 
readiness. These funds will provide the facilities our Soldiers require 
as they train, mobilize, and deploy. Included are one Readiness Center, 
two maintenance facilities, two training projects, and a training range 
environmental mitigation project.
    Modular Force Projects.--This year, our Army National Guard is 
requesting $201.7 million for 37 projects to transform to a Modular 
Force. There are 13 projects for our Army Division Redesign Study, 
three for Aviation Transformation to provide modernized aircraft and 
change unit structure, four for the Army Range and Training Land 
Strategy, and 17 for the Stryker Brigade Combat Team initiative.
    Other Worldwide Support Programs.--The fiscal year 2006 MCNG budget 
also contains $46.1 million for planning and design of future projects, 
along with $7.6 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 (MCAR)

    Our Army Reserve's fiscal year 2006 Military Construction request 
for $106,077,000 (for appropriation and authorization of 
appropriations) is for Current Readiness and other worldwide 
unspecified programs.
    Current Readiness Projects.--In fiscal year 2006, our Army Reserve 
will invest $56.4 million to construct four new Reserve Centers and the 
second phases of two other Reserve Centers; invest $15.4 million to 
construct the first phase of a three-phase noncommissioned officer 
academy; and $5.4 million for a Public Safety Center--for a total 
facility investment of $77.2 million. Construction of the six Army 
Reserve Centers will support over 2,700 Army Reserve Soldiers. In 
addition, our Army Reserve will invest $11.5 million to construct six 
training ranges, which will be available for joint use by all Army 
components and military services.
    Other Worldwide Unspecified Programs.--The fiscal year 2006 MCAR 
budget request includes $14.4 million for planning and design for 
future year projects. The fiscal year 2006 MCAR budget also contains 
$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)

    Our Army's fiscal year 2006 family housing request is $549,636,000 
(for appropriation, authorization of appropriation, and authorization). 
It continues the successful and well-received Whole Neighborhood 
Revitalization initiative approved by Congress in fiscal year 1992 and 
supported consistently since that time, and our Residential Communities 
Initiative (RCI) program.
    The fiscal year 2006 new construction program provides Whole 
Neighborhood replacement projects at seven locations in support of 709 
families for $231.7 million. In addition, we will replace 709 houses 
and upgrade another 1,112 using traditional military construction.
    The Construction Improvements Program is an integral part of our 
housing revitalization and privatization programs. In fiscal year 2006, 
we are requesting $162.4 million for improvements to 1,112 existing 
units at three locations in the United States and five locations in 
Europe, as well as $138.0 million for scoring and direct equity 
investment in support of privatizing 3,606 units at three RCI 
locations.
    In fiscal year 2006, we are also requesting $17.5 million for 
planning and design for future family housing construction projects 
critically needed for our Soldiers.
    Privatization.--RCI, our Army's Family Housing privatization 
program, is providing quality, sustainable housing and communities that 
our Soldiers and their families can proudly call home. RCI is a 
critical component of our Army's effort to eliminate inadequate family 
housing in the United States. The fiscal year 2006 budget provides 
support to continue implementation of this highly successful program.
    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 45 installations with a 
projected end state of almost 84,000 units--over 90 percent of the 
family housing inventory in the United States. By the end of fiscal 
year 2005, our Army will have privatized 29 installations with an end 
state of 60,000 homes. We have privatized over 50,000 homes through 
December 2004, and with your approval of the fiscal year 2006 budget, 
we will have privatized over 71,600 homes by the end of fiscal year 
2006.

                 ARMY FAMILY HOUSING OPERATIONS (AFHO)

    Our Army's fiscal year 2006 family housing operations request is 
$812,993,000 (for appropriation and authorization of appropriations), 
which is approximately 59 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 ($138 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 ($132 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. We continue to make steady progress in the 
privatization of utility systems/infrastructure on our installations.
    Maintenance and Repair ($309 million).--The maintenance and repair 
(M&R) account supports annual recurring maintenance and major 
maintenance and repair 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 results in slippage of maintenance projects that 
adversely impacts on Soldiers and family quality of life.
    Leasing ($214 million).--The leasing program provides another way 
of adequately housing our military families. The fiscal year 2006 
budget includes funding for 13,190 housing units, including existing 
Section 2835 (``build-to-lease''--formerly known as 801 leases) project 
requirements, temporary domestic leases in the United States, and 
approximately 8,100 units overseas.
    RCI Management ($20 million).--The RCI management program provides 
funding for the implementation and oversight requirements for 
procurement, environmental studies, real estate support, portfolio 
management, and operation of the overall RCI program.

                  BASE REALIGNMENT AND CLOSURE (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 rid the Department of excess infrastructure and align the 
military's base infrastructure to a reduced threat and force structure. 
Through this effort, our Army estimates approximately $10 billion in 
savings through 2005.
    Our Army is requesting $93.9 million in fiscal year 2006 for prior 
BRAC rounds ($4.5 million to fund caretaking operations of remaining 
properties and $89.4 million for environmental restoration). In fiscal 
year 2006, our Army will complete environmental restoration efforts at 
four installations, leaving nine remaining BRAC installations requiring 
environmental restoration. We also plan to dispose of an additional 
1,119 acres in fiscal year 2006.
    To date, our Army has disposed of 227,429 acres (88 percent of the 
total acreage disposal requirement of 258,607 acres). We have 31,186 
acres remaining to dispose of at 21 installations. Our Army continues 
to save more than $900 million annually from previous BRAC rounds. To 
date, the Army has spent $2.6 billion on BRAC environmental 
restoration.

                       OPERATION AND MAINTENANCE

    The fiscal year 2006 Operation and Maintenance budget includes 
funding for Sustainment, Restoration, and Modernization (S/RM) and 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 (IMA) to 
best utilize operation and maintenance funding.
    Sustainment, Restoration, and Modernization.--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 our 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 
Army 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 funds programs to operate the bases, 
installations, camps, posts, and stations for our Army worldwide. The 
program includes municipal services, government 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.
    Installation Management Agency.--The Installation Management Agency 
(IMA) is a result of the Army leadership's vision to streamline 
headquarters, create more agile and responsive staffs, reduce layers of 
review and approval, focus on mission, and transform the Army. IMA 
brings together all installation support services under one umbrella to 
promote optimal care and support of Soldiers and families. IMA is at 
the center of the Army's initiative to mold installation support 
functions into a corporate structure, enabling equitable, efficient, 
and effective management of Army installations worldwide. IMA supports 
readiness, promotes well-being, and preserves infrastructure and the 
environment.
    In its first 2 years, IMA has been successful in executing the 
tasks associated with growing a new organization, while simultaneously 
supporting the Global War on Terrorism. In the upcoming year, IMA will 
continue to develop a cadre of leaders to orchestrate excellence in 
installation management; manage installations equitably, effectively, 
and efficiently; support the well-being of the Army's people; practice 
sound stewardship and resource management; deliver improved mission 
support to all organizations; and develop and sustain an innovative, 
team-spirited, highly capable, service-oriented workforce.

                  HOMEOWNERS ASSISTANCE FUND, DEFENSE

    Our Army is the Department of Defense Executive Agent for the 
Homeowners Assistance Program. This program provides assistance to 
homeowners by reducing their losses incident to the disposal of their 
homes when military installations at or near where they are serving or 
employed are ordered to be closed or the scope of operations reduced. 
For fiscal year 2006, there is no request for appropriations and 
authorization of appropriations. Requirements for the program will be 
funded from prior year carryover and revenue from sales of homes. 
Assistance will be continued for personnel at five installations that 
are impacted with either a base closure or a realignment of personnel, 
resulting in adverse economic effects on local communities. The fiscal 
year 2006 Homeowners Assistance Program budget does not include 
resources for potential requirements that the new Base Realignment and 
Closure 2005 process may cause.

              FISCAL YEAR 2005 SUPPLEMENTAL BUDGET REQUEST

    The fiscal year 2005 Supplemental request funds facilities that 
directly support the Global War on Terrorism in both the United States 
and overseas locations. It contains $990.1 million in Military 
Construction for the Active Component Army.
    Within the Central Command area of operations in Afghanistan and 
Iraq, there are $687.3 million for military construction projects. 
Projects in Afghanistan include barracks, a fuel storage tank farm and 
distribution system, Joint operations center, power generation plant, 
and an ammunition supply point. Projects in Iraq include barracks, a 
tactical operations building, medical facilities, an overhead cover 
system for force protection, an equipment support activity, a battalion 
and company headquarters, a 60-mile supply route, and a project to 
encapsulate hazardous materials bunkers.
    Within the Southern Command area of operations at Guantanamo Bay, 
Cuba, there is $41.8 million for two military construction projects--a 
detention facility and a radio range security fence.
    Within the United States, there is $261 million for military 
construction relating to modularity. The projects, distributed to seven 
different locations, include site preparation and utility work, an 
aircraft maintenance hangar, an aircraft hangar, and mobilization and 
training barracks.
    Additionally, the fiscal year 2005 Supplemental budget includes 
$248 million in Other Procurement, Army for relocatable buildings to 
provide temporary barracks, company operations, and dining and 
maintenance facilities at five locations in the United States. These 
are required to support our Soldiers as they prepare for battle.

                                SUMMARY

    Madam Chairman, our fiscal year 2006 budget is a balanced program 
that supports our Soldiers and their families, the Global War on 
Terrorism, Army transformation, readiness and Department of Defense 
installation strategy goals. We are proud to present this budget for 
your consideration because of what this $3.3 billion fiscal year 2006 
budget will provide for our Army:
  --New barracks for 5,190 Solders
  --New housing for 5,800 families
  --Management of 71,600 privatized homes
  --Operation and sustainment of 48,000 government-owned and leased 
        homes
  --New or improved Readiness Centers for over 3,300 Army National 
        Guard Soldiers
  --New Reserve Centers for over 2,700 Army Reserve Soldiers
  --Three Aviation Transformation projects
  --$292 million investment in training ranges
  --Facilities support for two Stryker Brigades
  --Transfer/disposal of 88 percent of prior Base Realignment and 
        Closure acreage
    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 our Army's transformation.
    In closing, we would like to thank you again for the opportunity to 
appear before you today and for your continued support for our Army

    Senator Hutchison. Thank you, Mr. Prosch. You are the only 
one on the panel making a statement?
    Mr. Prosch. Yes, ma'am.
    Senator Hutchison. Then I would like to defer to Senator 
Allard, since he has to go, for the first questions. And then I 
will call on Senator Feinstein, and then I will go next. We are 
going to have a 5 minute time rule.
    Senator Allard. Thank you, Madam Chairman.

                EASEMENTS TO PREVENT URBAN ENCROACHMENT

    One of the things that's happening in Fort Carson is that 
we have an opportunity to begin to take advantage of some 
easements around the base there to prevent urban encroachment. 
This is a problem, when we were on Armed Services Committee, 
that we've addressed with some authorizing legislation. And it 
seems as though we have reached a consensus, as far as the 
community leaders are concerned; we have reached consensus as 
far as the base commander is concerned; and we have reached a 
consensus with the property owners around there. The owners are 
willing sellers. In fact, there's only just a couple of 
property owners there who own very large ranches that border 
Fort Carson. There is urban encroachment that's occurring on 
that area, and I think everybody's concerned about it.
    And so, I just want to inquire of you, Mr. Prosch, what 
sort of priority will these conservation easements have 
particularly when we have everything pretty well lined up.
    Mr. Prosch. Sir, we think it's a great program. And we've 
had some real successes in dealing with encroachment at Fort 
Bragg. We're getting some great successes also at Fort Hood and 
at the National Training Center. We've found that at Fort 
Bragg, our pilot initiative with these easements, we were able 
to obtain land around Fort Bragg and work in close coordination 
with the Fish and Wildlife Service, and actually develop a 
nature habitat surrounding Fort Bragg, which allowed us to move 
endangered species habitat to that area and free up training 
area.
    We're doing the same thing at Fort Hood. On the 16th of 
April, we're going to commemorate a partnership with Central 
Texas that will allow us to free up 47,000 acres of land at 
Fort Hood for both training and cattle grazing.
    We're doing the same thing at the NTC, with the leadership 
of Senator Feinstein. And I would welcome the opportunity to 
work closely with you and the great people in Colorado to help 
that.
    If you look at the challenges we have in the environmental 
arena, encroachment and endangered species are the two biggest 
challenges that we have, because they threaten readiness. And 
if we can not do live-fire training and maneuver training, we 
can not get your soldiers combat-ready in the way that the 
threat they're going to see when they hit the ground in another 
area.
    Senator Allard. Well, I thank you for that statement and 
agree with what you're saying.

            RESTATIONING FACILITY REQUIREMENTS--FORT CARSON

    The other thing that's happening in Colorado is that the 
2nd Combat Brigade Team, the 2nd Infantry is being permanently 
transferred from Korea to Fort Carson, Colorado. I understand 
that there may be some significant restationing facility 
requirements. These requirements may cost as much as 300 
million in military construction. I think Fort Carson is not 
the only base facing these challenges. What is the Army's plan 
to meet these requirements?
    Mr. Prosch. Sir, we're anxiously awaiting their arrival, in 
August. And I would turn it over to Geoff Miller, my active 
duty army assistant here, for the details.
    General Miller. Thank you.
    One of the things, Senator, that's going on--you know, 
we're going to do a combination of things at Fort Carson, for 
example. We're going to renovate 17 of our barracks to the 
``One-Plus-One'' standard to welcome the 2nd Brigade Combat 
Team back in. We're also going to do some interim facilities 
that will round out that capability. But we do--and we will 
need to come back to the Congress to ask for military--MILCON 
to be able to have permanent capability once the final 
stationing choices are made, after the BRAC announcements are 
made. So----
    Senator Allard. So that's a request you would make in the 
next budget year, in the 2007 budget year?
    General Miller. Yes, sir, that's correct.
    Senator Allard. I see. Okay.
    Madam Chairman, that pretty well wraps up my questions. And 
I see my time's close to running out. And I thank you.
    Senator Hutchison. Thank you.
    Senator Feinstein.
    Senator Feinstein. Thank you very much, Madam Chairman.
    Senator Hutchison. And we're on a 5 minute rule.
    Senator Feinstein. Thank you.

                        DECREASED BUDGET REQUEST

    Why is the Army's request decreased by 16\1/2\ percent, 
when the Army's overall facilities quality rating is C3?
    Mr. Prosch. Ma'am, you'll see a decrease in military 
construction in this budget over what we did last year. Some of 
the rationale on that is that, because of the great success in 
our privatization for housing, we don't have to do as much 
military construction for housing. You can see that our OCONUS 
military construction is focused in our enduring installations. 
We're going to ask for your support for that OCONUS 
construction. Our military housing overseas, we are now----
    Senator Feinstein. Well, let me just stop you. As I 
understand, the housing request has a drop of $220 million, or 
13 percent--actually, 12.9 percent--from last year's request, 
but the overall MILCON is down 16\1/2\ percent. In the time 
I've been on the committee, I've never seen anything quite like 
this, in terms of a decrease of the most active service engaged 
in war today.

                              RCI PROGRAM

    Mr. Prosch. Yes, ma'am. The family housing operations is 
dropped because of the success of the RCI program, because the 
operations are funded by Basic Allowance for Housing (BAH) 
funds to our privatization partner now. So that's one reason 
why you see a drop there. And that's been very successful. And 
that accounts for several hundred million dollars in drop of 
the family housing operations piece. But if you look at the----
    Senator Feinstein. You're saying that the same number of 
housing units are built, but built this much more cheaply?
    Mr. Prosch. We have 23 installations where we have 
privatized housing. One of the great success stories is at 
Presidio of Monterey. And what you see there is, we used the 
basic allowance for housing as the income stream to fund that. 
And our privatization partners construct and do the family 
housing operations for those programs, so that the Army is 
still funding it, but it's a different stream; it's not through 
the military construction program now. And----
    Senator Feinstein. Well, I'm just wondering, can you say, 
then, that private building of military housing is a big enough 
savings to reduce your budget by 16\1/2\ percent?
    Mr. Prosch. I'm just talking about the operations of family 
housing right now.
    Senator Feinstein. Something--I mean, just something in the 
numbers don't jive.
    Mr. Prosch. Right.
    Senator Feinstein. And maybe we could work together and see 
if----
    Mr. Prosch. Sure.
    Senator Feinstein [continuing]. We can get an understanding 
of those numbers.
    Mr. Prosch. Yes, ma'am.
    Senator Feinstein. Because I don't understand it.
    I would like to ask you a question about--Senator Allard 
has similar concerns but about Fort Ord in----
    Mr. Prosch. Yes, ma'am.

                   FORT ORD BURN--REMEDIATION FUNDING

    Senator Feinstein [continuing]. California. The Army, 
according to this, intends to spend $4.8 million this coming 
year. And last year, range fires burned nearly 2,000 acres of 
Fort Ord at a location that the Army has had difficulty 
clearing because of native grasses. So the fire took care of it 
for you. Could you please describe for me the efforts taken by 
the Army last year at Fort Ord, and explain the funding and the 
time required to complete the remediation actions there?
    Mr. Prosch. Yes, ma'am.
    At Fort Ord, the Army had scheduled a 500-acre programmed 
burn to try to take out some of the chaparral, native species, 
endangered plant there. And it got out of control, but was 
contained on post, and 1,470 acres were, in fact, burned. We 
have been able to surface-clear all of that 1,470 acres. The 
unexploded ordnance is the biggest challenge that we have with 
the range there at Fort Ord. To date, the Army has spent $344.4 
million at Fort Ord. So we are steadily making progress. Last 
year, we spent $26.9 million in order to try to continue to 
make steady progress at Fort Ord. We have cleared, so far, a 
total of 27,000 acres at Fort Ord. We have, remaining, 14,000.
    The biggest challenge is the impact area there, the 7,000 
acres, in a range where the Army has been firing ordnance since 
1917. The $4.8 million allocated for fiscal year 2006, we 
believe, is a balanced approach to try to deal with land that 
we're prepared to turn over. Should we have an opportunity to 
have a more rapid turnover, we could put some more money into 
that.
    I would like to compliment Congressman Farr and the 
stakeholders there in the Monterey area. They have established 
a Strategic Management Assessment Requirements Technology Team, 
called a SMART Team. And we have very, very good cooperation 
with the stakeholders, the local people, the environmental 
community there. And we will continue to try to press on with 
this, as best we can.
    Anything you'd like to add, Geoff?
    General Miller. I think one other thing, Senator, if we can 
add onto--is the SMART Team that's come on. We're using a new 
technology, which is an aerial survey technology using ground-
penetrating radar to locate the ordnance in the old impact area 
so we can more rapidly make the decision. We think this is 
going to speed our ability to get at this last 14,000 acres, 
and then move back to public use of that land as quickly as 
possible.
    Senator Feinstein. So you have adequate funding to do what 
you need to do.
    General Miller. Yes, ma'am.
    Senator Feinstein. So if I watch, I'll be very pleased by 
what I see?
    General Miller. We believe that after we do this next 
survey, that we can more rapidly get in, and there may be an 
opportunity to invest in some--in the success that that will 
have.
    Senator Feinstein. Okay.

        WEAPONS OF MASS DESTRUCTION CIVIL SUPPORT TEAMS FUNDING

    General Pudlowski, this committee has added funding each of 
the past 3 years to implement the construction program of the 
Army Guard's Weapons of Mass Destruction CST program. How many 
facilities remain to be completed? And how much funding will be 
necessary?
    General Pudlowski. Thank you, ma'am.
    First, let me thank you and the rest of the leadership, and 
tell you that the Guard soldiers are performing extremely well 
today in the Gulf and in other places throughout the world. And 
particularly from California, the number of soldiers that have 
come out of the 40th Division have been tremendous in assisting 
other commands in their preparations and efforts----
    Senator Feinstein. This committee anticipates that Guard 
soldiers from California and Texas are the best in America.
    General Pudlowski. Ma'am, I will tell you that they are 
doing extremely well----
    Senator Hutchison. And if you don't mention Texas pretty 
fast, you're going to be in big trouble.
    General Pudlowski. I will tell you that the 56th Brigade 
and the 36th Infantry Division is doing just as well in the 
environment today. Those comments are coming back daily. And 
the 36th Division's got other missions ahead for their future, 
as well. And, sir, that's not to take away from what Colorado 
has done and how they've contributed.
    Ma'am, to your question, the Civil Support teams are an 
important piece of what we have in the inventory of the 
National Guard, and how they've been employed. We have 23 
additional units that still have to be organized. We're in the 
process of organizing it from a facility perspective. We would 
need the facilities for those 23. Total cost is approximately 
$40 million. And if that resource was made available----
    Senator Feinstein. Okay. So this is how many out of how 
many?
    General Pudlowski. This is 23 out of 55.
    Senator Feinstein. Thank you. And so, you anticipate that 
it'll be completed when? All 55.
    General Pudlowski. At the current rate, it would take us 
the next 5 years of the FYDP to accomplish that. But for a cost 
of $40 million--each one is approximately two-point-some-
approximately $2 million apiece--we would be able to complete 
that whole operation.
    Senator Feinstein. Thank you.

                     RESERVES TRAINING--CALIFORNIA

    Mr. Prosch. Ma'am, may I just make one comment about a 
great contribution that Fort Hunter Liggett and Camp Roberts in 
California provide to all the Reserves in the western part of 
the United States. Without Fort Hunter Liggett, we wouldn't 
have a significant maneuver area for them to utilize, because 
the National Training Center is very busy with the active 
force. Camp Pendleton has encroachment challenges and they're 
busy, and Fort Lewis is very busy. So it's very important for 
our Reserve forces. And Hunter Liggett allows not only the 
combat brigades, but also the combat-service support and the 
logistical units to train there. So they have tremendous 
capability, and they also have good support with the local 
communities. So we thank you.
    Senator Feinstein. So it's reasonable to believe, Mr. 
Secretary, that the Army is going to retain Hunter Liggett.
    Mr. Prosch. The Army is evaluating all installations fairly 
and squarely. You'll be very proud of the process, when the 
list comes out on May 17, based on military criteria.
    Senator Feinstein. Thank you.

                      GLOBAL RESTATIONING FUNDING

    Senator Hutchison. Mr. Prosch, the Army is the service most 
affected by the Integrated Global Presence and Basing Strategy, 
and we're looking at 60,000 to 70,000 troops coming home. That 
has been announced. You know, I advocated that initiative, and 
am very pleased that it is going forward. I don't see very much 
in this budget request that supports restationing, aside from 
around $392 million earmarked in the BRAC account for global 
restationing.
    My question is, first of all, is that $392 million in the 
BRAC account for the global restationing for the Army? That's 
my first question on this subject.

                          SUPPLEMENTAL FUNDING

    Mr. Prosch. We are going to be relying heavily on the 
supplemental to assist us with the standup of our ten new 
brigades and with the restationing of units that come from 
overseas. We are using BRAC as a strategic lever to determine 
the right location to put all these places.
    Senator Hutchison. Are you--you're saying 
``supplemental''--are you looking at a future supplemental, 
after BRAC, in which you would start the process of preparing 
bases that are going to take these people, or are you talking 
about a great big MILCON commitment in the next year's budget 
for that purpose?
    Mr. Prosch. When you look at the supplemental right now, 
you see that we've got money earmarked to support modularity--I 
have some handouts here that your people could perhaps show to 
you--that we're using to provide facilities at the temporary 
locations where we put our ten new brigades. On the 17th of 
March, as part of the BRAC announcement, we will also include 
the locations of where we're going to move the units that are 
coming from overseas.
    We are going to come to you, after the BRAC is announced, 
to get your support for the MILCON funding for the long-term 
answer to these organizations. But we're using the supplemental 
now in 2005, because we're standing up new brigades, as we 
speak.
    Geoff, do you want to comment?
    Senator Hutchison. You meant May, sir.
    Mr. Prosch. 16th of May. I'm sorry.
    Senator Hutchison. Yeah, I was thinking, what's today?
    Mr. Prosch. On the 15th of March, they're going to announce 
the BRAC commissioners.
    Senator Hutchison. Yes.
    Mr. Prosch. So the 16th of May is----
    Senator Hutchison. Is the BRAC day.
    And you will be, in that BRAC announcement, making the 
choices of where the incoming brigades are going.
    Mr. Prosch. Yes, ma'am.
    Senator Hutchison. So I'd just--the reason I'm pursuing 
this is that I've gotten some mixed signals about funding for 
the moves. I just want to make sure that the commitment to the 
moves is made, it is there, and the money will follow.
    Mr. Prosch. Yes, ma'am.
    Senator Hutchison. Thank you.
    Mr. Prosch. I would just add that we have announced the 
units that are going to be returning.
    Senator Hutchison. Yes. You just haven't announced where 
they're going.
    Mr. Prosch. The when and the where--the where will be 
determined by the BRAC analysis.
    Senator Hutchison. Right.
    Mr. Prosch. And the when--we're going to try to make the 
right decisions, based on quality of life. We will want to 
coordinate with the local school districts. We're going to want 
to make sure that we have adequate housing. But we're going to 
want to make sure that we've developed brigade-sized facilities 
for these units when they come back.
    Senator Hutchison. Yes, I think all of that is absolutely 
essential and the correct way to approach it. I just have 
gotten mixed signals about the money being available to make 
these moves. And as long as you're telling me the commitment is 
going to be kept, that those troops will be moving home, and 
that we will have the funding request to do it. That's all I 
need to know.
    Mr. Prosch. Yes, ma'am.
    Senator Hutchison. And you have said yes. Correct?
    Mr. Prosch. Yes, ma'am.

             OVERHEAD AND COMPARTMENT PROTECTION LOCATIONS

    Senator Hutchison. In the supplemental that is going to be 
before us shortly, the Army has requested $300 million for 
overhead and compartment protection at various locations, but 
no specificity. Could you elaborate on where those will be and 
what you're envisioning the uses for that $300 million to be?
    Mr. Prosch. Yes, ma'am. Let me start, then I'll turn it to 
Geoff Miller, who returned from Iraq about 3 months ago.
    As part of the supplemental, one of the requests from the 
combatant commander, General Abizaid, was to try to provide 
enhanced overhead protection for our soldiers in theater. And 
so, we, as the executive agent, are trying to support the 
combatant commander's request. As you recall, there was a 
dining facility that was attacked recently. There is a distinct 
threat from mortar and rocket attacks. And so, they would like 
to provide enhanced protection for the large-density troop-
soldier areas. It's a two-level type of facility, to where the 
top level would absorb the blast, and the second level would 
actually stop the fragmentation from hitting the troops.
    Senator Hutchison. And where--I understand that, and that's 
a very good explanation, but as you are expanding, are you 
looking at doing these all throughout Iraq and also 
Afghanistan, or are we just looking at Iraq?
    General Miller. Senator, right now they're focused on Iraq. 
There are 41 different locations, and, as Mr. Prosch said, 
they're in--where troops are concentrated--in living areas, in 
dining facilities. And kind of the rule of thumb, if there are 
more than 50 soldiers in an area, we wanted to put overhead 
cover, because we have a--we were having a fairly significant 
challenge in mortars. And that's going down. But these went in. 
So they will go into the Afghanistan--really, around Baghram 
Airport--as we build that up.
    Senator Hutchison. I just want to, on a personal note, say, 
I was privileged to give four Purple Hearts to those who were 
in that dining facility, and I was--it was during December--I 
was most struck by how quickly they got to Brooke Army Medical. 
I think they got there Christmas Eve, and the attack was maybe 
the 19th, something very quick. I was very pleased. And, of 
course, they were great. I met with each of them before I was 
able to give them their Purple Hearts, and they were great 
young people. Just amazing.
    General Miller. Senator, if I can, for the record, we'll 
come back and give you the 41 locations----
    Senator Hutchison. Okay.
    General Miller [continuing]. Where we're going to put--be 
putting this overhead cover.
    Senator Hutchison. Thank you.
    [The information follows:]
                     Overhead Cover Locations--Iraq
    The following list identifies the 41 facilities currently scheduled 
to receive overhead cover. U.S. Central Command is continuing to 
identify additional facilities that require overhead cover:

                        [In thousands of dollars]
------------------------------------------------------------------------
              Location                        Facility            Cost
------------------------------------------------------------------------
Anaconda............................  Dining Facility........    $14,590
Anaconda............................  Post Exchange--East....      3,660
Anaconda............................  Post Exchange--West....      3,000
Fallujah............................  Dining Facility 1......      3,200
Fallujah............................  Dining Facility 2......      3,200
Fallujah............................  Post Exchange..........        800
Marez...............................  Dining Facility........     12,000
Kalsu...............................  Dining Facility........      1,450
Freedom.............................  Dining Facility........      2,129
Hope................................  Dining Facility........      6,000
Falcon..............................  Dining Facility........      7,278
Taji................................  Dining Facility 1......      8,400
Taji................................  Dining Facility 2......      8,400
Diamondback.........................  Dining Facility........      8,000
Rustimiyah..........................  Dining Facility........      3,090
Brassfield..........................  Dining Facility/Gym....        200
McKenzie............................  Dining Facility........      1,920
Caldwell............................  Dining Facility 1......      2,077
Caldwell............................  Dining Facility 2......      2,077
Caldwell............................  Dining Facility........        804
Warrior.............................  Building 4098..........      5,683
Warrior.............................  Building 4088..........      1,151
Warrior.............................  Building 4096..........        172
Prosperity..........................  Dining Facility........      2,000
Victory.............................  Dining Facility........      6,626
Victory South.......................  MWR Dining Facility....     19,700
Victory South.......................  Cafe Dining Facility...     15,400
Liberty.............................  Dining Facility              6,750
                                       DeFleury.
Liberty.............................  Dining Facility Black..      6,750
Liberty.............................  Dining Facility Pegasus      3,129
Gaines Mills........................  Dining Facility........        160
Speicher............................  Dining Facility........      3,710
Speicher............................  Dining Facility Victory      3,710
Danger..............................  Dining Facility........      2,000
Cobra...............................  Dining Facility I......        408
Summerall...........................  Post Exchange..........         50
Summerall...........................  Dining Facility........        124
Hurricane Point.....................  Dining Facility........        846
Hurricane Point.....................  Post Exchange..........         48
Taqqadum............................  Dining Facility 1......     13,617
Taqqadum............................  Dining Facility 2......      1,808
Various Sites.......................  Miscellaneous..........    113,833
                                                              ----------
      TOTAL.........................  .......................    300,000
------------------------------------------------------------------------

    Senator Hutchison. My last question, and then I'll see if 
Senator Feinstein has any others for this panel.

                     JOINT BASING--ELLINGSTON FIELD

    Mr. Prosch, as you know I am supportive of the service's 
move toward joint basing, specifically Ellington Field. You are 
very familiar with what we're doing there, and have been 
terrifically supportive. And I just wanted to ask you what the 
status is, from your standpoint, of the move of the Army over 
to Ellington Field from its present location, the Reserve unit 
in Houston, and see if you think that everything is going to go 
well there, and what you determine the status to be.
    Mr. Prosch. Ma'am, I'm very pleased to announce that 
Ellington Field is on schedule.
    Senator Hutchison. Great.
    Mr. Prosch. And I would like to thank the Members of 
Congress for giving us a really good tool, which is called the 
Real Property Exchange. And we have been able to use that in a 
lot of places around the country where you have old armories in 
an urban, central part of town, where the land is very 
valuable, but the facilities are antiquated, and then trade 
that land and build a modern joint facility out in the suburbs. 
And that's exactly what we're doing at Ellington Field. We're 
taking some valuable land, we've got a partnership with the 
University of Texas Medical Association, and we're going to get 
a fair market value and plow that into a joint facility, with 
both the Army, Navy, Marine, and Air Guard at Ellington Field, 
which is a very strategic location, critical for the defense of 
the petrochemical industry.
    And the land surveys are on track. We anticipate that the 
environmental studies will be completed in June of this year. 
We plan to complete all of the actual construction plans this 
summer. We anticipate to do an award in 2006, and actually 
break ground in 2006. We hope to have a memorandum of agreement 
signed with the Army and the University of Texas in August, and 
we'll send you an invitation to that signing ceremony.
    Senator Hutchison. Thank you very much. I'm very pleased 
that it is going on track. I think what you're doing there and 
in other places is so right. It's right for the community, and 
it's right for our Services to be in better locations. And 
particularly this one, with the unique security risk of those 
chemical complexes, I think it is just essential to have the 
Air Force, Army, and Navy and Marine components there. It will 
very helpful. Along with the Coast Guard.
    Mr. Prosch. I might ask my colleagues from the Reserves to 
comment.
    Senator Hutchison. General Pudlowski?

                            JOINT FACILITIES

    General Pudlowski. Ma'am, if I may, we, too, have seen, in 
the Guard, the opportunities that are presented by joint 
facilities. Last year when we came here, we had approximately 
140 facilities that we had occupied in a joint fashion. By the 
end of the year, that had jumped up to 170 locations, and we've 
got 26 more projects that are scheduled in the FYDP.
    I'll just give you a couple of examples of that. In Austin, 
Texas, we have two facilities, one of which will be a 
maintenance facility, that'll be a joint maintenance facility 
shared with the Army Reserve. And we have an Armed Forces 
Reserve Center that'll be shared with the Army Reserve, the 
National Guard, the Marine Corps Reserve, and the Naval 
Reserve, which gives us a greater approach and a greater appeal 
as to how we're going to do that. In California, we have the 
Los Alamitos facility that's going to be shared, not only with 
the Army Reserve, but also with the active Army. We continually 
look for those opportunities.
    We're also seeing some others occur--for example, in West 
Virginia, where we have a training site--that we would look at 
the potential of that to be shared as a joint COOP site, with 
perhaps even the Department of Energy.
    So there are opportunities here, and each time we find this 
opportunity, we seek it because it, in effect, conserves some 
of the State cost for that additional 25 percent when we make 
it a full Federal project.
    Thank you.
    Senator Hutchison. Thank you very much. I'm so pleased that 
you're doing that throughout the country. I just think it's the 
right thing.
    General Profit. Ma'am, I would only add to what Mr. Prosch 
said about Ellington Field, that we're proud to be leading that 
effort in the Army Reserve, and I think your leadership in this 
particular effort has been pivotal, and I appreciate it.
    Thank you very much.
    Senator Hutchison. Thank you very much.
    That's all I have for this panel.
    Senator Feinstein.

                    MILCON PROJECTS IN SUPPLEMENTAL

    Senator Feinstein. I'm still into the 16\1/2\ percent. As I 
understand it, you took $138 million in MILCON projects and put 
them into the supplemental. And they include $100 million in 
these areas: the child development center for Fort Carson--I 
don't know why that's an emergency, if, in fact, it is in the 
supplemental; a barracks complex at Fort Lewis for $15\1/2\ 
million; a barracks at Fort Leonard Wood for $14.8 million; and 
then you have the whole--I guess, the modularity thing 
worldwide, at $100 million. Is that all correct, what I've just 
read?
    Mr. Prosch. I'm going to ask Geoff Miller to talk to 
specifics, and then let me try another try at why our MILCON 
request is down 16 percent.
    General Miller. Senator, the----
    Senator Feinstein. I think I probably misspoke. And I still 
don't understand it. But you have put an amount for modularity 
into the supplemental, right?
    Mr. Prosch. Yes, ma'am.
    Senator Feinstein. How much is that? Is that $100 million?
    Mr. Prosch. Geoff?
    Senator Feinstein. What is it? It's $180 million? All for 
modularity, in the supplemental?
    General Miller. Ma'am, we have a total of $559 million in 
the supplemental that is supporting modularity and movement 
through there. And it is a combination of OPA funds to buy 
modular facilities, interim facilities, in MILCON to do the 
preparatory work to allow these modular facilities that are 
barracks and headquarters.
    So this is startup money, as Senator Hutchison pointed out, 
because we will come back in the future and ask for MILCON as 
we make the permanent stationing choices then to be able to 
transition these troops that are coming back from overseas and 
in the modularity piece, so we can have permanent facilities 
there.
    Senator Feinstein. Well, just so--I don't know whether this 
qualifies as an emergency, but, clearly, it's certainly a way 
of doing it. I mean, what you did is, you took a part of out of 
this budget and simply put it in the emergency supplemental, if 
I understand it.

                           MODULAR FACILITIES

    Mr. Prosch. Well, if I could just comment, we are growing 
10 new brigades to try to stretch out the OPTEMPO period that 
our soldiers have so they don't have to go back to Iraq every 
other year. As we stand up these ten new brigade formations--we 
recruited soldiers at Fort Lewis, at Fort Bliss, at Fort Hood--
and so, these soldiers, in order to not to have to put them 
inside gymnasiums and tents, we're going to use these modular 
facilities. So, in a way, this is really helping us fight the 
war on terror, by stretching out the OPTEMPO, and we believe 
this is the right thing to do. And with this supplemental, we 
can do this in 2005, immediately, versus several years in the 
MILCON piece.
    Senator Feinstein. Well, is this going to continue to 
happen as more people come home, that the modulars are going to 
be in emergency supplementals and not part of the regular 
budget process?
    Mr. Prosch. I believe that, after we get these 10 brigades 
stood up, and this time next year when we're testifying before 
you, we're going to be able to lock into military construction, 
because we will have determined the end state for our 43 new 
active brigades and our 77 total brigades in the Army. And 
we'll want to do it the old-fashioned way, with MILCON, with 
permanent facilities.
    Senator Feinstein. I appreciate that statement, Mr. 
Secretary.
    Mr. Prosch. Yes, ma'am.
    Senator Feinstein. I'm going to write it in indelible ink, 
and hopefully hold you to it.
    Mr. Prosch. Yes, ma'am.
    Senator Feinstein. Thank you.
    Thanks, Madam Chairman.
    Senator Hutchison. Well, and I think we could even do 
something before then. If, on May 17, we know where they're 
going, we could start making preparations, depending on the 
timetable that you all have for them moving, but----
    Mr. Prosch. Yes, ma'am, that will be helpful. And we will 
come see you immediately, because it might make sense to do 
some reprogramming within----
    Senator Hutchison. I think one thing that I gleaned from 
Senator Feinstein, and I will say I agree with, the fewer 
modular units and the more permanent construction we can get a 
head start on, the better off we are.
    Senator Feinstein. I really agree with that.
    Senator Hutchison. I just hate that you're doing it right 
now, and it's a huge expense that goes away in use. If we see, 
on May 17, where people are coming back and we can start 
military construction, even if the moves are a year or two 
away, and we can have permanent facilities and not waste money 
on modular units, that would be my preference, for sure. And I 
think we're seeing that on the committee.

                                BARRACKS

    Mr. Prosch. I would like to, just for the record, thank you 
all for the steady progress and support you've made. This is 
our 13th year of our barracks program, and over one-half of our 
active Army MILCON budget is going towards barracks. And we are 
going to be 85 percent complete at the end of 2006 to build out 
to the One-Plus-One standard. And I'm sure you're familiar with 
that. We now, as a standard in the Army, we want our soldiers 
to have a suite, where we have two private sleeping areas with 
a walk-in closet, and a common kitchenette and bathroom area--I 
took my son, when he was a college student, to one of these, 
and he said, ``Wow, where do you enlist, Dad?''
    Senator Hutchison. That's true. I saw those at Fort Bliss, 
the new ones, and it is very, very nice, and so much better 
than what we had before. It's great. They love it.

                     ADDITIONAL COMMITTEE QUESTIONS

    Thank you very much. We appreciate not only your 
accessibility and your work, but also your testimony today.
    Thank you.
    Mr. Prosch. Thank you.
    [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 Dianne Feinstein

                           BRAC ENVIRONMENTAL

    Question. The Navy has sold portions of its previously BRAC'd 
property and ploughed that money back into environmental remediation. 
Has the Army experienced such sales, and, if so, do you have a similar 
agreement with the DOD Comptroller to use those funds for environmental 
remediation?
    Answer. Yes, the Army has received revenues for BRAC properties and 
used the proceeds for environmental remediation.

                            ARMY MODULARITY

    Question. Generals Pudlowski and Profit, do the National Guard and 
Reserves have additional MILCON requirements related to Army 
Modularity?
    Answer. Yes, for the Army National Guard there are additional 
requirements for transformation to the Army Modular Force. The Army 
National Guard is currently assessing and validating all the 
requirements. We will program for these needs once this process is 
complete.
    The Army Reserve does not currently have additional Military 
Construction requirements related to Army Modular Force transformation. 
However, as Army Reserve force structure in support of Modular Forces 
is determined, additional requirements may be identified. The Army 
Reserve will program for any such requirements as soon as they are 
known.

                           GUANTANAMO PRISON

    Question. DOD is requesting a total of $41.8 million, through the 
Army Supplemental request, for construction of a permanent prison and a 
new security fence at Guantanamo, Cuba. The justification documents for 
the Guantanamo construction do not make clear what will be done with 
the current temporary facilities once the new prison is constructed. Do 
you intend to remove or demolish these facilities, or are they to be 
kept in case the prison population exceeds the 220 capacity of the new 
facility? In other words, is DOD expanding the detention facilities at 
Guantanamo, or replacing them?
    Answer. The funding requested in the fiscal year 2005 Supplemental 
Request is to construct a 176 cell, long-term maximum-security 
detention facility for 220 detainees at Guantanamo Bay, Cuba. This 
facility, known as the Camp 6 Detention Facility, will allow for the 
closure of temporary Camps 1, 2, and 3. Although these camps would be 
closed, they would not be destroyed, retaining capability for the Joint 
Task Force commander to reopen them should the detainee population 
surge. By ``mothballing'' these camps and constructing Camp 6, the 
commander will be able to reduce the total internal guard force by 124 
military police.
    Question. If the new prison is to be strictly a replacement 
facility, does that mean the maximum capacity for housing detainees 
will be 220?
    Answer. Camp 6 will have the capacity for 220 maximum security 
detainees. The existing Camp 5, with a capacity of 100 maximum security 
detainees, and Camp 4, with a capacity of 200 medium security 
detainees, will be retained, providing a total capacity of 520.
    Question. What is the current capacity at Guantanamo, and what is 
the current detainee population?
    Answer. The current capacity in Guantanamo (GTMO) in Camps 1 
through 5 is 1,116. The current detainee population, as of March 16, 
2005, exceeds 530. Camps 1, 2 and 3 were designed as temporary medium-
security detention facilities requiring robust forces to guard ``must 
retain'' maximum-security detainees. As temporary facilities, these 
camps are nearing the end of their life expectancy. Refurbishment and 
maintenance costs are becoming prohibitive.
    Question. How did DOD arrive at the 220 bed requirement?
    Answer. The fiscal year 2005 Supplemental funding request is to 
build a 176 cell long-term maximum security facility with a capacity 
for 220 detainees at Guantanamo Bay, Cuba. The facility will include 
132 single cells and 44 double cells. In September 2004, the detainee 
population exceeded 580 detainees. One assumption was that 250 of those 
detainees would be classified as ``retain in DOD control''. The 
remaining 336 would be transferred for continued detention or released 
to their country of origin. The 250 ``retain in DOD control'' would 
require long-term detention due to conviction by military commission, 
intelligence value, or because they are deemed too dangerous to 
transfer or release. The ``retain in DOD control'' number has since 
been revised upward to 300.
    A second assumption was that, as the Global War on Terrorism 
continues, small numbers of additional detainees will arrive for 
screening. Since March 2004, 10 additional detainees have arrived in 
Guantanamo Bay.
    The final assumption is that by building a facility with 220 beds, 
the Joint Task Force could close the temporary detention Camps 1, 2, 
and 3, reduce the number of personnel needed to guard the detainees. 
This will also maintain the capability to provide maximum security, 
long-term detention for up to 320 ``retain in DOD control'' detainees 
in Camps 5 and 6, and medium security detention for an additional 200 
detainees in Camp 4.
    Question. When do you expect the prison population to be reduced to 
that level?
    Answer. Based on detainee movement operations already approved by 
the Deputy Secretary of Defense, the number of detainees could be 
reduced to less than 520 by May 1, 2005.
    Question. What other MILCON will be required to support the 
permanent housing of detainees at Guantanamo? For example, what 
additional facilities will be required for the permanent stationing of 
the military personnel assigned to this mission?
    Answer. We do not plan to seek additional MILCON funding for 
permanent structures at Guantanamo Bay at this time due to other higher 
priorities. The fiscal year 2005 Supplemental funding will be used to 
build the Camp 6 Detention Facility and the Radio Range Security Fence 
to allow for reduced force manning.

                      Department of the Air Force

STATEMENT OF FRED W. KUHN, DEPUTY ASSISTANT SECRETARY 
            OF THE AIR FORCE INSTALLATIONS
ACCOMPANIED BY MAJOR GENERAL L. DEAN FOX, FOR AIR FORCE CIVIL ENGINEER, 
            DEPUTY CHIEF OF STAFF FOR INSTALLATIONS AND LOGISTICS

    Senator Hutchison. And now we will turn to our second 
panel. That would be Mr. Fred Kuhn, the Acting Assistant 
Secretary of the Air Force for Installations, Logistics, and 
Environment; Major General Dean Fox, the Air Force Civil 
Engineer and Deputy Chief of Staff of the Air Force for 
Installations and Logistics.
    Mr. Kuhn. Madam Chairman, Senator Feinstein, distinguished 
members of the committee, good afternoon.
    This year's Air Force MILCON budget is the largest in 14 
years, with increases across the spectrum of Air Force 
operations throughout our Total Force. Our fiscal year 2006 
military family housing submission is the largest in Air Force 
history. It keeps us on target to meet our goal of funding, to 
eliminate CONUS inadequate housing in 2007, and overseas 
inadequate in 2009. The Air Force remains committed to funding 
restoration and modernization to meet the OSD goal of a 67-year 
recapitalization rate by fiscal year 2008 and beyond. The Air 
Force is meeting OSD's facilities sustainment goal by funding 
$2 billion this year, and will continue to fund sustainment in 
accordance with that DOD facility sustainment model.
    I sincerely thank the committee and the Congress for its 
efforts to lift the cap on housing privatization, because the 
Air Force would not have otherwise been able to meet our goal 
of funding the elimination of inadequate housing for Airmen and 
their families by 2007. We thank you for providing the 
privatization tools that allowed us to leverage 173 million 
taxpayer dollars into nearly $1.6 billion invested in 13 of our 
bases and in their local communities. This leverage of nine 
privatized dollars for every taxpayer dollar invested allows us 
to fix 11,000 homes now, and another 34,500 homes over the next 
2 years, rather than burdening the Federal budget with an 
additional $5.6 billion in MILCON funds.
    The success of our privatization program would not be 
possible without the authority you provided in Title 10, United 
States Code, Section 2883, which allows the Secretary of 
Defense to transfer military construction appropriations into 
the family housing improvement fund in order to fund these 
forward costs of our privatization projects. For example, 
Congress appropriated $15 million for Hickam Air Force Base, 
Hawaii, in fiscal year 2002 MILCON to renovate 102 units, but 
we were successful in awarding a privatization project with a 
portion of those MILCON funds to fix 1,356 Hickam Air Force 
Base homes for Airmen and their families. That project had a 
project development value of $298 million invested in the local 
economy at a leverage of 71-to-1. We were able to use the 
remaining MILCON dollars to award other privatization projects, 
like Wright-Patterson Air Force Base, Ohio, where we are 
providing 1,536 homes, totaling $109 million in development.
    Similarly, at Beale Air Force Base, in California, we are 
privatizing 1,344 homes and gaining $151 million in development 
with a government investment of $6.7 million, a 22-to-1 
leverage. This project was in jeopardy following the fiscal 
year 2005 congressional rescission however, using the Section 
2883 authority, we redirected funds from appropriations for 
Eglin Air Force Base, Florida, and Travis Air Force Base, 
California, to cover the Government's fund appeal.
    When using the Section 2883 authority, we always make the 
appropriate notifications to Congress. And I want to emphasize 
that we always fix housing only at locations directed by 
Congress. To that end, we will privatize 2,155 homes at Eglin 
Air Force Base and its neighbor, Hurlburt Field, and 1,179 
homes at Travis Air Force Base, California, using the funds 
originally appropriated for replacement projects at those 
bases.
    The final example I would like to provide is Randolph Air 
Force Base, in Texas, where Congress appropriated funds for 
three MILCON projects in fiscal years 2003 through 2005. These 
three projects would have eliminated 406 inadequate homes at 
Randolph Air Force Base, in Texas. However, by delaying these 
projects and privatizing Randolph in a group with six other 
bases, we will now be able to fix the required inventory of 
3,898 homes, while injecting $415 million into the local 
communities of these seven installations.

                           PREPARED STATEMENT

    These examples are typical of how the Air Force has 
maximized the use of MILCON funds and transfer authority of 
Title 10 to accelerate our program and eliminate inadequate 
housing. As our program continues to execute and we look for 
additional opportunities to privatize, we will absolutely keep 
the Congress informed of every change we make in this area.
    On behalf of all of our Air Force men and women and their 
families, I thank you.
    [The statement follows:]

 Prepared Joint Statement of Fred W. Kuhn and Major General L. Dean Fox

    Madam Chairman, Senator Feinstein, and distinguished members of the 
committee, the strength and flexibility of airpower and our joint 
warfighting success in operations around the world is made possible by 
three interdependent factors; outstanding Airmen, superior weapons 
platforms, and an agile support infrastructure. The Air Force fiscal 
year 2006 military construction (MILCON) submission is our commitment 
to these three factors. It provides our Airmen and their families the 
proper facilities to work and live, which in turn will enable them to 
better execute our air and space missions. This year's Air Force MILCON 
budget request is the largest in 14 years, over $4.7 billion, with 
increases across the spectrum of air and space operations and 
throughout our Total Force. Our fiscal year 2006 Military Family 
Housing (MFH) submission will keep us on target to eliminate inadequate 
housing. The Air Force is committed to funding facility restoration and 
modernization at a 67-year recapitalization rate by fiscal year 2008, 
and funding facility sustainment consistent with OSD's Facility 
Sustainment Model (FSM). Sound investment in our installations allows 
us to take care of our people and their families through quality of 
life and work place improvements.

                              INTRODUCTION

    Air Force facilities, housing, and environmental programs 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 
sustaining and recapitalizing existing infrastructure, investing in 
quality of life improvements, accommodating new missions, continuing 
strong environmental leadership, optimizing use of public and private 
resources, and eliminating excess and obsolete infrastructure wherever 
we can. Our total force military construction, family housing, and 
sustainment, restoration, and modernization programs are vital to 
supporting operational requirements and maintaining a reasonable 
quality of life for our men and women in uniform and their families.
    The Air Force fiscal year 2006 President's Budget (PB) request of 
just over $1.3 billion for Total Force military construction reflects 
our highest construction priorities. It balances the restoration and 
modernization of current mission facilities, quality of life 
improvements, new mission requirements, future project designs, and 
limited funding for emergency requirements. This request includes $1.07 
billion for active military construction, $165 million for the Air 
National Guard, and more than $79 million for the Air Force Reserve.
    The Air Force fiscal year 2006 PB request of $1.2 billion for the 
Military Family Housing investment program balances new construction, 
improvements, and planning and design work. It will also advance our 
Housing Privatization program. But, 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 2006, we will bolster our operations 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 $2 billion to Total Force sustainment. 
That is 95 percent of the requirement from OSD's Facilities Sustainment 
Model. However, in fiscal year 2006 the Air Force's Total Force R&M 
funds is restricted to $173 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 intend to 
invest more heavily in critical infrastructure maintenance and repair 
through our O&M program in order to achieve the Air Force goal of a 
facility recapitalization rate of 67 years by 2008.

Overseas Military Construction
    The quality of installations overseas remains a priority. Even 
though the majority of our Airmen are assigned in the United States, 20 
percent of the force is assigned to extended tours overseas, including 
29,000 Air Force families. Overseas base infrastructure is old and 
progressively deteriorating, requiring increased investment to replace 
and maintain. Host nation funding helps, but it is not enough. We also 
must provide supplemental funding to support time-critical 
infrastructure necessary for the Global War on Terror. The fiscal year 
2006 request for overseas construction includes $193 million for 18 
separate infrastructure and quality of life projects in the United 
Kingdom, Germany, the Azores, Italy, Turkey, Guam, and Korea. All 
projects are in places designated as enduring locations by regional 
commanders, as described in the Global Basing Strategy.
    In addition, we want to thank you for the essential overseas fiscal 
year 2004 MILCON funding you approved in the Emergency Supplemental 
Appropriations Act (H.R. 3289). The supplemental provided essential 
construction projects in Southwest Asia and at critical en-route 
airlift locations directly supporting ongoing operations in that 
region.

Planning and Design/Unspecified Minor Construction
    This year's Air Force MILCON request includes almost $96 million 
for planning and design (P&D), including $40.4 million for military 
family housing. The request includes $79 million for active duty, $12.9 
million for the Air National Guard, and $3.8 million for the Air Force 
Reserve. These funds will allow us to complete the design work for 
fiscal year 2006 construction programs and to start the designs for 
fiscal year 2007 projects, allowing us to award contracts that year. 
However, P&D funds for Congressional inserts and directed designs are 
not funded in the President's Budget request. They are accomplished at 
the expense of other Air Force designs. We would greatly appreciate 
your assistance ensuring adequate P&D funding for any Congressional 
inserts.
    This year's request also includes $24 million for the Total Force 
unspecified minor construction (UMC) program, our primary means for 
funding small, unforeseen projects that cannot wait for the normal 
military construction process. Because these projects emerge over the 
year, it is not possible to predict the total funding requirements. 
When UMC requirements exceed our funding request, we augment them by 
reprogramming available MILCON construction funds.

           SUSTAIN, RESTORE, AND MODERNIZE OUR INFRASTRUCTURE

    The Air Force remains focused on sustaining, restoring, and 
modernizing our infrastructure. In 2006, we have increased sustainment 
funding to keep our ``good facilities good'' and targeted limited 
Restoration and Modernization (R&M) funding to fix critical facility 
deficiencies and improve readiness.
    Our sustainment program is aimed at maximizing the life of our 
infrastructure by keeping our facilities in good condition. 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 near-term readiness.
    When facilities require restoration or modernization, we use a 
balanced program of O&M and military construction funding to make them 
``mission ready.'' Unfortunately, restoration and modernization 
requirements in past years exceed available O&M funding, causing us to 
defer much-needed work. The restoration and modernization backlog is 
projected to grow to nearly $9.8 billion in 2006. 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 sustainment funding in fiscal year 2006 
is $2.0 billion, 95 percent of the amount called for by the Facility 
Sustainment Model (FSM) and consistent with established OSD goals. The 
fiscal year 2006 Total Force R&M funding is $173 million. This budget 
carefully balances sustainment, restoration, modernization, and 
military construction programs to make the most effective use of 
available funding in support of the Air Force mission.

           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 
spent on facilities we need, not on sustaining ones we do not. For the 
past seven years, the Air Force has aggressively demolished or disposed 
of facilities that are unneeded or no longer economically viable. From 
fiscal year 1998 through fiscal year 2004, we demolished 18.5 million 
square feet of non-housing building space. This is equivalent to 
demolishing more than three average size Air Force installations and 
has allowed us to target our infrastructure funding to maintain more 
useful facilities. While this demolition cost us $221 million in O&M 
funding in the short term, it saves us money in the long term. For 
fiscal year 2005 and beyond, the Air Force will continue to identify 
opportunities to eliminate unnecessary facilities.

                 INVEST IN QUALITY OF LIFE IMPROVEMENTS

    The Air Force sees a direct link between readiness and quality of 
life. When Airmen deploy, time spent worrying whether their families 
are safe and secure is time not spent focusing on the mission. Quality 
of life initiatives are critical to our overall combat readiness and to 
recruiting and retaining our country's best and brightest. Family 
housing, dormitories, and other quality of life initiatives reflect our 
commitment to our Airmen.

Family Housing
    The Air Force Family Housing Master Plan details our Housing 
military construction, 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 2006 budget request for the family 
housing investment program is more than $400 million over the fiscal 
year 2005 budget. Consistent with Department of Defense Strategic 
Planning Guidance, the Air Force intends to eliminate inadequate family 
housing units in the United States by 2007, accelerate funding at four 
northern tier bases one year earlier than originally planned, and 
eliminate inadequate overseas family housing units by 2009. We thank 
you for your assistance in helping keep us on the path to meet these 
goals.
    For fiscal year 2006, the $1.2 billion requested for our housing 
investment program will provide over 2,900 new homes at 17 bases, 
improve more than 2,000 homes at 16 bases, and support privatization of 
more than 2,200 homes at three bases. An additional $767 million will 
be used to pay for maintenance, operations, 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 new dormitories to eliminate our 
room shortage. In Phase III, we will replace existing dormitories at 
the end of their useful life with a standard Air Force-designed private 
room to improve our young Airmen's quality of life.
    The total Air Force requires 60,200 dormitory rooms. It will cost 
approximately $711 million to fully execute the Air Force Dormitory 
Master Plan. That will replace all inadequate permanent party dormitory 
rooms by fiscal year 2007 and all inadequate technical training 
dormitories by fiscal year 2009. This fiscal year 2006 budget request 
moves us much closer toward these goals, requesting $184 million for 
eight dormitory projects--creating 1,648 new rooms for unaccompanied 
personnel at both stateside and overseas bases. With this request, we 
will reach 47 percent of our final permanent party goal and 19 percent 
of our technical training goal.

Fitness Centers/Family Support Centers
    Along with housing, fitness centers are a critical component of the 
Air Force's quality of life. Our expeditionary nature requires that 
Airmen deploy to all regions of the world, and into extreme 
environments. They must be physically prepared to deal with these 
challenges. Our Airmen must be ``fit to fight.'' Under our new fitness 
program, Airmen are devoting more time and energy to physical fitness. 
As a result, fitness center use has increased dramatically. The Air 
Force Fitness Center Master Plan prioritizes requirements based on 
need, facility condition, MAJCOM input, Operations Tempo, and a 
location's remoteness or isolation. The fiscal year 2006 military 
construction program includes two fitness centers: Charleston Air Force 
Base (AFB), SC and Vandenberg AFB, CA.
    Family Support Centers are also critical to the quality of life of 
our Airmen and their families. They provide needed support services and 
ensure a strong sense of community on our bases. This is especially 
important in overseas locations where our Airmen and their families are 
separated from cultural and community support networks they are 
accustomed to in the United States. For them, our Air Force family 
becomes their primary support structure, especially when a spouse is 
deployed. The fiscal year 2006 submission includes a new Family Support 
Center at Aviano Air Base, Italy.

                        ACCOMMODATE NEW MISSIONS

    Our Airmen are the best in the world, but superior weapons have 
also played a key role in recent joint warfighting successes in the 
Global War on Terrorism. Advanced weapon systems enable our combatant 
commanders to respond quickly in support of national security 
objectives. The fiscal year 2006 Total Force new mission military 
construction program consists of 40 projects, totaling more than $402 
million, and supports core modernization, beddown of new missions, and 
expansion of existing missions. These include Global Hawks at Beale 
AFB, California; Predator force structure changes at Indian Springs Air 
Force Auxiliary Field, Nevada; Combat Search and Rescue aircraft 
beddown at Davis-Monthan AFB, Arizona and a HC-130P simulator facility 
at Kirtland AFB, New Mexico; a Distributed Common Ground Station at 
Hickam AFB, Hawaii; and small diameter bomb facilities at RAF 
Lakenheath, United Kingdom. In particular, two new systems, the F/A-22 
Raptor and the C-17 Globemaster III, require extensive construction 
support.
    The F/A-22 Raptor is the Air Force's next generation air 
superiority fighter, but it is equally capable attacking ground targets 
or gathering intelligence data. Langley AFB, Virginia, will be home for 
the first operational F/A-22 squadrons. Flight training, weapons 
training, and aircraft battle damage repair training will be conducted 
at Tyndall AFB, Florida, Nellis AFB, Nevada, and Hill AFB, Utah. Our 
fiscal year 2006 military construction request includes one F/A-22 
project at Langley AFB, one project at Tyndall AFB, two projects at 
Nellis AFB, and one project at Hill AFB for a total of $47.5 million. 
These projects support the F/A-22 initial beddown and training and will 
not be affected by the final aircraft purchase number.
    The C-17 Globemaster III is replacing our fleet of C-141 
Starlifters. C-17s will be based at Elmendorf AFB, Alaska; Travis AFB 
and March Air Reserve Base (ARB) in California; Dover AFB, Delaware; 
Hickam AFB, Hawaii; Jackson Air National Guard Base, Mississippi; 
McGuire AFB, New Jersey; Altus AFB, Oklahoma; Charleston AFB, South 
Carolina; and McChord AFB, Washington. Thanks to your support, the 
construction funding requirements for Charleston and McChord are 
complete. The request for fiscal year 2006 includes two projects for $6 
million at Dover AFB, three facility projects for $12.6 million at 
Travis AFB, and two facility projects for $54.8 million at Elmendorf 
AFB.

              OPTIMIZE USE OF PUBLIC AND PRIVATE RESOURCES

Housing Privatization
    We would also like to thank you for eliminating the cap on the 
Department of Defense Family Housing Improvement Fund. Our Airmen and 
their families appreciate your staunch commitment to their quality of 
life. To date, we have awarded thirteen privatization projects 
providing 10,977 privatized homes for our Air Force families. The Air 
Force has leveraged an investment of $173 million with private sector 
funding to yield $1.6 billion in total development.
    Last year, we completed three privatization projects (Elmendorf 
AFB, Alaska; Robins AFB, Georgia; and Dyess AFB, Texas) and have three 
more under construction (Wright-Patterson AFB, Ohio; Patrick AFB, 
Florida; and Kirtland AFB, New Mexico). We recently awarded five new 
privatization projects at Moody AFB, Georgia; Little Rock AFB, 
Arkansas; Buckley AFB, Colorado; Hanscom AFB, Massachusetts; Hickam 
AFB, Hawaii; and awarded the second phase of the project at Elmendorf 
AFB. Two years ago we set a goal to privatize 60 percent of U.S.-based 
family housing by 2007. With this budget we are on track to beat that 
goal by an additional 12 percent. The fiscal year 2006 request includes 
$65 million to start privatizing more than 2,200 units at three more 
bases: Peterson AFB and the U.S. Air Force Academy in Colorado; and 
F.E. Warren AFB, Wyoming.

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, under OSD's utilities privatization program, the Air Force 
has conveyed 10 systems, with a plant replacement value in excess of 
$230 million. By the time the program is complete, we anticipate as 
many as 100 of about 500 systems could be privatized. We are on track 
to meet 95 percent of OSD's milestone: completing Source Selection 
Decisions by September 30, 2005. During the course of this process, we 
expect that many competitive solicitations will end up as sole source 
procurements from local utility companies.

                               CONCLUSION

    The readiness of our fighting force, now and in the future, depends 
upon our infrastructure. We will continue to enhance our installations' 
capabilities and our Airmen's quality of life and ensure Air Force 
infrastructure remains ready to support our global operations.

                         HOUSING PRIVATIZATION

    Senator Hutchison. Thank you very much, Mr. Secretary.
    I think the Air Force has come to privatization a little 
later than some of the other Services, and with some of the 
MILCON money, there has been a determination, after MILCON has 
been appropriated, that privatization would be the better 
route. My question is, How are you going to work with the 
committee in the future to come to us with a change, if you're 
not going to use MILCON money where you told Congress you 
would? Where would this money go if there is a reprogramming 
request? If you're going to go to privatization, we need to 
have some sort of notification. How would you propose to handle 
that?
    Mr. Kuhn. I think there are many ways that we have done 
this and we will continue to do this. One of the ways is, the 
gentleman to my right and the individuals in his office have 
come over to the Congress to talk about every housing 
privatization project in the Air Force, where the MILCON 
started for the projects, and how they interrelated.
    I also see that there are three points in which we also 
come to you under congressional notification. One is in the 
concept approval of the housing privatization program, in which 
we not only do a notification, but we offer to come over to 
talk to your staff about these issues. And we come back a 
second time, before award, to talk to you about the project 
itself, the dollars that were leveraged, any details that you 
would like. And then there's the third notification when the 
money actually gets transferred into the family housing 
improvement fund.
    But I think my commitment to you, and General Fox's 
commitment to you, is that we can, and have, offered to come 
over to talk to this issue on a systematic, periodic basis with 
your staffs, and they have been incredibly responsive to us in 
that, and it's been a very helpful dialogue.
    Senator Hutchison. Good. Thank you.
    Mr. Kuhn. Yes, ma'am.
    Senator Hutchison. Bolling Air Force Base was going to be 
traditional construction but now it is going into 
privatization.
    Mr. Kuhn. Yes, ma'am, into a group.
    Senator Hutchison. Yes. My question is, you're going to 
privatization for Bolling, and are you going to preserve the 
historic houses? How are you going to handle those historic 
homes?
    General Fox. Madam Chairman, we are looking at Bolling Air 
Force Base as a privatization candidate. And when we initially 
looked at Bolling and ruled it out the first time that we 
looked, it was because it was too good a deal for a developer, 
if you would. The basic allowance for housing was too high to 
make it feasible for the government to press ahead. So the only 
way that we look at it and say that it's a smart move for the 
government is to group it with some other bases that might not 
be quite as good a deal. So, in essence, it becomes the way to 
carry some other bases that are not as good a leverage.
    As Mr. Kuhn mentioned, the great thing about privatization 
is the up-front capability that it gives us. We are now seeing 
nine-to-one leverage across our entire housing privatization 
program, which means, for every dollar that the Government puts 
forward up front, we're leveraging nine in private development. 
So that's what makes the program successful for us.
    At Bolling Air Force Base, we're looking at potentially 
grouping with five other bases. And so, as we look at those 
bases and what we press ahead with in privatization, certainly 
we will have the developer give us proposals that will include 
preserving the historic units. I believe that the developer who 
would then own those units will probably have other proposals, 
as well. But, at this point, I don't think that we're able to 
tell you what a proposer would give us, in terms of the 
different propositions that they might make to us.
    Senator Feinstein. Madam Chairman?
    Senator Hutchison. Yes?
    Senator Feinstein. At 2:30, we have a closed intelligence 
meeting on the defense intelligence budget.
    Senator Hutchison. Sure.
    Senator Feinstein. And I'd like to be excused. It's the 
only chance I have----
    Senator Hutchison. Of course. Do you have a question before 
you leave? Whatever is your pleasure.
    Senator Feinstein. I think--can I ask one question----
    Senator Hutchison. Sure.

                     SPANGDAHLEM AIR BASE, GERMANY

    Senator Feinstein [continuing]. On Spangdahlem? Because 
we've gone over this before. There are two project requests for 
Spangdahlem, the large-vehicle inspection station, at $5.4 
million, and the control tower, at $7.1 million. The question I 
wanted to know is, Do we know which air assets will remain at 
Spangdahlem following the global realignment that would support 
the infrastructure improvement? And, secondly, why haven't we 
requested NATO funding for these projects?
    And another project that appears to be eligible for NATO 
funding is a warehouse at Aviano.
    General Fox. Senator Feinstein, the purpose for 
Spangdahlem, for the long term, it is an enduring base. 
Spangdahlem is one of two bases, coupled with Ramstein Air 
Base, also in Germany, that replaced the capability that Rhein-
Main Air Base has provided us.
    Senator Feinstein. General, we went over this. I think it 
was--was it last year?
    Senator Hutchison. Yes.
    Senator Feinstein [continuing]. Last year, so we're 
relatively familiar with it. I mean, part of our problem has 
been that you folks change your mind periodically after we've 
begin a project. And I guess what I want to see is that there 
really is going to be the air assets there to support the 
improvements.
    General Fox. Senator Feinstein, there's no change in 
Spangdahlem, nor Ramstein.
    Senator Feinstein. But that still doesn't answer my 
question, because we've never really, to my knowledge, been 
really assured that the air assets are going to be there.
    General Fox. Both those bases, for the long term, replace 
the Rhein-Main capability that brings heavy airlift through 
Central Europe en route to other NATO locations or Southwest 
Asia.
    Senator Feinstein. So what you're telling us is that, on a 
permanent basis, there will be sufficient air assets at 
Spangdahlem to justify these permanent improvements.
    General Fox. Yes, ma'am. Yes, ma'am. At Spangdahlem and 
Ramstein, both of those become airlift capabilities, to include 
wide-body aircraft, C-5 and C-17 aircraft.
    Senator Feinstein. Have we asked for NATO funding for any 
of this?
    General Fox. Yes, ma'am.
    Senator Feinstein. And is it forthcoming?
    General Fox. The vehicle inspection gate is not eligible 
for NATO funding, but the tower is partially eligible, and we 
have asked for NATO recoupment of funds. So when we go forward 
with that project, we pre finance, and then go back to NATO and 
ask for recoupment of those funds. But Spangdahlem and Ramstein 
both are enduring locations.
    Senator Feinstein. And they will recoup $7.1 million?
    General Fox. No, ma'am. We----
    Senator Feinstein. How much will they give you?
    General Fox. I would have to estimate, at this point. I'll 
answer, for the----
    Senator Feinstein. Well, I'd just like----
    General Fox [continuing]. For the record.
    Senator Feinstein [continuing]. To get you on the record so 
we know the money comes back and that you don't use it for 
something else.

                NATO PRECAUTIONARY PREFINANCE STATEMENT

    General Fox. Senator, the money does not come back to us, 
and I can't use it for something else. When--in a NATO 
scenario, we file a--what is known as a precautionary pre 
finance statement, which tells NATO we intend for them to pay 
back any and all funds that are eligible under NATO. NATO funds 
a minimum military essential requirement. So when they look 
across all NATO member countries, they say--if those NATO 
member countries have a very-much-smaller control tower 
requirement--and usually most countries don't build to our 
standards--they will fund to the minimum standard. And so, we 
can expect to recoup whatever the minimum standard is that 
other countries----
    Senator Feinstein. Of that----
    General Fox [continuing]. Would get.
    Senator Feinstein [continuing]. $7.1 million?
    General Fox. Yes, ma'am.
    Senator Feinstein. Or in excess of the $7.1 million?
    General Fox. A portion of that $7.1 million.
    Senator Feinstein. I guess I don't understand the word 
``recoup''--does that mean----
    General Fox. Recoupment----
    Senator Feinstein [continuing]. They pay you dollars?
    General Fox. Recoupment means that NATO applies, then, 
funds that they will fund against--a project that we pre 
finance--against the United States share to the NATO Security 
Investment Program. So then the following year, the United 
States does not contribute as much as it ordinarily would to 
NATO.
    NATO contributes--NATO's budget, in Security Investment 
Program, is in the neighborhood of about $550 to $600 million 
per year. The United States share of----
    Senator Hutchison. The question I think----
    General Fox [continuing]. That's about 25 percent.
    Senator Hutchison. Right. But what she's saying is, okay, 
we fund it, NATO comes back, say, and gives us $4 million of 
the $7 million in credits to other NATO accounts. So the Air 
Force has funded the NATO commitment, basically.
    General Fox. So----
    Senator Feinstein. So it's taken off of----
    General Fox. Basically, it buys down----
    Senator Feinstein [continuing]. Our NATO commitment.
    General Fox [continuing]. It buys down our normal 
contribution in subsequent years to NATO. It reduces our share.
    Senator Feinstein. Is that same thing true for the 
warehouse at Aviano?
    General Fox. It would be. I can't tell you exactly what 
percentage of the warehouse at Aviano Air Base qualifies for 
NATO, based on the minimum NATO standard. But it is exactly 
true, as a normal course of business in Europe, the U.S. Air 
Forces in Europe files a recoupment request for anything that 
is or might be eligible for NATO funding. NATO funds, normally, 
operational requirements only, and then to a common minimum 
standard across NATO.
    Where we've really leveraged NATO funding very well for the 
United States is when we went to Aviano and did the Aviano 
beddown. We convinced them that, since it was a replacement for 
Crotone Air Base that was not built, that they should also fund 
support facilities, as well. So we leveraged something like 
$350 million that NATO paid for the Aviano beddown, for 
example. So we do claim, for the U.S. Government, everything 
that NATO makes eligible across member nations.
    Senator Feinstein. But it's just deducted from our 
contributions today----
    General Fox. It just means that----
    Senator Feinstein [continuing]. So it's just a fungible 
exchange.
    General Fox. Yes, ma'am. We do not get funding back; it 
just decrements the amount in subsequent years that we the 
United States would normally contribute.
    Senator Feinstein. Thank you both very much. I appreciate 
that.
    Thanks, Madam Chairman.
    Senator Hutchison. Thank you.

                    GOODFELLOW AIR FORCE BASE, TEXAS

    I just have one more, and this is more of a local nature.
    Goodfellow Air Force Base, in San Angelo, Texas, is one of 
the good examples of true joint training facilities. All of the 
services are represented there. I wanted to ask you, it seems 
to me that Goodfellow has a lot of expansion room, and they're 
doing this intelligence training and language training that is 
so essential right now. My question is, do you have any plans 
to expand that mission profile with the same type of 
intelligence and its cryptology and language training for 
intelligence services? Are you looking at any expansions of 
that at this time?
    Mr. Kuhn. I don't know of any expansions, vis-a-vis the Air 
Force. I don't know what DOD or, for instance, the joint cross-
service groups in the BRAC might be looking at for that. But 
I've met with the Goodfellow community on many occasions. We've 
talked about the lands, we've talked about their jointness in 
that area and in other areas, and they've been in the forefront 
of this issue for a lot of years.
    Senator Hutchison. Well, it seems that it has really picked 
up with our war on terrorism, because, of course, we're 
recruiting more people who can, not only----
    Mr. Kuhn. Yes, ma'am.
    Senator Hutchison [continuing]. Learn to speak Arabic, but 
to try to decipher signals. And I just----
    Mr. Kuhn. Yes, ma'am. Where jointness becomes even more 
important. Yes, ma'am, I agree with you. But just where I sit 
in the Air Force, I don't know of any plans of the Air Force to 
do anything for that particular----

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Hutchison. But there is a lot of expansion room 
there.
    Mr. Kuhn. Yes, ma'am, there is.
    Senator Hutchison. Have you been there to see their 
facilities?
    Mr. Kuhn. Yes, ma'am. Had a barbeque there. Yes, ma'am.
    Senator Hutchison. Oh, yes, that's----
    Mr. Kuhn. Yes, ma'am.
    Senator Hutchison. Well, the barbeque is at Dyess, in 
Abilene, also. That's another big one.
    Mr. Kuhn. Been there, too.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                  Questions Submitted to Fred W. Kuhn

          Questions Submitted by Senator Kay Bailey Hutchison

                             FAMILY HOUSING

    Question. Mr. Kuhn, is the Air Force privatizing family housing at 
places where authorization and appropriation for the family housing 
requirements have not been received?
    Answer. No. All of the awarded AF housing privatization projects 
had MILCON projects (for significantly smaller scope or number of 
units) slated for them, including Patrick AFB, which had funds, 
authorized and appropriated that were rescinded by Congress. The Air 
Force uses the authority under Title 10, United States Code Section 
2883, to transfer Military Construction appropriations into the Family 
Housing Improvement Fund in order to fund the scored costs of our 
privatization projects. During the March 16, 2005 Senate Appropriations 
MILCON and Veterans Affairs Committee hearing, Mr. Kuhn affirmatively 
answered Senator Hutchinson's question regarding whether the Air Force 
would notify the committee in cases where MILCON would be used for 
privatization projects. As our Military Family Housing program 
continues to execute and we look for additional privatization 
opportunities we will continue to keep the committee informed of 
changes in our program.

                            BUDGET OVERVIEW

    Question. Mr. Kuhn, I understand you hoped to bring forward a $1.8 
billion MILCON request, but it was reduced to $1.3 billion in the last 
rounds of the budgeting process. What did not get funded as a result of 
that cut?
    Answer. Many changes occurred from the fiscal year 2005 President's 
Budget Request Future Year Defense Program (FYDP) to the fiscal year 
2006 President's Budget Request. Major Commands and Bases were forced 
to defer requirements to future years due to competing budget 
priorities. A list of deferred requirements is attached

                       JOINT FUNDING/JOINT BASING

    Question. Mr. Kuhn, the Defense Department consistently says it 
will emphasize jointness in the upcoming BRAC round which I think is 
exactly the right thing to do. The Air Force generally has the best 
facilities among the Services. How do you intend to embrace jointness 
and still ensure Air Force facilities are of the quality you believe 
you need to most effectively execute your mission?
    Answer. Thank you for the compliment regarding the existing 
infrastructure structure within the Air Force. The Air Force fully 
embraces the concept of jointness through the joint utilization of 
infrastructure assets. This is not a new concept for us. This is 
something we are already doing at the majority of our installations, 
active, guard and reserve today. We strongly believe the responsibility 
to maintain the installation at these high standards belongs to the 
host unit commander. Prior to a new tenant from another service moving 
onto an Air Force installation, the potential tenant and Air Force 
personnel conduct a site survey. The host unit commander informs 
potential tenants of construction compatibility standards, the inter-
service support agreement standards, and tenant funding 
responsibilities. Final approval for inter-service beddown activities 
is at the Secretariat-level where facility and inter-service support 
levels are addressed. This high-level review reinforces the expectation 
to support existing facility and installation services standards. The 
Installation Capability Council, which is chaired by OSD with members 
from the Services and their Secretariats have chartered a Joint Basing 
Group. This group is developing a policy for the Common Delivery of 
Installations Support. The policy will include standards, metrics and 
pricing or reimbursement rules for installations support.
                                 ______
                                 

              Questions Submitted by Senator Wayne Allard

                  LOWRY AIR FORCE BASE-HAZARDOUS WASTE

    Question. All the developers at Lowry Air Force Base, save one, 
have had their claims for asbestos remediation rejected by the Air 
Force. The Colorado Delegation has been patient with the asbestos 
reimbursement cost process, but the Air Force's response has been most 
unsatisfactory. What is remarkable is that the Air Force continues to 
talk up the Lowry Redevelopment as its shining example in the BRAC 
process, yet this glaring unresolved problem remains. Why has the Air 
Force refused to acknowledge its responsibility for the asbestos it 
left at Lowry Air Force Base, including the asbestos found in utility 
pipes?
    Answer. Our approach to asbestos, as well as to other unknown and 
undisclosed contamination on former Air Force property, is consistent 
with the law. We accept the full responsibility imposed by Federal law 
with respect to Air Force contamination that poses an unacceptable risk 
to human health and the environment. Where--as at Lowry--the condition 
of the property was disclosed to and accepted by the Lowry 
Redevelopment Authority (LRA), and where much of the soil there has 
been relocated from other locations on Lowry or brought onto Lowry at 
the direction of the developers or the LRA, our obligations have 
changed. And where--as at Lowry--there has never been a credible, 
science-based assertion that a situation poses an unacceptable risk to 
human health and the environment, the obligations of the Federal 
Government are nonexistent. With respect to your question on asbestos 
materials in utility pipes, the Air Force does not remove underground 
utility pipes from base closure property. The LRA and its builders have 
been aware that the Air Force did not remove the underground utility 
lines. It is the developer's responsibility to ensure the proper 
management of such pipes during construction activities.
    Question. All the developers at Lowry Air Force Base, save one, 
have had their claims for asbestos remediation rejected by the Air 
Force. The Colorado Delegation has been patient with the asbestos 
reimbursement cost process, but the Air Force's response has been most 
unsatisfactory. What is remarkable is that the Air Force continues to 
talk up the Lowry Redevelopment as its shining example in the BRAC 
process, yet this glaring unresolved problem remains. Why has the Air 
Force refused to reimburse the developers who used their own money to 
pay for the Air Force's hazardous waste?
    Answer. Please be assured that the decisions to deny claims were 
made only after careful review of the facts and applicable law, and 
that the decisions were made with the full support of the U.S. 
Department of Justice. The privileged nature of the settlement 
discussions prevents us from discussing any details.
    Question. All the developers at Lowry Air Force Base, save one, 
have had their claims for asbestos remediation rejected by the Air 
Force. The Colorado Delegation has been patient with the asbestos 
reimbursement cost process, but the Air Force's response has been most 
unsatisfactory. What is remarkable is that the Air Force continues to 
talk up the Lowry Redevelopment as its shining example in the BRAC 
process, yet this glaring unresolved problem remains. Don't you find it 
embarrassing that this hasn't been resolved particularly when 
communities from around the country are meeting at Lowry this Spring to 
discuss successful redevelopment strategies?
    Answer. No. The Air Force has followed Federal and State laws in 
its response to the discovery of asbestos at Lowry Air Force Base. The 
developers incurred their costs at the behest of a State agency that 
directed unprecedented sampling and response actions and then, without 
any basis, informed the developers that the Air Force would pay for it. 
It is not the Air Force's responsibility to resolve such errors. We 
believe that Lowry is an excellent example of successful redevelopment 
and we applaud the LRA for the work it has accomplished to date. We 
also note that the meeting in question is sponsored by a non-Federal 
group, the National Association of Installation Developers (NAID). The 
announcement for the June 4-7, 2005 conference presents the following 
information: ``. . . Lowry . . . has reached marketplace success must 
faster than anticipated, while driving an economic engine that is 
helping the region recover . . .'' and ``since closing in 1994, and 
then breaking ground in 1997, Lowry has become one of Denver's hottest 
neighborhoods. Nearly 3,000 new homes for 6,500 residents now command 
premium prices . . . to date the LRA estimates a $4 billion economic 
benefit to the State.''

             LOWRY AIR FORCE BASE-PRIVATIZATION INITIATIVE

    Question. I would also like to point out a good news story from 
Lowry, and that is the privatization initiative. This plan would allow 
the Air Force and the Lowry Redevelopment Authority to privatize the 
remaining environmental issues and to complete the conveyance of all 
the remaining land at Lowry. This effort would effectively end any Air 
Force involvement at Lowry, protect them against any future 
environmental clean-ups, and allow the LRA to privately contract out 
all of the remediation efforts left at the site. I believe that if this 
plan had been put in place prior to the discovery of asbestos in the 
soil at Lowry, the entire issue would have been taken care of in a much 
less confrontational manner. I hope that as we proceed with another 
round of BRAC that the DOD will push for these agreements. Will the 
Department of Defense continue to pursue privatization initiatives with 
the communities that are affected by the BRAC process?
    Answer. Yes, the Air Force will continue to pursue privatization 
initiatives at locations where it is economically feasible. In addition 
to Lowry, the Air Force Real Property Agency is pursuing privatization 
at the former McClellan AFB, CA. In coordination with the Department of 
Defense, the Air Force is developing criteria for the BRAC 2005 
Handbook that will aggressively reflect privatization as a viable 
method under BRAC 2005.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                SUPPLEMENTAL REQUEST/KUWAITI AERIAL PORT

    Question. Because of the timing of the President's Budget Request, 
and the submission of the $75 billion Supplemental request, it's 
impossible not to question projects included in the supplemental as 
emergencies. The Air Force has asked for an aerial port at Ali Al Salem 
Air Base in Kuwait. The request is for $75 million and that's just the 
first phase of an unspecified number of phases. First, can you give me 
the total cost and number of phases for this project, and secondly, why 
our location at Kuwait City Airport isn't sufficient? These are 
temporary facilities, are they not?
    Answer. The $75.5 million MILCON request in the fiscal year 2005 
Supplemental is an emergency. It is intended to provide the minimum 
construction requirements necessary to move all flying operations out 
of the Kuwait City International Airport (Mubarak AB) and meet the 
current contingency requirements in support of Operation IRAQI FREEDOM 
(OIF). The project expands the runway, taxiway, aircraft parking, and 
fueling capability at Ali Al Salem (AAS) in order to enable the 
airfield to support wide-body aircraft. Additionally, the project 
provides only the basic facility needs to process passengers, handle 
cargo, plus billeting/dining facilities (using pre-engineered 
buildings). The $75.5 million project in the fiscal year 2005 
Supplemental was developed last year assuming continued commercial 
traffic into Kuwait City International Airport (KCIA). Current revised 
planning assumption is that all U.S. flights will be redirected to AAS 
vice KCIA. With this increased number of daily commercial landing and 
takeoffs, recent pavement/soil analysis done by the Corp of Engineers 
determined that the existing design and condition of the Host Nation 
(HN) airfield will require repairs ($18.3 million to $35 million 
depending on design) to the existing airfield pavements in order to 
support heavy aircraft beyond 2 years. We will request HN funding for 
this effort, and if unsuccessful in obtaining HN funding will submit 
O&M funded repair under section 2811. Bottom line: the $75.5 million 
project will effectively move all operations out of KCIA in the short 
term, but the additional load on the AAS runway will cause it to fail 
unless it is repaired. Next, there is a four-phase plan to transition 
Ali Al Salem into an enduring base with permanent type facilities in 
accordance with the long range CENTCOM Master Plan. These phases are 
not tied to OIF, (like the interim $75 million Supplemental project 
mentioned above), and will be submitted for Host Nation funding/cost 
sharing and potential future U.S. MILCON funding. The preliminary scope 
of work and cost estimates for these future phases are reflected in 
detail in the below spreadsheet.

                        [In thousands of dollars]
------------------------------------------------------------------------
                                                            HN funding
                      Project title                           request
------------------------------------------------------------------------
Phase 1 Priority:
    Conc Strat Lift Ramp 8 wide/48 other................          75,300
    Connecting Taxiways.................................           2,800
    Engine Runup & Maint Pad............................           3,100
    Fuel Hydrant Sys (8 Strat, 24 Other), Ph 1..........          15,000
    Flightline/Satellite Fire Station...................           3,000
    2 Lane Asphalt road, Ph 1...........................           2,000
    Communications......................................           2,200
    Supporting fac, utilities, demo, sitework...........           7,000
    Demining, Ph 1......................................           7,000
                                                         ---------------
      Phase 1 Total.....................................         117,400
                                                         ===============
Phase 2 Priority:
    Operational Fuel Storage............................          10,000
    Fuel Hydrant Sys (8 Strat, 24 Other), Ph 2..........          24,900
    PAX Terminal........................................           5,000
    Fleet Service Warehouse.............................           2,300
    Air Freight Terminal................................           5,000
    Wide body Maintenance Hangar........................          22,400
    Maintenance Shops w/Hangar..........................           4,500
    Hangar Apron........................................           3,600
    Squadron Ops Facility...............................           3,400
    AMU Facility........................................           3,400
    Fuels Ops & Testing Facility........................           1,100
    2 Lane Asphalt road, Ph 2...........................             800
    Army Fac (Troop Processing, Hospital, etc)..........          59,000
    Supporting fac, utilities, demo, sitework...........           7,000
    Demining, Ph 2......................................           7,000
                                                         ---------------
      Phase 2 Total.....................................         159,400
                                                         ===============
Phase 3 Priority:
    12,000  200 Runway w/50 shoulders..........          23,000
    7,500  100 Taxiway w/50 shoulders..........          10,500
    Asphalt Overruns....................................           1,300
    Ladder & High Speed Taxiways........................          16,900
    Hot Cargo Pad.......................................           4,900
    Air Traffic Control Tower...........................           1,800
    Airfield Lighting/NAVAIDS...........................          11,200
    2 Lane Asphalt road, Ph 3...........................             800
    Supporting fac, utilities, demo, sitework...........           7,000
    Demining, Ph 3......................................           7,000
                                                         ---------------
      Phase 3 Total.....................................          84,400
                                                         ===============
Phase 4 Priority:
    80 km Pipeline from Refinery........................          38,400
    Flightline Dining Facility..........................           2,700
    Housing (1024 room)........................           8,400
    Repair old runway/taxiway after move................          24,600
    MWR & Support Facilities............................           2,800
    2 Lane Asphalt road, Ph.............................          42,900
    Supporting fac, utilities, demo, sitework...........           7,000
    Demining, Ph 4......................................           7,000
                                                         ---------------
      Phase 4 Total.....................................          93,800
                                                         ---------------
      Cost Sharing Totals...............................         455,000
------------------------------------------------------------------------

    The transition from Kuwait International Airport to Ali Al Salem 
serves two purposes. One, the Government of Kuwait (GoK) has requested 
that all Military operations relocate as they move to establishing a 
Free Trade Zone and increase tourism to their country. Second, by 
consolidating the Aerial Port of Debarkation APOD (currently at KCIA) 
with the passenger processing and tactical airlift (currently at AAS) 
the force protection risk of convoying deploying/redeploying forces 
between these locations is mitigated. Currently Military and U.S. 
commercial aircraft are parked adjacent to the uncontrolled freeway and 
accessible by commercial vehicles operating on KCIA. Bussing troops 
from KCIA to Camp Buehring for in processing, then on to AAS for 
airlift into Iraq exposes them to risk of attack. The fiscal year 2005 
Aerial Port project allows relocation of APOD from KCIA to mitigate 
force protection risks to troops, improves efficiency of logistics and 
troop movements, and satisfies HN request to allow KCIA civil aviation 
expansion. The facilities to be constructed are pre-engineered 
temporary facilities with anticipated life expectancy of 5 to 7 years 
given the extreme temperature conditions of AAS.

                         RECAPITALIZATION RATE

    Question. Mr. Kuhn, as promised, the Air Guard's request is up 
nearly 30 percent from last year's request, but that still only 
represents a $38 million increase. When compared to the amount funded 
with Congressional ads, the Air Guard still falls $73 million below 
last year's funded amount. The recapitalization rate for the Air Guard 
is 163 years--just slightly less than 100 years off the 67 year goal 
set by DOD. Given that only 24 percent of this year's request buys 
current mission projects, how do you plan to buy down the 
recapitalization rate?
    Answer. The OSD goal for the Services to achieve a 67-year 
recapitalization rate is by fiscal year 2008; a goal which the Air 
National Guard is currently programmed to meet. The Air National 
Guard's fiscal year 2006 and fiscal year 2007 MILCON programs continue 
to be dominated by new mission requirements for the beddown of the C-5 
at Memphis, TN and Martinsburg, WV. Projects associated with these 
beddowns are primarily new footprint and do not count toward the 
recapitalization rate. The completion of these beddowns and the up-turn 
in funding projected for fiscal year 2008 will make this possible.
                                 ______
                                 

            Questions Submitted to Major General L. Dean Fox

          Questions Submitted by Senator Kay Bailey Hutchison

               SUSTAINMENT/BASE OPERATIONS SUPPORT (BOS)

    Question. General Fox, your testimony notes your restoration and 
modernization (R&M) backlog will grow to nearly $9.8 billion in 2006. 
It also notes your request for R&M funds was restricted to $173 million 
in fiscal year 2006. How do you expect to make any progress against the 
backlog with such small R&M request?
    Answer. The readiness of our infrastructure remains an emphasis 
item for the Air Force; however, near-term fiscal constraints 
prohibited us from bringing forward a more robust R&M request. During 
the Program Review period, the Air Force was forced to react to major 
adjustments in the overall Department of Defense budget, including 
reductions of almost $4.8 billion to the Air Force budget in fiscal 
year 2006. In developing options to source funding in response to this 
direction, we looked at the full range of Air Force programs, from 
flying programs to installation support programs. While our fiscal year 
2006 budget request for R&M is less than we would prefer, in the out-
years we intend to invest more heavily in critical infrastructure 
maintenance and repair through our R&M program in order to achieve a 
facility recapitalization rate of 67 years by fiscal year 2008. This 
strategy is in line with established OSD goals. This additional 
investment in our R&M program will assist in making progress against 
our R&M backlog.
    Question. General Fox, your testimony notes your restoration and 
modernization (R&M) backlog will grow to nearly $9.8 billion in 2006. 
It also notes your request for R&M funds was restricted to $173 million 
in fiscal year 2006. What funding strategy does the Air Force intend to 
employ to bring down this backlog?
    Answer. Our strategy is to invest more heavily in the out-years in 
critical infrastructure maintenance and repair in order to achieve a 
facility recapitalization rate of 67 years by fiscal year 2008. This 
strategy is in line with established OSD goals. This strategy will 
assist in making progress against our R&M backlog.
    Question. General Fox, your testimony notes your restoration and 
modernization (R&M) backlog will grow to nearly $9.8 billion in 2006. 
It also notes your request for R&M funds was restricted to $173 million 
in fiscal year 2006. Given the backlog, why has the Air Force not asked 
for more R&M?
    Answer. Near-term fiscal constraints prohibited us from bringing 
forward a more robust R&M request. During the Program Review period, 
the Air Force was forced to react to major adjustments in the overall 
Department of Defense budget, including reductions of almost $4.8 
billion to the Air Force budget in fiscal year 2006.
    Question. General Fox, your testimony notes your restoration and 
modernization (R&M) backlog will grow to nearly $9.8 billion in 2006. 
It also notes your request for R&M funds was restricted to $173 million 
in fiscal year 2006. Why has the Air Force not submitted a larger 
sustainment and BOS budget?
    Answer. Sustainment, Base Operating Support (BOS), and Restoration 
and Modernization (R&M) are three separate programs, each with separate 
requirements and associated funding goals. For Sustainment, the Air 
Force's fiscal year 2006 budget request is in keeping with established 
OSD goals; namely, it represents 95 percent of the requirement derived 
from the OSD Facility Sustainment Model. For BOS, while our fiscal year 
2006 budget request is less than we would prefer, near-term fiscal 
constraints prohibited us from bringing forward a more robust BOS 
budget. During the Program Review period, the Air Force was forced to 
react to major adjustments in the overall Department of Defense budget, 
including reductions of almost $4.8 billion to the Air Force budget in 
fiscal year 2006. In developing options to source funding in response 
to this direction, we looked at the full range of Air Force programs, 
from flying programs to installation support programs.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                      VANDENBERG AFB/MCCLELLAN AFB

    Question. General Fox, the Air Force plans to spend $34.7 million 
in fiscal year 2006 for environmental remediation at the former 
McClellan AFB. Could you please tell me, what is the extent of 
remediation efforts still required at McClellan, how much time and how 
much funding is still required?
    Answer. Former McClellan AFB is on the EPA National Priorities List 
(NPL) list and is a very complex environmental site. There are nine 
operable units, which have been organized into 15 specific Records of 
Decision (RODs). Two RODs are completed. 2010 is the projected Final 
ROD date, with 2015 being the final remedy in place date. The Estimated 
Cost to Complete is $752 million. The Air Force is seeking to implement 
alternate contracting methods to buyout all or portions of the 
environmental program over the FYDP. Currently 11 percent of the 
property is conveyed. All conveyances are estimated for completion by 
end of 2016.

                       FOREIGN CURRENCY EXCHANGE

    Question. Maj Gen Fox, Your program notes the challenging foreign 
currency exchange rate. The dollar has been in decline for a couple of 
years now. When submitting requests for this budget, did your estimates 
take into consideration the weakened value of the dollar? If so, given 
a consistent dollar valuation, will exchange rates continue to be a 
challenge in fiscal year 2006?
    Answer. Yes, we have taken into consideration the weakened value of 
the dollar in developing the cost estimates of our fiscal year 2006 
overseas projects. However our prior year projects were programmed at 
higher rates of exchange and the issue of exchange rates will remain a 
challenge when making payment for these projects in fiscal year 2006.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. Yeah.
    Well, thank you very much. Those are my questions. And I 
appreciate your being here and look forward to working with 
you.
    Mr. Kuhn. Thank you very much.
    General Fox. Thank you.
    Senator Hutchison. Thank you.
    Our hearing is recessed.
    [Whereupon, at 3:16 p.m., Wednesday, March 16, 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 2006

                              ----------                              


                         TUESDAY, JUNE 28, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 4 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Allard, Feinstein, Johnson, 
and Landrieu.

                       OVERSEAS BASING COMMISSION

STATEMENT OF HONORABLE AL CORNELLA, CHAIRMAN, OVERSEAS 
            BASING COMMISSION
ACCOMPANIED BY:
        MAJOR GENERAL LEW E. CURTIS, III, UNITED STATES AIR FORCE 
            (RET.)
        VICE ADMIRAL ANTHONY A. LESS, UNITED STATES NAVY (RET.)
        BRIGADIER GENERAL KEITH MARTIN, PENNSYLVANIA ARMY NATIONAL 
            GUARD (RET.)
        LIEUTENANT GENERAL H.G. TAYLOR, UNITED STATES ARMY (RET.)

           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. The hearing will come to order. I 
apologize for being late, I thank all of you for being here and 
I'm very pleased that we now have our report and our hearing. 
The Commission has concluded that making the necessary changes 
in the report did not have a material affect on its conclusions 
and recommendations, thus the report has been edited in 
response to concerns of the Department, and we appreciate all 
of the cooperation by both the Department of Defense and the 
Overseas Basing Commission.
    The Overseas Basing Commission was created in November of 
2003 in the Military Construction Appropriations Act, Senator 
Feinstein and I were the authors of that legislation. We passed 
the legislation because we were concerned that the United 
States was pouring large amounts of money into overseas 
military facilities that were more appropriate to the Cold War 
than to the security environment of the 21st century. I also 
was concerned that the Department was not thinking boldly 
enough about the posture more appropriate to that new security 
environment, and creating the Commission served a dual 
purpose--providing Congress with an independent view of our 
overseas basing needs, and working with the Department of 
Defense to tackle this effort vigorously.
    We have before us a fresh look at these important 
questions, not necessarily does it have all the right answers, 
but it is another independent view of the subject. I believe 
we'll find that the Commission's very existence will prove to 
have been as important as any of the specific recommendations 
it has to make.
    I'm pleased to note the Commission report overall is in 
support of the Global Basing Strategy of the Department of 
Defense, and while the Commission diverges from the Department 
on some of the specifics, its plan, in the words of the report 
says, ``The Commission fully understands the need for change 
and endorses most of the initiatives undertaken in the 
Department of Defense's Integrated Global Posture and Basing 
Strategy.''
    I will not read the rest of my opening statement, but just 
to say that I think the goal of the Commission and our goal in 
passing the legislation authorizing the Commission has been 
met, and I think that in the main it is also in agreement with 
the Department of Defense Global Basing Initiative. There are 
some differences, and we will discuss those. We will certainly 
want to hear from the Department of Defense as well, but I 
think when we are looking at some of the problems that we had 
in transporting troops during the run up to the situation in 
Iraq, and the training constraints that we have at overseas 
bases, that certainly the move now to having more troops at 
home and deploying from here is something that is in the works, 
thanks to a lot of effort on the part of the Department.
    So, with that, let me ask my ranking member, Senator 
Feinstein for her opening statement, and as the co-sponsor of 
the legislation to create the Commission, we're very pleased 
that we now have a report, and we believe it will add to the 
body of knowledge to make all of our bases better training 
facilities, and better places for our service men and women to 
live and work. Senator Feinstein.

                 STATEMENT OF SENATOR DIANNE FEINSTEIN

    Senator Feinstein. Thank you very much, Madame Chairman, 
and my thanks to the Commission, to its Chairman, Al Cornella, 
to the members, I really think you have done an excellent job. 
I had a chance at reading the classified version and have just 
received this new one now and look forward to looking through 
it.
    I am very pleased you're working through the classification 
issues which have arisen in conjunction with the report, and 
we've reached the point where we can go forward with this 
hearing today. Senator Hutchison's and my goal in establishing 
the Commission was really to enable and obtain an objective, 
informed overview of the global basing plan from the 
perspective of experts outside of the Pentagon. Your report 
offers precisely the type of overview we were hoping to achieve 
and it raises a number of valid and very thought-provoking 
questions.
    The timing of the report in conjunction with the ongoing 
BRAC process could not really be more propitious. I understand 
you've been invited to testify before the BRAC Commission, and 
I would anticipate that your insight into the global basing 
plan will be a valuable asset to them in their deliberations.
    I agree with both you and the Defense Department that it is 
time to re-think the stationing of the United States military 
forces around the world, but I also share your concerns that 
the Pentagon may be moving too fast, too soon without giving 
enough consideration to America's overarching foreign policy 
and national security objectives. This isn't just an exercise 
of moving pieces on a chessboard. When, how and where we 
reposition existing military forces overseas has a far-reaching 
impact, not only on our national security interest, but also on 
a whole host of economic and political interests. The movement 
of troops from Europe and Korea back to the United States will 
have a huge impact on the communities to which they are 
returning, as your report rightly points out, quality of life 
is a key element of the global re-basing strategy, so the 
Department needs to be very careful to avoid returning American 
troops and their families to bases in communities that are not 
ready to receive them, and this is a major concern, I think, of 
Senator Hutchison, and certainly of my own.
    How the Pentagon expects to accomplish this in the midst of 
the wholesale realignment of domestic bases that will occur as 
a result of BRAC is a question that needs to be answered, and 
interestingly enough, I see where, in your report, you 
mentioned that costs, which are anticipated to be between $9 
and $12 billion with only $4 billion currently budgeted from 
fiscal year 2006 to 2011. You mentioned that these may be 
understated, and that an independent analysis conducted for 
your Commission put the tab at closer to $20 billion. I think 
this is something that we need to come to grips with, I hope, 
Mr. Cornella, that you will talk about that in your remarks.
    Secondly, timing and synchronization are central themes, 
but your report is a great first step, I really want to thank 
you for it, and I certainly look forward to your testimony. 
Thanks, Madame Chairman.
    Senator Hutchison. Thank you. Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Madame Chairman, I would like to make my 
full statement a part of the record.
    But I would just like to just briefly make these comments.
    In some respects the Commission was critical of the manner 
in which the Department of Defense put together its current 
Integrated Global Basing Posture and Basing Strategy, and some 
may even be tempted to argue that the Commission's 
recommendations indicate that we need to delay, or stop 
entirely, the BRAC process. Madame Chairman, I disagree with 
that assessment.

                           PREPARED STATEMENT

    I note that the Overseas Basing Commission stating it 
fully, agrees with the Department's contention, that there's 
considerable need for a rebasing initiative, in fact, the 
Commission strongly endorses most of the rebasing initiatives 
undertaken by the Department of Defense, and I look forward to 
getting to the heart of the recommendations offered by the 
Commission, and I believe that this hearing will further 
demonstrate how important it is that the BRAC process move 
forward, and that the Department's re-basing initiative is 
fully implemented, and I note with interest that there's one 
bullet in your conclusions and recommendations where you state 
that the overseas basing posture of the United States and 
domestic base closure and realignment are closely related. 
Although the Commission calls for an overarching review of the 
overseas basing posture, you state that we believe that the 
BRAC process should move forward as scheduled, thank you, 
Madame Chairman.
    [The statement follows:]

               Prepared Statement of Senator Wayne Allard

    Thank you, Madame Chairman for holding this important hearing.
    The Commission on the Review of Overseas Military Facility 
Structure of the United States has performed a great service for our 
country. The Commission's report lays out several principles that 
should be considered when reviewing the Department of Defense's 
overseas rebasing initiative. These principles include among others:
  --Ensuring that the rebasing initiative is tied to a master plan
  --Coordinating with agencies outside the Department of Defense
  --Assessing the impact of rebasing on intelligence, force protection, 
        homeland security, and other important national priorities
    In some respects, the Commission was critical of the manner in 
which the Department of Defense put together its current Integrated 
Global Posture and Basing Strategy. Some may even be tempted to argue 
that the Commission's recommendations indicate that we need to delay or 
stop entirely the BRAC process.
    Madame Chairman, I disagree with that assessment. I note that the 
Overseas Basing Commission stated it fully agrees with the Department's 
contention that there is considerable need for a rebasing initiative. 
In fact, the Commission strongly endorsed most of the rebasing 
initiatives undertaken by the Department of Defense.
    I look forward to getting to the heart of the recommendations 
offered by the Commission. I believe that this hearing will further 
demonstrate how important it is that the BRAC process move forward and 
that the Department's rebasing initiative is fully implemented.
    Thank you for the opportunity to say a few words. I look forward to 
the testimony of our witnesses.

    Senator Hutchison. Senator Landrieu.

                 STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Madame Chair, I have a full 
statement for the record.
    I would just like to add, I think it's very important that 
our desires and needs as a Nation be brought into line with our 
budget and monies that we have to allocate, and I'm seeing, 
unfortunately, a pattern of setting out on a course 
underestimating the costs associated, and basically running up 
the debt. And so, I think we've got to be very practical in 
this approach, we have some strategic defense postures to keep 
in place, but we also have some very real budget constraints, 
and if the cost is going to be twice or three times as much as 
we had anticipated, then we're going to need to find the money 
somewhere, and just can't pretend that we can do this with 
minimal to no cost, and we've got to be able to be more 
realistic about that, and I'll say more about that in the 
statement that I submit. Thank you.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Madame Chairman, thank you for calling this hearing to review the 
Overseas Basing Commission recommendations.
    Since the end of the Cold War, the United States has stood as the 
unrivaled military leader in the world. Our fighting men and women have 
preserved national security and served our foreign policy interests 
admirably since the collapse of the Soviet Union. However, the attacks 
of September 11, 2001 on the United States highlighted the need to 
transform our national defense strategy to address the terrorist and 
extremist threats which seek to destroy our country's influence in the 
world.
    Admiral Nimitz, one of our foremost Naval heroes defined the task 
for us. He noted that ``whoever gets there firstest with the mostest 
wins.'' That is our contemporary challenge which positions U.S. 
fighting men and women abroad. We must place them around the globe in 
such a way as to assure that U.S. forces are the first in the The 
Theater, and that they can bring overwhelming force to bear.
    Yet while our government contemplates a global strategy to keep our 
Nation more secure, we must also consider the personal impacts our 
decision-making will have. As we contemplate closing facilities in 
Germany and other places in Europe, we must keep a special focus on our 
military families. We are already asking them to make incredible 
sacrifices. We do not need to add the inevitable burdens of separation 
and worry by relocating our bases to places where it is unlikely or 
impossible for their families to follow.
    Another consideration for this process is ensuring that our allies 
and friends recognize that we aim to strengthen our commitment to 
secure our common interests. We must explore ways in which we can 
together transform our partnership in order to enhance our collective 
defense capabilities. It is time for our allies to work toward this 
goal together. Gone are the days when the United States can be expected 
to foot the bill for every cause.
    Madam Chairman, while I trust that all the members of the Overseas 
Basing Commission will provide valuable recommendations to strengthen 
the U.S. Global Defense Posture, I think it is important that this 
subcommittee keep in mind that managing this complex concept is a 
costly endeavor. While have put much effort into the building blocks of 
posture changes which include the facilities that make up our overseas 
footprint. However, we also need a new approach to managing the force 
which includes our permanent and rotational presence overseas must 
include our allies and their own accountability for the goals which 
they can no longer expect to achieve without their own proportionate 
investment.
    We must make certain that we keep our Nation's obligation to those 
who have served and sacrificed in its defense. I believe that the U.S. 
Global Defense Posture is important and necessary. I also believe that 
our commitment to this endeavor must be tempered by realistic 
expectations to be achieved and by appropriate and responsible 
contributions to be made by the United States as well as our Allies.
    In its report, the Overseas Basing Commission expressed areas where 
the Department of Defense can provide for a more secure America. 
Suggestions in the report range from better communication and a wider 
spectrum of views by partners in the decision-making process to a more 
cohesive overall design which would be administered by a specific body 
that would be assigned responsibilities to both guide and monitor its 
implementation. Also, the Commission suggests Congress exercise its 
full authority in ensuring that plans and programs are appropriate to 
the task.
    The Commission's recommendations are critical in the strategy of 
transformation which will change the face of national security for many 
years to come. It is essential we have an honest and open dialogue to 
insure America continues to preserve the lives of its citizens for 
generations to come.
    Thank you all for your testimony. Also, I hope that in the future 
we will be able to discuss one of the most important issues which faces 
this committee, the shortfall in Veterans Health Care funding.
    Madame Chairman, Senator Hutchison, thank you for your continued 
leadership on these issues. I look forward to the testimony of our 
witnesses.

    Senator Hutchison. Senator Johnson.

                    STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Thank you, Madame Chairman. I want to in 
particular welcome a fellow South Dakotan, Al Cornella, 
Chairman of the Commission, to the panel today and express my 
appreciation and the Senate's appreciation for you leadership. 
Mr. Cornella is a former BRAC Commissioner and has been willing 
to take on the very significant task of chairing the Overseas 
Basing Commission, and we're appreciative of that, Al, we are 
proud of your service to the country. I welcome our other panel 
members here, as well, who have each of them, undertaken a very 
large scale, but very important undertaking, and will serve the 
Senate well, I'm certain. I will submit a full statement, 
Madame Chairman.
    I do, however, want to note that I believe that the 
Overseas Basing Commission recommendations and the ongoing 
quadrennial review are of such significance that it would have 
been my preference to have seen those issues resolved prior to 
going onto the BRAC Commission's deliberations about the 
closure and the Department of Defense's recommendations, 
frankly, for the closure of military bases around the country. 
I think that all of these interact with each other, and it is 
hard for me to imagine how the recommendation from the 
Department of Defense could be, well premised without in fact 
having prior access to the studies and reviews of the 
quadrennial review as well as the Overseas Basing Commission.
    Nonetheless, here we are, and I look forward to the 
testimony of the Commission, and I want to tell the Commission 
that I was very supportive of this effort I think that your 
work is going to be a very constructive and positive 
contribution to our overall review of America's military 
posture in the world and domestically as well, thank you.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    Mr. Johnson. I would like to thank Chairwoman Hutchison and Ranking 
Member Feinstein for calling today's hearing to discuss the Overseas 
Basing Commission's interim report.
    I would also like to thank Chairman Al Cornella for appearing 
before the Subcommittee today. The work performed by the Overseas 
Basing Commission is vitally important to our national security and the 
long-term viability of our military force.
    Today the Military Construction and Veterans Affairs Subcommittee 
will hear testimony from Commission members about redeploying 
servicemembers from U.S. military facilities overseas. Their report 
could not come at a more important time.
    The threats facing the United States today are vastly different 
from those during the Cold War. Much has changed since that conflict 
ended and we must shift our security posture to confront new and 
emerging enemies. In addition, Secretary Rumsfeld has released his list 
of proposed domestic base closures and realignments, and the Base 
Realignment and Closure (BRAC) Commission has begun their important 
work to review and revise the Secretary's list. Domestic base closures 
have a profound effect on our military force and the economic health of 
local communities. We should not close a single domestic base if it may 
unduly compromise our ability to defend our homeland.
    Currently, the Department of Defense is undertaking a monumental 
shift in overseas deployments. The threats confronting the United 
States have changed dramatically following the collapse of communism 
and the terrorist attacks of September 11. In response, approximately 
70,000 soldiers, as well as 100,000 family members and civilian 
employees, will be returning from overseas in the next decade. This 
shift in our military force abroad is long overdue.
    However, the Overseas Basing Commission's interim report raises a 
number of important questions that must be addressed. For instance, the 
U.S. military plans to move troops stationed overseas back to American 
soil, but according to the Commission, if a crisis arises abroad, the 
military does not have enough sea and air transportation to rotate 
forces rapidly enough to respond. Just as troubling, the Bush 
Administration has projected it will cost $12 billion to redeploy 
soldiers back to the United States, but has only budgeted $4 billion 
for fiscal years 2006 through 2011. The Commission believes these costs 
are understated and according to their independent analysis the price 
tag is closer to $20 billion.
    Furthermore, if the Defense Department's proposed changes in 
overseas bases are enacted, it will result in additional troop 
rotations. The Commission's report argues that extended and more 
frequent rotations could strain U.S. military personnel and their 
families to the point where the United States is incapable of 
maintaining an all-volunteer force. I am extremely concerned with these 
conclusions. The military is already having trouble meeting recruitment 
and retention quotas. Creating more stress for our soldiers and their 
families will exacerbate this problem and irreparably damage our 
military.
    In response to these concerns, the Commission cautions the 
Department of Defense and urges them to reduce the speed of returning 
soldiers from overseas bases, and I believe this idea has merit. At a 
time when we are fighting wars in Iraq and Afghanistan, we must ensure 
the redeployment of American service members is in accord with our 
long-term strategic defense goals and should be thoughtfully planned 
and executed.
    Additionally, the Commission contends overseas redeployment should 
wait until the Department of Defense determines which domestic military 
bases will be shuttered during this round of base closures. If 
Secretary Rumsfeld and the Pentagon continue to move forward with their 
plan to bring troops back to the United States from overseas 
deployments, I believe we must consider postponing this current round 
of domestic base closures. Simultaneously closing domestic and overseas 
bases may irrevocably damage our ability to defend against threats at 
home and abroad.
    I commend the Overseas Basing Commission for addressing the 
critical issues and concerns raised in preparation for shifting troops 
back to the United States. I strongly encourage Secretary Rumsfeld and 
the Department of Defense to seriously consider the Commission's 
recommendations. We must reorganize our military force in order to 
respond to the threats of the 21st century. The challenge is to do so 
in a manner that is not detrimental to our national security and the 
men and women who proudly serve our country.

    Senator Hutchison. Thank you, Senator Johnson. I think that 
the Department in the next panel will discus how it took into 
consideration the troops that were coming back during the BRAC 
process, so we will get a chance to question them on that.
    Mr. Cornella, thank you for Chairing the Commission, I want 
to thank each Commissioner for all of the time and effort that 
you have put into doing this, you came to Washington many 
times, you went overseas, we appreciate the effort for this 
volunteer force that you gave us, and with that, let me ask 
you, Mr. Cornella, to give us the synopsis of the report, and 
whatever you would wish you say.

                        STATEMENT OF AL CORNELLA

    Mr. Cornella. Madame Chairman, Senator Feinstein, staff 
members, distinguished guests, members of the general public, 
my name is Al Cornella. As I was introduced, I serve as the 
Chairman on the Commission of Overseas Military Facilities 
Structure of the United States, thankfully more commonly known 
as the Overseas Basing Commission.
    I serve with five other Commissioners, four of whom are 
present today. From my far left, the Commission vice-Chairman 
Lou Curtis, Major General United States Air Force, Retired, 
Tony Less, United States Navy, Retired, Pete Taylor on my 
right, Lieutenant General, United States Army, Retired, and 
Keith Martin, Brigadier General, Pennsylvania Army National 
Guard, Retired. Dr. James Thompson, our sixth Commissioner and 
President of BRAC is out of the country and unable to be here 
with us today.
    I would also like to introduce the Commission's Executive 
Director, Ms. Patricia Walker, seated behind me.
    Madame Chairman, I would respectfully ask that the 
statements you received be entered into the record, and I be 
allowed to make a brief opening statement.
    The Commission's talented staff included lead research 
analysts, a general counsel administrative staff, and analysts 
detailed from the Department of Defense and Government 
Accountability Office. The Commissioners and staff have worked 
diligently to prepare the May 2005 report. A final report will 
be provided to Congress and the President by August 15, 2005. 
We were asked to provide this early report so it might be used 
in conjunction with the domestic BRAC process.

                                OVERVIEW

    The Overseas Basing Commission was established by public 
law in fiscal year 2004. The Commission's task is to 
independently assess whether the current overseas basing 
structure is adequate to execute current missions, and to 
assess the feasibility of closures, realignments or 
establishment of new installations overseas to meet emerging 
defense requirements.
    However, the Commission's work is not intended to preclude 
the Department of Defense's effort toward developing an 
integrated global presence and basing strategy, or IGPBS, and 
you'll probably hear me use that acronym several times. Rather, 
the Commission report should assist Congressional Committees in 
performing their oversight responsibilities for DOD's basing 
strategy military construction appropriations, and the 2005 
base re-alignment and closure determinations.
    But one thing I would like to add as I note from your 
opening statements, that there are views about criticism of the 
Department. I do not believe that our report is offered as 
criticism of the Department, it's offered as ways to strengthen 
the IGPBS plan, but we feel these are constructive thoughts 
that we're sending forth.
    The Commission has been active since May 2004 and began 
with a thorough analysis of national security, defense and 
military strategies. The Commission completed a careful review, 
the Foundation for Global Reposturing, the 2004 Department of 
Defense, again IGPBS. It is important to note, at this point, 
the Department on several occasions has advised us that we are 
entitled to and have received all of the information that has 
been provided to Congress relative to overseas basing.
    Second, based on the Commission's interview, interviews of 
key officials in the office of the Secretary of Defense, the 
Joint Staff, the Combatant Commanders and the State Department, 
the Commission developed evaluation criteria to assess how 
effectively the current and future overseas basing posture 
support current and future national security and military 
operations. In addition, the Commission consulted with former 
senior military leaders, and other national security experts. 
We conducted four public hearings where we received testimony 
from former experts, military experts, defense analysts and 
experts on military family issues. At the final hearing, we had 
representatives from the Department of Defense and the State 
Department. We have engaged in briefings from the Department of 
Defense, the State Department, the Congressional Budget Office, 
Congressional research service, and other entities. We visited 
military installations in many countries, meeting with U.S. 
forces, embassy representatives, foreign military officers and 
local officials. We have met with the majority of combatant 
commands, and in most cases, with the commanders and their 
staffs. We have made two trips to the Pacific Command, three to 
the European Command, and one to the Central Command. We spent 
about 2 months overseas traveling, the Commissioners also 
received briefings from U.S. Southern Commands, Special 
Operations Command, and Transportation Command. We have 
interacted with several thousand people over the past year, the 
vast majority from within the Department of Defense. All of the 
Commissioners and I have learned a great deal from these 
discussions, both here and abroad.
    Based on this review and analysis, the Commission has 
identified six major areas of concern--geopolitical 
considerations, timing and synchronization, operational 
requirements, mobility, quality of life and costs, and I will 
touch on a few of these briefly, and then we are prepared to 
address all of them in your questions.

                       TIMING AND SYNCHRONIZATION

    The Commission would like to make note that decisions have 
been made in regard to locations and force levels before the 
2005 Quadrennial Defense Review, QDR, and the 2005 Mobility 
Capability Study had been completed. The simultaneous 
activities of Service Transformation Army Modularity Operation 
Enduring Freedom, Operation Iraqi Freedom and the Global War on 
Terrorism, IGPBS, BRAC, resetting the forces and rebuilding, of 
pre-positioned equipment--have all competed for funding within 
a limited budget, not to mention the stress that's created on 
the forces, the current schedule of IGPBS moves will adversely 
impact the service's ability to adequately fund modernization 
and readiness.
    In regard to mobility, strategic and infra-theater, lift 
and sea lift capabilities must be significantly upgraded. We 
have yet to meet the lift capabilities identified by the 
mobility requirement study of 2005, which was conducted in the 
year 2000. In addition, announcements of global reposturing are 
being made before the presently ongoing Mobility Capability 
Study is concluded. Again, it would seem prudent to wait for 
the results of that study. It is clear that the mobility of our 
military forces being stressed by the current strain on 
strategic infra-theater lift and sea lift capabilities, the 
stress on strategic lift capabilities is being caused in large 
part by ongoing military operations in Afghanistan and Iraq. 
Strategic mobility is the key to our ability to respond to 
events worldwide, plans for sea and air lift capabilities as 
well as pre-positioned equipment sets must take into account 
the additional demands that IGPBS could place on an 
increasingly continental United States-based force. Surging 
forces from the continental United States will be problematic 
if strategic and tactical life capabilities and pre-positioned 
stocks are not in place.

                            QUALITY OF LIFE

    Next, I'll briefly turn to quality of life issues. These 
issues are complex, but are also key concerns of the global 
positioning strategy, primarily because the United States 
relies on an all-volunteer force. In order to sustain the 
military force both in numbers and in strength, the 
expectations of military personnel and their families with 
regard to active and reserve duty as well as redeployments must 
be met. If these expectations are not adequately met, then the 
U.S. military risks being severely compromised. Needless to 
say, this has enormous consequences politically, and in terms 
of maintaining national security. We have a moral obligation to 
our men and women in uniform and to their families to provide 
the quality of life support that they deserve. Returning forces 
and families should have housing, schools for their children 
and adequate medical facilities in place before they return, 
and the same should be maintained abroad until the last service 
member departs.
    The Commission calls this the ``last day-first day'' 
approach; not only does this have moral implications, but it 
will also be reflected in retention rates. The Commission notes 
with concern that the impact in recruiting and retention by 
IGPBS rotational forces has not been adequately evaluated, nor 
have associated risks to sustaining the voluntary force been 
assessed. We strongly recommend that this be given priority, 
and that necessary assessments be completed as quickly as 
possible.

                      GEOPOLITICAL CONSIDERATIONS

    In the present era of the global War on Terror and the 
indisputable global competition in defense, intelligence, 
diplomacy, commerce and energy matters, the Commission feels it 
would be wise to broaden the underlying assumptions, scope and 
participation in the IGPBS process to include vital players 
involved in other areas of national security. The inter-agency 
process, for example, might include the Departments of Defense, 
State, Energy, Homeland Security, Justice, Commerce and 
Treasury, the National Intelligence Director and others. After 
completing the interim report, we were advised that have a 
fourth Commission, but we of the fourth Commission have come to 
a similar conclusion--the others are in the 9/11 Intelligence 
Commission--while moving troops back to the United States may 
be a political priority, force projection demands can only be 
met by developing a rebasing strategy and coordination with 
strategic U.S. alliances abroad, both existing and future.
    Many of our overseas basing capabilities rest on 
contingencies such as future political relations with bilateral 
partners involving fully negotiated and ratified legal 
agreements that support those relations. In many cases the 
status of forces agreements, Article 98 agreements and other 
legal agreements are not in place at the proposed new 
locations.

                              TROOP LEVELS

    I will mention one specific recommendation, as it is the 
only one that has potential to change the number of returning 
troops, and we estimate this recommended change to affect 
roughly 4,000 troops. In order to hedge against uncertainty in 
regard to near-term threats, demonstrate aid and continued and 
enduring commitment to NATO, and allow for heavy force 
military-to-military contact with our NATO allies, at least one 
of the heavy brigade combat teams scheduled for return to the 
United States should remain in Europe, fully manned, until one, 
the Balkans support mission is lifted to a ground-based 
defensive tank killing system is stationed in Europe and 
Operation Iraqi Freedom is mitigated. Additionally, heavy 
brigade combat teams' equipment should be repositioned to float 
in the region. These recommendations are in addition to the 
Department's plan for a Stryker Brigade in Germany, and the 
173rd Airborne Brigade in Italy, and again, we offer these 
suggestions only to strengthen the Department's plan, not as a 
criticism.

                           PREPARED STATEMENT

    As a final note, I wish to thank the members of the 
committee for inviting the Commission to appear today. It's 
been my privilege to briefly describe the Commission work to 
date. Of course, the report has not been finalized and it is my 
hope that this will be the beginning of dialogue in this 
matter, so that the Commission can strengthen its analysis, 
conclusions and recommendations before submitting the final 
report on August 15. Please be assured that the Commission and 
staff are open to the views and concerns of Congress.
    Thank you for giving us this opportunity to serve your 
needs and those of the Nation, and we will be happy to answer 
any questions you may have at this time.
    [The statement follows:]

                   Prepared Statement of Al Cornella

    My name is Al Cornella, and I serve as the Chairman of the 
Commission on the Review of Overseas Military Facility Structure of the 
United States, more commonly known as the Overseas Basing Commission 
(OSBC).
    I serve with five other Commissioners four of whom are present 
today--the Commission Vice Chairman, Lewis Curtis, Major General United 
States Air Force (Retired); Anthony Less, Vice Admiral, United States 
Navy (retired); Pete Taylor, Lieutenant General, United States Army 
(Retired); Keith Martin, Brigadier General, Pennsylvania Army National 
Guard (Retired). Dr. James Thomson, our sixth Commissioner and the CEO 
and president of RAND is out of the country and could not be here 
today. I would also like to introduce the Commission's Executive 
Director, Ms. Patricia Walker.
    The Commission's talented staff included lead research analysts, a 
general counsel, administrative staff, and analysts detailed from the 
Department of Defense and the Government Accountability Office. The 
Commissioners and staff have worked diligently to prepare this May 2005 
report. A final report will be provided to Congress and the President 
by August 15, 2005. We were asked to provide this early report so it 
might be used in conjunction with the domestic BRAC process.
    The Overseas Basing Commission was established by public law in 
fiscal year 2004. The Commission's task is to independently assess 
whether the current overseas basing structure is adequate to execute 
current missions and to assess the feasibility of closures, 
realignments, or establishment of new installations overseas to meet 
emerging defense requirements.
    However, the Commission's work is not intended to preclude the 
Department of Defense's efforts toward developing an integrated global 
presence and basing strategy. Rather, the Commission report should 
assist Congressional committees in performing their oversight 
responsibilities for DOD's basing strategy, military construction 
appropriations, and the 2005 Base Realignment and Closure Commission 
determinations.
    This Commission has been active since May 2004, and has conducted 
four hearings where we received testimony from former military experts, 
defense analysts, and experts on military family issues. We have 
engaged in briefings from the Department of Defense, the State 
Department, the Congressional Budget Office, Congressional Research 
Service, and other entities. The Commission has met with commanders and 
received extensive briefings on the transformation plan for the 
European Command, Pacific Command, and Central Command. The Commission 
has also met with the Transportation Command, Special Operations 
Command, and Southern Command. The majority of our time was dedicated 
to the areas of greatest change.

Main Testimony
    Congress created the Overseas Basing Commission as an independent, 
unbiased entity to produce a report that advises Congress on the 
current and future overseas basing structure of U.S. military forces. 
This is truly a daunting task. In order to explain the preliminary 
conclusions and recommendations that the Commission is prepared to 
offer to this committee today, let me begin by explaining the analytic 
approach we took examining and thoroughly studying various important 
aspects of the overseas basing structure.

Analytic Approach
    First, the Commission began with a thorough analysis of national 
security, defense, and military strategies. The Commission completed a 
careful review of the foundation document for global reposturing, the 
2004 Department of Defense Integrated Global Presence and Basing 
Strategy (IGPBS).
    Second, based on the Commission's interviews of key officials in 
the Office of the Secretary of Defense, the Joint Staff, the COCOMs, 
U.S. Transportation Command, and the State Department, the Commission 
developed evaluation criteria to assess how effectively the current and 
future overseas basing postures support current and future national 
security and military operations.
    In addition, the commission consulted with former senior military 
leaders and other national security experts. Commissioners and staff 
participated in six overseas trips to various commands. We conducted 
four public hearings where we received testimony from former military 
experts, defense analysts, and experts on military family issues. At 
the final hearing we had Mr. Doug Feith and Vice Admiral Robert F. 
Willard from the Department of Defense and Ambassador Rose Likens as a 
representative of the State Department. We have engaged in briefings 
from the Department of Defense, the State Department, the Congressional 
Budget Office, Congressional Research Service, and other entities.
    We visited military installations in many countries, meeting with 
U.S. Forces, embassy representatives, foreign military officers, and 
local officials. We have met with the majority of Combatant Commands 
and in most cases with the commanders and their staffs. The 
Commissioners have received briefings from U.S. Central Command, U.S. 
Southern Command, U.S. Special Operations Command and U.S. 
Transportation Command. We have made two trips to the Pacific Command, 
three to the European Command, and one to the Central Command. All the 
Commissioners, and I, have learned a great deal from these discussions, 
both here and abroad.
    Finally, based on its review and analysis, the Commission 
identified six major areas of concern:
  --Geopolitical Considerations;
  --Timing and Synchronization;
  --Operational Requirements;
  --Mobility;
  --Quality of Life; and
  --Costs.
    I will briefly address each area of concern, and explain the 
findings and conclusions of the Commission on each issue.

Geopolitical Considerations
    The Commission has determined that the DOD's IGPBS does not 
adequately address current and future geopolitical and strategic needs 
in response to existing and emerging security threats for two reasons. 
First, it is the view of the Commission that the IGPBS is too narrowly 
based on military concerns. While the Commission wishes to commend the 
Department of Defense on the design of IGPBS--which is a strategy that 
is directly aimed at addressing the matrix of existing and emerging 
threats--it is clear that the IGPBS has been almost exclusively 
designed by and for the military.
    In the present era of a global war on terror and the indisputable 
global competition in defense, intelligence, diplomacy, commerce and 
energy matters, the Commission feels that it would be wise to broaden 
the underlying assumptions, scope and participation in the IGPBS 
process to include vital players involved in other areas of our 
national security. The interagency process might, for example, include 
the Departments of Defense, State, Energy, Homeland Security 
(especially Immigration and Customs and Border Patrol), Justice 
(especially the Federal Bureau of Investigation), Commerce, and 
Treasury, the National Intelligence Director, and others. After 
completing the interim report, we were advised that we are the fourth 
commission to come to this conclusion. (Others are 9-11, Intelligence, 
and Roles and Missions Commissions)
    The basic concept of the IGPBS--as established by DOD--is 
fundamentally strong, and can be further refined to include issues 
related to homeland security, law enforcement, energy, non-
proliferation, and other pressing national needs and priorities. 
Information sharing and inter-agency coordination among government 
agencies is a top priority of this Administration, and we feel that 
IGPBS can support this goal by broadening and diversifying its approach 
and implementation.
    Indeed, many of our overseas basing capabilities rest on 
contingencies such as future political relations with bilateral 
partners fully negotiated and ratified legal agreements that support 
those bilateral relations. In many cases, the Status of Forces 
Agreements (SOFA), access agreements, Article 98 agreements, and other 
legal agreements are not in place in proposed new locations.

Timing and Synchronization
    Another reason the Commission feels that the IGPBS should be 
modified relates to more particular matters of the proposed timing and 
synchronization of IGPBS. The Commission has concluded that while the 
IGPBS is an ambitious plan to restructure our global posture, it does 
so without fully taking into account other dynamic, ongoing and, in 
some cases, unpredictable changes.
    If the IGPBS is based on the 2001 Quadrennial Defense Review (QDR), 
why would you not wait for the results of the current 2005 QDR--
scheduled to be completed this fall--or the 2005 Mobility Capabilities 
Study (MCS) to be completed in August before announcing movements of 
forces?
    The simultaneous activities of service transformation, Army 
modularity, Operation Enduring Freedom, Operation Iraqi Freedom, the 
Global War on Terrorism, IGPBS, BRAC, resetting the forces, and 
rebuilding of pre-positioned equipment sets all compete for funding 
within a limited budget. Not to mention the stress on forces. The 
current schedule of IGPBS moves will adversely impact the Services 
ability to adequately fund modernization and readiness.

Operational Requirements
    The commission is concerned that heavy forces in Europe are being 
removed from the mix. We also note the strategic importance of Okinawa. 
Diminishing our capabilities on the island would pose risk to our 
allies and our national interests in the region. At the same time, we 
feel it is important to move from Futenma Marine Corps Air Station.
    Moreover, not enough attention has been given to our ability to 
train and exercise the force in the formulation of the overseas basing 
plan. Infrastructure is sparse in some regions and, capabilities for 
integrated training across services and with allies remain sketchy.
    The Commission notes with concern that the impact on recruiting and 
retention by IGPBS rotational forces has not been adequately evaluated, 
nor have associated risks to sustaining the volunteer force been 
assessed. We strongly recommend that this be given priority, and that 
the necessary assessments be completed as quickly as possible.

Mobility
    It is clear that the mobility of our military forces is being 
compromised by the current strains on strategic lift, intra-theater 
lift, and sealift capabilities. The stress on strategic lift 
capabilities is being caused, in large part, by our on-going military 
operations in Afghanistan and Iraq. However, other tactical lift 
demands in terms of responding to political crises such as in Haiti and 
Sudan, as well as unanticipated natural disasters necessitating 
military intervention such as in the recent December 2004 tsunami 
event, also play a factor in challenging DOD's mobility capabilities.
    While moving troops back to the United States may be a political 
priority, force projection demands can only be met by developing a 
rebasing strategy in coordination with strategic U.S. alliances abroad 
(both existing and future).
    Strategic and Intra-theater air and sealift mobility capabilities 
must be significantly upgraded. We have yet to meet the lift 
capabilities identified by the Mobility Requirements Study 2005 
(conducted in the year 2000). In addition, announcements of global 
reposturing are being made before the presently ongoing Mobility 
Capabilities Study (MCS) is concluded. It would seem prudent to wait 
for the results of that study.
    Strategic mobility is the key to our ability to respond to events 
worldwide. Plans for sea and airlift capabilities, as well as 
prepositioned equipment sets, must take into account the additional 
demands that IGPBS could place on an increasingly continental United 
States (CONUS)-based force. Surging forces from CONUS will be 
problematic if strategic and tactical lift capabilities and 
prepositioned stocks are not in place.

Quality of Life
    Next, I would like to turn to quality of life issues. These issues 
are complex but are also key concerns of the global positioning 
strategy, primarily because the United States relies on an all-
volunteer force. In order to sustain the military force (both in 
numbers and in strength), the expectations of military personnel and 
their families with regard to active and reserve duty as well as 
redeployments must be met. If these expectations are not adequately 
met, then the U.S. military risks being severely compromised. Needless 
to say, this has enormous consequences politically and in terms of 
maintaining national security.
    We have a moral obligation to our men and women in uniform--and to 
their families--to provide the quality of life support they deserve. 
Returning forces and families should have housing, schools for their 
children, and adequate medical facilities in place before they return 
and the same should be maintained abroad until the last service member 
departs. The commission calls this a ``last-day, first-day'' approach. 
Not only does this have moral implications, but will also be reflected 
in retention rates.

Costs
    Now, with regard to the cost of changing the overseas basing 
structure and the realignment and closure of bases in general, the 
Commission recognizes that the costs are significant. In many cases, it 
is not even possible to predict the true costs of certain strategic 
changes.
    The cost of IGPBS is estimated at $8 to $12 billion. An independent 
analysis for the commission put the figure closer to $20 billion. Many 
costs are sunk into projected host nation support that may not come to 
fruition. In other cases, the services are expected to pay from within 
their service budgets.
    For example, costs need to be estimated and planned for troop and 
base relocations. Significant upgrades of main operating bases, forward 
operating sites, cooperative security locations, and pre-positioned 
combat support sites need to be planned. Let us also not lose sight of 
the fact that significant financial investments in new weapons systems, 
strategic lift capabilities, training, and integrated systems need to 
be made in order to keep the U.S. military as the premier fighting 
force in the world.
    Finally, these changes need to keep abreast of making Quality of 
Life expenditures in order to attract and keep a dedicated military 
force. Investing in the training of our military force is also a vital 
component of maintaining strategic capability, and requires the 
expenditure of enormous funds.
    In light of this, the Commission recognizes that Congress should be 
informed of realistic costs as to coordinate strategic and operational 
requirements with budgetary needs and constraints. The Congress needs 
accurate estimates to determine what is prudent, and must be prepared 
to support IGPBS if it is to succeed.
    Therefore, in light of the previously mentioned concerns, the 
Commission makes the following recommendations:
  --The detailed synchronization required by so massive a realignment 
        of forces requires that the pace of events be slowed and 
        reordered. We know of no nation asking us to leave. These moves 
        should be conducted at a pace that does not place additional 
        stress on our armed forces.
  --That the entire effort of overseas basing be integrated into one 
        overarching design that is coordinated and synchronized with 
        all ongoing initiatives. Furthermore, an interagency review 
        process is put in place to periodically consider the impacts of 
        the global force posture and to ensure that outcomes are 
        consistent with overall national interests.
  --The Commission believes strongly that Congressional oversight of 
        the global posture review is truly necessary. The Congress, 
        including the Armed Services and Foreign Relations Committees, 
        should provide more rigorous oversight (to include hearings) of 
        the global basing process given the scope and cost of the DOD 
        rebasing plans, their impacts on the individual services, the 
        men and women of our armed services and their families, and to 
        the political and trade alliances of the United States. 
        Particular attention should also be paid to the timing and 
        synchronization and cost of all the related efforts.
  --DOD must ensure that all necessary infrastructure and quality of 
        life programs (such as housing, medical, schools, etc.) are 
        retained at overseas bases until the last day the service 
        members and their families depart. At the same time, Congress 
        must ensure that the necessary infrastructure and quality of 
        life programs are already in place by the first day the first 
        troops and families arrive from their overseas locations.
  --Moreover, the Commission strongly urges that the planned overseas 
        basing structure be coordinated with strategic lift 
        considerations, especially with regard to troop and equipment 
        mobilization. We feel that this planning is necessary in terms 
        of adequately meeting the demands of the overall global pre-
        positioning strategy
    Additionally, the Commission recommends that:
  --Marine Corps air assets assigned to Futenma Marine Corps Air 
        Station on Okinawa should relocate to Kadena Air Base and/or 
        Iwakuni Marine Corps Air Station; all other Marine Corps assets 
        should remain on Okinawa.
  --In order to hedge against uncertainty in regard to near term 
        threats, demonstrate a continued and enduring commitment to 
        NATO, and allow for heavy force military to military contacts 
        with our NATO allies, at least one of the heavy brigade combat 
        teams scheduled for return to the United States should remain 
        in Europe fully manned until: (1) The Balkan's support mission 
        is lifted; (2) a ground-based offensive tank killing system is 
        stationed in Europe; and (3) Operation Iraqi Freedom is 
        mitigated. Additionally, a heavy brigade combat team equipment 
        set should be pre-positioned afloat in the region. These 
        recommendations are in addition to the current DOD plan for a 
        Stryker Brigade in Germany and the 173rd Airborne Brigade in 
        Vicenza, Italy.
  --Further, there should be a commitment to support continuous 
        rotational deployments to Eastern Europe and provide U.S. 
        military-to-military presence in the new NATO countries.
  --The U.S should review its treaty with Iceland, and update it to 
        reflect the post-Cold War security environment.
  --Greater depth is needed in Africa to secure long term United States 
        interests against potential competitors. The Horn of Africa 
        initiative should be replicated in those locations elsewhere on 
        the African Continent that may prove to be of increasing 
        importance to future strategic concerns. To some extent, 
        similar initiatives are needed in Latin America.

Final Remarks
    As a final note, I wish to thank the members of this committee for 
inviting the commission to appear today. It has been my privilege to 
describe the work of the Commission to date, and to express its 
preliminary recommendations.
    Of course, the report has not been finalized, and it is my hope 
that this will be the beginning of a dialogue in this matter so that 
the Commission can strengthen its analysis, conclusions and 
recommendations before submitting its final report on August 15, 2005. 
Please be assured that the Commission and staff are open to the views 
and concerns of Congress. Thank you for giving us this opportunity to 
serve the needs of the Congress and of the Nation, and we will be happy 
to answer any questions that you may have at this time.

    Senator Hutchison. Thank you very much, Mr. Cornella, and 
we will do 5 minute rounds so that everyone will have a chance, 
and then we'll go back through for a second round.

                        TIMING OF IMPLEMENTATION

    Let me start with the slowing of the plan, and that is the 
area that concerns me the most in your recommendations. I 
certainly agree that in a perfect world we would have 
everything right up to the last day overseas for a family, and 
then the first day they arrive everything would be in place, 
but I don't know that that is realistic, nor do I think it is 
necessarily in the best interest of the families or the 
military, and here's why.
    General Schoomacker has made modularity a priority for our 
forces to be trained for the kind of combat that they are 
seeing today, and I just wondered, if you are looking at the 
military capability, did you consider that moving the troops 
home, and having the modular brigades begin to train together 
so that they could go back into Iraq and Afghanistan, what 
impact slowing the process down, as you have suggested, would 
have on that capability?
    Mr. Cornella. Well, I'm going to let some others answer as 
well, but I will start with your question, Senator. I think you 
point out exactly what may be the problem, in the sense that 
for modularity to occur, the timing is sensitive. And as forces 
are moved back from overseas for all of this to take place, it 
is intermeshed and it has to happen, but that is one of our 
concerns, that in order for that to happen on the schedule that 
has been put forth, we are very concerned that that 
infrastructure, as you indicate, will not be in place at those 
receiving locations, and we think that's critical, both in 
regard to the moral obligation to our forces that I indicated, 
and to quality of life for those folks, and for retention. I'm 
going to see if any of the other Commissioners would like to 
respond; I do have a little more to follow up on.
    Senator Hutchison. I'd be happy to hear from anyone else on 
that, but just if you could also direct your attention to the 
capabilities to do that overseas, versus on our own bases.
    Mr. Cornella. I'm not sure I understand your question, 
Senator.
    Senator Hutchison. Well, if they're trying to get these 
brigades trained and ready to go, and they designated the bases 
to do that, we don't have that kind of capacity in Europe and 
Germany right now.
    Mr. Cornella. I would turn to General Taylor.
    General Taylor. Madame Chairman, I appreciate the 
opportunity to respond to that.

                             TROOP MOVEMENT

    I think there may be a little bit of misunderstanding about 
what we have recommended. We're not saying that the forces 
should not come back except in that one case, and we explained 
why we felt that was necessary, or suggested that the 
Department should consider leaving one heavy brigade there, but 
the majority of the forces, large majority of them, we're in 
agreement, they should come back. All we're saying is that, 
don't do it until we have both the quality of life and the 
training capability at our bases here in the United States to 
receive these. The bases here in the United States are fairly 
well occupied right now, and it's going to take some 
infrastructure, in both quality of life resources as well as 
training capability, new ranges--just a piece of desert is not 
necessarily enough to train forces, we've got to build the 
modern digistat ranges, we've got to make sure there's adequate 
infrastructure there to receive them.
    Our forces in Germany are being trained right now, yes, and 
I've served there many years, and yes, there are some 
challenges, but we have been able to train some forces over 
there, our forces have given a good account of themselves in 
Iraq and Afghanistan that have been moved from Europe, but 
again, I emphasize that we're not suggesting that they 
shouldn't come back, we just want to synchronize with the 
preparation of the infrastructure here, at the receiving bases 
here in the United States before we do that. And maybe that's 
going to happen, but based on the information that we were able 
to obtain through the conduct of our assessments, we didn't see 
that the right resources had been allocated, or the right plans 
had been made for that.
    Senator Hutchison. Well, it just seems to me that building 
permanent facilities at a foreign base that you know you're 
closing is certainly not a wise use of funds, and you cannot 
train the number of brigades that we're talking about in 
Germany, which I'm not telling you anything that you don't 
know, it just seems that maybe the focus should be more on 
getting the facilities ready in the bases that are going to 
take them here, and that would certainly be the more permanent 
use of the dollars that are going into this, because if you 
delay too long, you may be really affecting the capabilities to 
transform the military, which certainly, the Department is 
trying to do right now, and I think General Schoomacker's whole 
theory is based on having them here and getting them trained so 
that they can deploy directly from domestic bases.
    General Taylor. Madame Chairman, I think we're saying 
exactly the same thing, it's just a matter of timing, and we 
encourage the Congress to put the right amount of resources 
into it to do it as quickly as we can, and as soon as that's 
done, I think we'd be totally supportive of what you've said.
    Senator Hutchison. Well, the other thing is, pouring money 
into overseas bases that we know we're going to abandon has to 
be looked at very carefully in this big picture, and the longer 
we wait the more things can happen that cause us to lose that 
focus. So, I think we are headed for the same goals, but I do 
think we have a difference in emphasis for what should happen 
when. From my standpoint, I know that others disagree with me, 
so we will certainly want to hear from them as well, and also 
the Department. My time is up, so I'm going to stop and go to 
Senator Feinstein.

                                MOBILITY

    Senator Feinstein. Thanks very much, Madame Chairman. I 
wanted to ask you about your comments on mobility. The reason I 
do this is because virtually wherever I go, and I talk 
particularly to Navy commanders, the question always comes down 
to strategic lift and our inabilities and deficiencies there, 
and you write that adequate strategic sea lift, airlift and 
pre-positioned equipment and stocks do not exist, and that 
current Intra-theater airlift is overstressed. Aside from the 
lift capability, the Commission is also concerned that the air 
and sea ports, inter-nodal connectivities and other mobility-
enabling systems are not adequate to meet potential 
contingencies. Nor is there a budgetary plan to do so. And I've 
had this told to me by CINCs, by others, and I watch the 
budgets and we never seem to come to grips with it.
    Can you add, in any way, to what you've said, anybody who'd 
like to comment?
    Mr. Cornella. General Curtis, would you like to comment?
    General Curtis. Senator Feinstein----
    Senator Feinstein. Don't be shy, say what you think.
    General Curtis. Senator Feinstein, I've watched the airlift 
mobility issues since I was a Captain at headquarters back when 
the C-5 was first introduced. It is always tough to find the 
space within the budget for the adequate procurement of lift, 
and every time we go through the mobility capability study, and 
the associated budget requirements, fitting everything in, our 
unconstrained requirement is difficult, and in my experience, 
there are trade-offs made.
    But clearly, as we become a more CONUS-based force, and we 
re-do the Army, both up armor and more air mobile vehicles, 
like the Stryker, we need to balance those things very 
carefully with lift capability versus our other requirements 
for modernization. And there are no easy answers to that, 
nobody will be satisfied in the end, because there are never 
enough dollars to go around, but everybody within the equation 
that reaches a solution needs to understand that's a very 
critical balance, and I'm sure you do.

                                  COST

    Senator Feinstein. Thank you. Could you expand on your 
comments on funding, that the cost may be understated, and tell 
us a little bit about the independent analysis that was 
conducted for you that put the tab at $20 billion?
    Mr. Cornella. Thank you, I will take that question.
    I left that out of the shortened version of the statement, 
and there's not necessarily a great deal of explanation in the 
other statement we presented to you. There is in our long 
report, quite a bit of information in regard to the cost, but 
that assessment was done by a detailee from the Government 
Accountability Office, and estimated at $20 billion, and I 
think that information was validated on May 10th by a senior 
member of the Department when they said they did agree with our 
figures, but we had cast a wider net to draw those figures in. 
And so we were looking at areas other than what they were 
stating in the $10 to $20 billion, pardon me, the $9 to $11 
billion. We also did have several--two to be exact--members of 
the Department say that the cost could be closer to $25 
billion, so we feel the $20 billion number is defensible.

                            STRYKER BRIGADE

    Senator Feinstein. I understand your European concern, that 
replacing our heavy forces with a Stryker Brigade before we've 
developed the organic tank killing weapon system necessary. 
What kind of response has there been to that recommendation so 
far?
    Mr. Cornella. Response from the Department?
    Senator Feinstein. Right.
    Mr. Cornella. Well, we've not discussed that specific 
recommendation at length with the Department, we have had 
conversations in our travels with Commanders that made that 
suggestion to us, that they thought that that was a good idea 
that that take place, and General Taylor, do you have anything 
you want to add?
    General Taylor. There is an initiative on the part of the 
Army to have an offensive tank killing capability with the 
Stryker variant, but so far it has not come to fruition, and so 
our basic premise is that we definitely need to have an 
offensive ground tank killing capability there as well as the 
other issues that we mentioned, and we're not saying that that 
Brigade should necessarily stay there forever, but until the 
criteria that we mentioned are realized.
    Senator Feinstein. In terms of deployment of bases, and 
transitioning the military, what lessons do you think were 
learned in Iraq and Afghanistan?
    General Taylor. I would first state an opinion, primarily 
about Iraq that, while initially we felt that we could do this 
with much lighter forces, we're finding out more and more that 
heavy forces, even in a city environment is very necessary. I 
know of some people who fight in that area very well, and some 
of them are parts of my family, and they would clearly rather 
fight out of a tank as even an up-armored Humvee, and I think 
the reports coming back from some of the recent efforts in Iraq 
have been, and Baghdad, have shown that there is a place for 
heavy force, although the Stryker variant up in Mosul has been 
very valuable as well. So, I think we're still learning, I 
think the decision on all of this is still out, but we haven't 
lost the need for some of our heavy forces.
    Senator Feinstein. Thank you, my time is up, Madame 
Chairman.
    Senator Hutchison. Senator Allard.

                            OVERSEAS SAVINGS

    Senator Allard. Thank you, Madame Chairman.
    I noticed in your summary here that you hadn't talked in 
detail as did Senator Feinstein, as to some of the costs. I 
wonder if you could give us just some bottom line figures, if 
possible, has the Department of Defense conducted an estimate 
as to how much money would be saved by reducing their basing 
overseas?
    Mr. Cornella. I'm not sure if we were provided with that 
number. Now it's logical to assume that if bases are reduced 
overseas, there will be some savings, and they may be 
significant. At the same time, those facilities may have to be 
replicated within the United States; and also, I'm not sure 
that those figures that are being put forth include any 
mobility that might be required in order to surge out of the 
continental United States. And I can't address that--those will 
be good questions for the Department in the next panel.
    Senator Allard. Did you try and conduct any kind of 
estimate?
    Mr. Cornella. I would have to ask staff about that; we will 
provide you with that information.
    Senator Allard. Okay. Is it correct to say that you do not 
recommend the Department of Defense go back and do its re-
basing strategy?
    Mr. Cornella. I think that I would turn to my other 
Commissioners, but I don't think that we mean to indicate that 
they do that.
    General Taylor. Again, Senator, it's a timing issue, and a 
synchronization issue, not the fact that they shouldn't do it. 
Unfortunately, it's not 100 percent clear, at least up to the 
point when we completed most of our reports, exactly what the 
timing was, that was still a developing process. Remember, this 
was prior to the release of the BRAC report, so exactly where 
they were going, or that the Department was recommending they 
were going was not available to us at that time. Now, some of 
that at least portions of that information is available to us, 
and that will help as we complete our report and look at where 
they might be going here in the United States.

                        FORWARD OPERATING SITES

    Senator Allard. It seems to me like in one of the hearings 
on the Armed Services Committee, they talked about forward 
basing, maybe in the Balkan states where we don't have now, 
that you would end up basically with an air field with 
utilities, and if you put in temporary tents, they would be 
basically two by fours in tent structure, and then when your 
mission was done, you would move out, does that seem like a 
reasonable approach to you?
    General Taylor. You're talking about both the security 
locations and the forward operating sites? Yes, and our only 
question about those is whether or not we have consummated the 
agreements with the host countries that we should have in place 
before we go too much farther, and that's being worked by both 
the Department and others, but the concept is valid and we have 
no problem with that.
    Senator Allard. And do you have any reason to believe that 
those host countries wouldn't cooperate with us? The last time 
I talked to most of them they were thrilled to death to be part 
of NATO, and even be part of the forward deployment effort.
    General Taylor. I would suggest that would be a question to 
ask the next panel. I'm sure they can enlighten you. We did not 
have verifiable information that these agreements have been 
consummated, but I'm sure the next panel can respond to that 
better.

                                  BRAC

    Senator Allard. Okay. To what extent do you believe the 
Department of Defense used its IGPBS to formulate its 
recommendations for base closure and realignment? The Secretary 
of Defense admitted his recommendations for base closures and 
realignments to Congress and BRAC and it was in May, and the 
question is, to what extent do you believe that the Department 
of Defense used the IGPBS to formulate its recommendations for 
base closure and realignments, did you look at that?
    Mr. Cornella. Yes, and I think it had a great deal to do 
with the recommendations to the BRAC Commission. The numbers of 
returning troops from overseas impacted Army bases most 
significantly.
    Senator Allard. And the follow up, then, do you see any 
reason why the BRAC process should not go forward?
    Mr. Cornella. Or as we say in our report, we see no reason 
why that should not go forward. I just would like to add one 
thing to your previous question about the Nations where we 
might have lily pads, or CSLs or whatever you might like to 
call them. We have seen instances most recently, without 
mentioning the names of any countries, one where access to an 
Air Force base was either restricted or denied within the last 
few months. We also have seen instances during the Iraq War 
where certain Nations did not allow access. These are the types 
of things that we're talking about in regard to making sure 
that those agreements are in place before you establish those 
locations in those countries.
    Senator Allard. Thank you, Madame Chairman, I see my time 
has expired.

                                  COST

    Senator Hutchison. Thank you, Senator Landrieu?
    Senator Landrieu. Thank you. Let me just see if I can 
summarize a couple of these questions, because I think the work 
you have done is extremely important, and we appreciate how 
difficult it can be sometimes to really give an independent 
view, and we want to be sure that we have our ears open and are 
willing to hear the independent view, so let me just ask 
again--one of the bottom lines of your report, which is all 
documented here, Mr. Cornella, is that the cost associated with 
moving our troops back could be twice as much as what is 
currently estimated? Is that correct?
    Mr. Cornella. Yes, Senator.

                                 TIMING

    Senator Landrieu. Is it also correct that you are 
suggesting that the time frame that is being adopted as we 
speak is probably too aggressive to accomplish the goal?
    Mr. Cornella. Well, I think again, it's a timing issue. If 
all of this could be timed properly, and we had, maybe, an 
infinite pot of money, there probably would not be a problem, 
but there are a lot of things that are taking place, and I 
cited many of those in my opening statement.
    Senator Landrieu. But in your estimation of the summary of 
your report, there is a time frame that has been proposed, and 
you reviewed it and in your professional judgment, you all are 
saying that it is unlikely that the time frame can be met?
    Mr. Cornella. We have addressed it, we have talked to 
commanders in the field, and we feel it's probably ambitious.
    Senator Landrieu. Would it be fair to say, then, that you 
have some serious concerns about meeting that time frame?
    Mr. Cornella. Well, I think we do in the sense that a lot 
of the moves are already taking place, and have started in 
regard to the Pacific, probably, without mentioning names of 
countries, more than have taken place in Europe, but I would 
agree with your statement, Senator.
    Senator Landrieu. Again, I'm not trying to put words in 
anybody's mouth, I'm just trying to clarify for the record what 
I think. The goal of this hearing is, is to really hear what 
you are saying about your view, and if it is that we've 
underestimated the cost, we need to hear.
    Mr. Cornella. Two thousand eleven sounds like a long way 
off, it's really not that far, and I guess my point was that a 
lot of the moves are already taking place as we rotate forces 
through Iraq and Afghanistan, and I think the plan is to bring 
the forces back from those rotations after they pick up their 
families in Germany and other locations, so the bulk of the 
moves may take place sooner rather than later, they may take 
place sooner, rather than towards the end of that 2011 time 
frame.
    Senator Landrieu. General Curtis, then I think Mr. Martin 
had something to add.
    General Curtis. Yes, Senator, there are three numbers down 
here in the report, and they really measure three different 
things, as our numbers often do in government. And, the $4 
billion is the number specifically tailored to this move within 
the palm through 2011. The $9 to $12 billion, as I understand 
it from the material being given by the DOD is an estimate 
which includes other things of the total cost of this move, and 
some of this money, I'm given to understand, would come out of 
the general O&M accounts within the services, not specifically 
be identified within the POM itself.
    Finally, the $20 billion number is a life cycle number 
beyond the POM, so it isn't directly comparable to either one 
of the two previous numbers. The concerns I have after watching 
the process, how we execute our financial processes is that the 
moves with either be slipped because of an insufficiency of 
funding to do it right, we will move without doing it right, or 
we will take money out of the O&M accounts to pay for the move, 
and not know what we didn't buy, what we gave up in terms of 
readiness or something else by forcing the Services to fund 
parts of the move internally. They're three different numbers 
that all mean the same thing, but they could drive unforeseen 
consequences if we insist on meeting the schedule without fully 
funding it with identifiable funds, and that's one of our big 
concerns.
    Senator Landrieu. Mr. Martin.
    Mr. Martin. Thank you very much, Senator, Madame Chairman. 
In perspective, this is the most sweeping transformation and 
repositioning of U.S. forces since the late 1940's, the Defense 
Reorganization Act of 1947. United States forces, the 
repositioning thereof, it should be positive for our national 
security and our national defense. The Department's plan is a 
good plan, if fully coordinated, synchronized, it can and will 
enhance the Nation's security and defense interests. But it 
should be and must be positive for our service men and women to 
the maximum extent possible. The bottom line of what we said on 
the quality of life is we shouldn't be moving soldiers, 
sailors, airmen and Marines any faster than we can build the 
new housing, the new medical facilities, new schools and 
training facilities as General Taylor pointed out, and 
certainly no faster than we can provide the air lift, sea lift 
and pre-positioned stockage to move them from their United 
States, now CONUS-based homes, to potential points of influence 
and engagement. We have an opportunity right now because of the 
Secretary's vision to do the right thing, we need to do it the 
right way. It is an opportunity, and we believe, a 
responsibility, because if we don't take care of the force we 
have now, we could face a future, and the enemies and threats 
of tomorrow with forces we won't have, and options we don't 
like.
    Senator Landrieu. Thank you.
    Senator Hutchison. Are there any other questions of this 
panel? If not, thank you very much for all of the effort that 
you made. We appreciate it and look forward to looking at it 
further, and now I would like to call the second panel from the 
Department of Defense forward. Thank you very much.
    Mr. Cornella. Thank you, Senator.

                         Department of Defense

STATEMENT OF HONORABLE RYAN HENRY, PRINCIPAL DEPUTY 
            UNDER SECRETARY OF DEFENSE FOR 
            INSTALLATIONS AND ENVIRONMENT
ACCOMPANIED BY:
        PHILLIP GRONE, DEPUTY UNDER SECRETARY OF DEFENSE FOR 
            INSTALLATION AND ENVIRONMENT
        ROSE LIKINS, ACTING ASSISTANT SECRETARY OF STATE, BUREAU OF 
            POLITICAL-MILITARY AFFAIRS
    Senator Hutchison. The next panel is Mr. Phillip Grone, 
Deputy Under Secretary of Defense for Installations and 
Environment, the Honorable Ryan Henry, Principal Deputy Under 
Secretary of Defense for Policy, and Ambassador Rose Likins, 
Acting Assistant Secretary of State, in the Bureau of Political 
and Military Affairs.

                        STATEMENT OF RYAN HENRY

    Mr. Henry. Thank you, Madame Chairman, Senator Feinstein, 
members of the subcommittee, thank you for the opportunity for 
appearing before you today, along with the Overseas Basing 
Commission and Chairman Cornella. Joining me today as you 
mentioned are Acting Assistant Secretary of State, Rose Likins, 
and Deputy Under Secretary, Phil Grone. And I want to say I 
appreciate the insightfulness of your opening remarks today. I 
would like now, if I may, to submit my full statement for the 
record, and make just a few brief remarks at this time.

                  GLOBAL DEFENSE STRATEGY AND PROCESS

    Madame Chairman, the Administration's plan to strengthen 
America's Global Defense Posture will result in the most 
profound re-ordering of military forces overseas since the end 
of World War II. The September 11 attacks clarified our 
understanding of the key security issues that we will face 
during the beginning of the 21st century. Simultaneously, we 
realize that much of our in-place force posture still reflected 
a Cold War structure. We had forward garrison forces configured 
to fight near and where they were based. Unlike the past 
century, today we no longer can predict where, when, or in what 
manner our forces may be called on to fight, therefore our 
forces need to be able to rapidly project power into theatres 
far from where they may be based. Through our Global Defense 
Posture Realignment, we have aimed to strengthen our ability, 
fulfill our international commitments to ensure that our future 
alliances are capable, affordable, sustainable and relevant.
    Then to focus on capabilities, and not just numbers. The 
Defense Department conducted our Global Defense Posture Review 
thoroughly and deliberately. We've collaborated with our inter-
agency partners through broad and sustained deliberations. 
We've also consulted extensively with our allies and our 
partners to incorporate their views. The Department of Defense 
and the Department of State have held joint consultations with 
relevant international partners, in over 20 foreign capitals, 
beginning in December 2003, and continuing on a sustained basis 
since then. We also have communicated with Congress, and 
personal and Committee staff members throughout the review. 
We've provided a detailed report to Congress in September of 
2004, followed by the submission of detailed overseas master 
plans from each of the regional Combatant Commanders in 
February 2005. And over 40 times the Secretary of Defense, the 
Combatant Commanders, the members of the Joint Staff, and the 
Office of the Secretary of Defense have traveled here to 
Capitol Hill to consult with Congressional Committees and 
Members.
    Finally, as mentioned by Chairman Cornella, we have worked 
closely with the Overseas Basing Commission in its efforts to 
provide Congress with an assessment of a global presence, 
basing and infrastructure needs.

                         A COMPLEX UNDERTAKING

    Madame Chairman, as members of the Overseas Basing 
Commission have expressed, the United States Global Defense 
Posture is incredibly complex. It is a multidimensional field 
involving numerous areas; strategic analysis of geopolitical 
and military factors, facilities and infrastructure analysis, 
diplomatic and legal negotiations and arrangements, acquisition 
policies and transportation issues, operational plans and 
synchronization with the Base Realignment Commission, the QDR, 
the Army Modularity Transformation, the Mobility Capabilities 
Study, and the Navy's Fleet Response Plan. We, in the 
Department, have thousands of people working on this complex 
endeavor, full-time in the military services and the combatant 
command, on the joint staff, in the acquisition community and 
other areas, all overseen by senior military and civilian 
officials and managed by Secretary Rumsfeld.
    Madame Chairman, we stressed in our discussions with the 
Commission that posture is more than just our footprint of 
facilities, it also includes the presence, force management, 
our surge capability and the pre-positioning of stocks among 
these building blocks of global posture. Quality of life 
concerns related to force management merit particular 
attention. Changing the way in which we posture our forces was 
driven in large part by the President and the Secretary's 
desire to relieve stress on our military forces and their 
families by providing more security at home, with fewer 
overseas moves and less disruptions. Specifically, posture 
changes will help reduce double separations, those caused when 
accompanying dependents are separated from both the service 
member and the their loved ones in the United States.
    Additionally, our posture changes are phased over several 
years to help ensure quality of life is sustained. Equally 
important, the plan changes to our posture directly support 
service initiatives aimed at keeping pace with our military 
personnel, such as the Army's Modularity and Unit Location 
concepts, the Navy's Fleet Response concept, and the Air 
Force's ongoing Force Management Improvement.
    Madame Chairman, of particular importance in this complex 
undertaking has been our sustained effort to inject the Global 
Defense Posture into other ongoing defense transformation 
initiatives, specifically, the BRAC and the 2005 QDR. I welcome 
the Commission's statement of support for the U.S. Global 
Defense Posture as important and necessary. The Commission's 
report reflects their earnest effort to assess military 
facilities, and structure of the U.S. overseas facilities. The 
Commission fundamentally agrees with many of the aspects of the 
President's posture plan, and it recognizes the importance of 
changing of posture to meet the 21st century's security 
challenges.
    Madame Chairman, thank you for this opportunity to speak to 
you, and I look forward to answering your questions. And, if we 
may, Ambassador Likins would also like to have an opening 
statement.
    Senator Hutchison. Madame Ambassador.

                  STATEMENT OF AMBASSADOR ROSE LIKINS

    Ambassador Likins. Thank you, Madame Chairman, and Senator 
Feinstein. I appreciate the opportunity to be here and to offer 
a few brief remarks.
    Since late 2003, the Department of State has been working 
closely with the Department of Defense and the National 
Security Council on reviewing and strengthening the U.S. Global 
Defense Posture. The Department has played an active role in 
the shaping and implementation of our future defense posture. 
We have been both participants in the inter-agency process, and 
have been spearheading the diplomatic talks and initiatives 
necessary to obtain the understanding and agreement of our 
friends and allies for this important initiative. The 
Department has and will continue to provide its frank 
assessment of these proposals, and to provide our views as to 
the best way forward. We've had a very good working 
relationship with our DOD colleagues on this issue, conducting 
all consultations together and jointly briefing Congress on 
several occasions.
    While the initial planning for the IGPBS was undertaken by 
the combatant commanders in the individual services, these 
plans were presented to the inter-agency for a full and 
thorough examination before their submission to the President. 
The Department has made its foreign policy views known on many 
occasions and will continue to do so. We firmly believe that we 
are taking the appropriate time to get this right, we continue 
to rigorously review proposals with our DOD colleagues, 
thoroughly examine the many facets of these plans, including 
the necessary legal arrangements, and have conducted numerous 
consultations with friends and allies around the world.
    While consultations in some parts of the world are quite 
advanced, others have not even begun, indicative of the fact 
that we will take whatever time is necessary to ensure that our 
plans are logical, workable, and that our engagement strategy 
makes sense. Consultations are proceeding carefully and 
deliberately to ensure that the arrangements put in place to 
host our forces are enduring and beneficial to a wide range of 
United States interests. Through the consultation process, 
we've received valuable feedback that has enabled us to adjust 
proposals and calibrate our expectations. We have gained 
valuable insights throughout the process, and in many ways, the 
consultation process is one of the many mechanisms for re-
thinking, and adjusting our defense posture plans.
    To use just one example, during the consultation process, 
we learned that the government of Germany was undertaking its 
own base realignment and closure process. This prompted us to 
accelerate the sharing of details with German officials related 
to our proposed posture changes in Germany and to undertake 
some additional coordination on our two initiatives. I want to 
assure you that we will not rush into a location where there 
are not adequate legal protections and guarantees for our 
forces, and for their freedom of action. We believe that proper 
legal arrangements are a fundamental requirement for any 
defense posture changes. The State Department believes these 
negotiations and DOD have substantially been involved in all 
talks. We have dedicated legal experts and a special negotiator 
working to ensure that the best legal arrangements are secure. 
We support the OBS's view that their long-term strategic 
national objectives, beyond simply military objectives, 
somewhat to reassure you that our efforts on this issue are 
focused on results that make sense from both the defense and 
strategic foreign policy perspective. Thank you very much.
    Senator Hutchison. Thank you, Madame Ambassador. We're 
going to just have about 10 minutes of questions because we 
have two votes called, and I don't want to keep you waiting any 
longer.
    Let me say, first of all, I'm very pleased that both the 
Department of State and the Department of Defense are 
represented on this panel because I wanted to make sure, and I 
think it is very important, that the Department of State is a 
part of this process as we are looking at closing of bases, or 
forward deploying somewhere else, that we have both Defense and 
State involved.
    Mr. Henry, one of the Commission report findings says, ``If 
unforeseen threats arise in either the near term or the mid-
term, we could be caught in mid-stride, unable to meet them.'' 
This is part of the reason they wanted to delay some of these 
moves. My understanding is that the entire reason for 
transforming our posture is because we're not currently 
positioned to meet unforeseen threats, and we need to have the 
capability to meet them as soon as possible. I would just like 
to ask your comments on that part of the report, and if you 
think speeding up the process will cause transformation to 
occur better, or slowing it down would.
    Mr. Henry. Yes, Madame Chairman, I would agree with your 
statement, and as I mentioned in my opening statement, 
uncertainty is part of the strategic landscape which we have in 
a post-9/11 world. We no longer have the comfort or the 
certainty that we had during the Cold War when we had a single 
enemy and we could predict where we would probably have to meet 
him. In a world we live in today, we might need to use our 
forces through large expanses of the Earth's globe, therefore, 
in the places we have our forces, we have to be able to move 
them quickly to where they might be needed to be employed. 
That's a fundamental feature of the transformation, and our 
capability to meet it. We just can't predict how we will have 
to fight with our forces, where or when.
    As far as your question regarding transformation, this is a 
part of an integrated approach to transformation. The Secretary 
of Defense has published his National Defense Strategy which 
supports National Security Strategy, and from which the Base 
Realignment Commission, the Global Defense Posture, the 
Quadrennial Defense Review, all of the major movements that 
we're making in the Defense Department stem from. This is key 
to transformation, all of these things supported simultaneously 
to move forward in a networked fashion.
    Senator Hutchison. Mr. Henry, in the previous panel there 
was concern raised, and also in the report, about our lift 
capacity. Do you think that we have a better capability for 
lift where we need to go by basing more of our troops in the 
United States, or do you think we have a lift problem that 
requires troops to stay in Germany and Korea?
    Mr. Henry. One of the analyses we did post-the Iraqi major 
combat operations, was to look at the amount of lift that was 
needed to move forces from Europe and around to where they had 
to go, and to try to determine the amount of lift and the speed 
of lift with which to get into the theatre, and if it would 
make a difference coming from Europe or from the continental 
United States, and depending on how we might position ourselves 
as a part of the Base Realignment Commission, in some 
instances, we could actually move quicker from the United 
States. That was one of the considerations that drove the 
Global Defense Posture, as was spoken by the previous panel, 
combatant commanders and operators will never have as much lift 
as they would like to, to feel comfortable, it is a matter of 
adjudicating the risk overall of the contingencies that we 
might have to face. As was mentioned by the panel, we are also 
in the process of a Mobility Capabilities Study, something we 
do approximately every 5 years to look at the total lift 
requirements, and how we're going to meet them. As this has 
been dovetailed into the Base Realignment work that we have 
been doing, they have first done one using the old structure 
and analysis. Now they're looking and finishing up their 
analysis, using as a baseline the Global Defense Posture. As we 
presented the committee in our report back in September of 
2004, and it looks like the impact will not be significant in 
roughly, in the same area that we would have had with the other 
structure. The details are still to be concluded on that, and 
we await the conclusion of the study, which will be integrated 
in the QDR.
    Senator Hutchison. Thank you. Senator Feinstein.
    Senator Feinstein. When troops are moved back to the United 
States, will they be accommodated in permanent or temporary 
facilities.
    Mr. Grone. Depending upon the unit and depending upon the 
location and depending upon the time, there will be a mix of 
permanent or temporary, in the main it will be permanent. The 
discussion about whether or not facilities would be available 
for returning forces is a phased plan over a 4-year period, 5 
years if you count the troops coming back from Korea this 
summer to Fort Carson between fiscal year 2005 and fiscal year 
2009. We are working, particularly with the Army, on 
standardizing our facilities design so that they can be sited 
to any location to use commercial construction standards, all 
of which is designed to make permanent facilities more quickly 
and more readily available to returning forces.
    Senator Feinstein. So, you will not be coming to this 
subcommittee or any other subcommittee to look for additional 
dollars for temporary housing?
    Mr. Grone. There may be occasions where, depending upon the 
unit, there may be some temporary billeting for single enlisted 
personnel that is required, but in the main we are planning to 
move out aggressively to provide permanent facilities as 
quickly as we can.
    Senator Feinstein. If you do that, then what type of 
coordination is being done with local school districts to 
mitigate the impact of thousands of soldiers coming back with 
many children?
    Mr. Grone. Well, we have, the Army in particular, since the 
bulk of the returning forces are Army, are engaged in a series 
of intensive consultations with local school districts and 
State and local government on transportation, schools and other 
issues that might be affected by forces returning from abroad. 
Certainly, with regard to housing, our preference is to rely, 
as is our standard housing policy, on the community first, and 
based on what we know, particularly for the three locations, 
whether we have the bulk of the forces returning from abroad, 
Fort Carson, Fort Riley and Fort Bliss, based on that 5 year 
window between 2005 and 2009 that we have people coming back, 
based on our assessment of the market's ability, the local 
market's ability to adapt based on our existing housing 
privatization efforts at all three of those locations. We 
believe that there is sufficient market availability there to 
accommodate returning forces, and a phase-in for families as we 
have laid it out over the course of that 5 year period, so we 
are intentionally engaged with school systems, and with local 
governments. We'll continue that consultation through the 
summer, so that when we get to the school year, 2006, next 
year, that we will be as integrated as we can be. That is not 
to say there won't be challenges, there will. But we believe 
that we will have a quality of life piece well in hand, and we 
look forward to continuing to consult with the subcommittee as 
we move forward to make sure that you're comfortable with the 
plans as we lay them out.
    Senator Feinstein. I would really appreciate that, because 
I know in California, we have schools that are really 
overcrowded at present, and I think there needs to be some real 
planning done in that regard, but thank you. Let me ask you, 
Mr. Henry, because I'm really concerned with what I see as lift 
deficiencies, and everything I've heard from the field doesn't 
jive with what you say. Would you be willing to share with our 
subcommittee your projected plans for specific lift--in other 
words, how many C-17s, new C-17s, et cetera, that kind of 
thing--because everything I read is that the lift capability of 
our country is severely stressed.
    Mr. Henry. Yes, we would be glad to share that, one thing 
it will be part of the QDR that we'll be reporting to the 
Congress, but we'll be glad to come up here in the interim as 
the data becomes available and then as decisions are made as to 
how we're going to proceed, we'd be glad to share that with the 
committee.
    Senator Feinstein. I would certainly appreciate knowing 
what you're planning is. I mean, in the next 10 years, how many 
C-17s will there be, for example?
    Mr. Henry. Yes, Senator, and as those decisions are still 
awaiting the final report out of the Mobility Capabilities 
Study, as mentioned earlier, and so specific decisions still 
await the final analysis and data.
    Senator Feinstein. Thank you very much, Madame Chairman, I 
think that does it for me. I would just like to conclude by 
saying, I know DOD doesn't like helpful suggestions, or any 
suggestion, but I really think this is a good report, and I 
really ask you to review it with an open mind. I think they've 
raised some very good points, and these are all people who have 
served, who have been there, done that, I think they know what 
they're talking about, period.
    Senator Hutchison. Thank you, I think they acknowledged 
that they will.
    Senator Feinstein. Not quite, but it was a nod, which is 
the best DOD ever does.
    Mr. Henry. Senator, we've read the report with great 
interest and we look forward, hopefully, to being able to 
discuss with the Commission their conclusions prior, and we 
think that we can help them with information and analysis and 
insights that would make the final report even better. Perhaps 
correct inaccuracies and some assumptions that we think that we 
could help them with.
    Senator Hutchison. I would just say that the biggest 
concern I have about the report is the slowing it down. I 
really believe that when you make a decision like this, that in 
order to be the most efficient, to use our taxpayer's dollars 
wisely and to bring people home where they know it's going to 
be permanent, it should be done quickly and not drug out. Now, 
obviously we do want to have the accommodations, we want the 
housing, and I think the public/private partnerships make that 
much more able to be done than if we were just building them 
through MILCON. Certainly coordination with the school 
districts and health care facilities in a community will be 
very important, and I think that is valid, but I would rather 
see us gear up to do it quickly, than to slow down and have 
buildings in Germany and buildings in America that are 
duplicative.
    Mr. Grone. In that regard, Madame Chairman, the most 
important potential impediment we have to implementation is not 
full authorization and appropriation of the budget requests to 
support the round, so if we had the resources available, we 
could certainly accelerate, and we will move out as 
expeditiously as you desire to ensure we have facilities in 
place for our people.

                         CONCLUSION OF HEARINGS

    Senator Hutchison. We'll work with you on that. Thank you 
very much, we're going to go to our vote now. Thank you.
    [Whereupon, at 5:30 p.m., Tuesday, June 28, 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:
    Prepared Statement of........................................   186
    Questions Submitted by.......................................   176
    Statements of...........................................4, 140, 185

Burns, Senator Conrad, U.S. Senator From Montana, Prepared 
  Statement of...................................................   142
Byrd, Senator Robert C., U.S. Senator From West Virginia:
    Questions Submitted by.......................................   134
    Statement of.................................................    91

Cooper, Hon. Vice Admiral Daniel L., (USN Ret.), Under Secretary 
  for Benefits, Veterans Benefits Administration, Department of 
  Veterans Affairs...............................................    89
Cornella, Hon. Al, Chairman, Overseas Basing Commission..........   183
    Prepared Statement of........................................   193
    Statement of.................................................   189
Craig, Senator Larry, U.S. Senator From Idaho:
    Questions Submitted by.......................................   119
    Statement of.................................................    92
Curtis, Major General Lew E., III, United States Air Force 
  (Ret.), Department of Defense..................................   183

Feinstein, Senator Dianne, U.S. Senator From California:
    Questions Submitted by...........................123, 163, 177, 180
    Statements of............................................3, 90, 184
Fox, Major General L. Dean, Air Force Civil Engineer, Deputy 
  Chief of Staff for Installations and Logistics, Department of 
  the Air Force, Department of Defense...........................   165
    Prepared Statement of........................................   166
    Questions Submitted to.......................................   179

Grone, Philip W., Deputy Under Secretary of Defense, Installation 
  and Environment, Department of Defense.........................1, 205
    Prepared Statement of........................................     8
    Summary Statement of.........................................     6

Henry, Hon. Ryan, Principal Deputy Under Secretary of Defense for 
  Installations and Environment, Department of Defense...........   205
Hutchison, Senator Kay Bailey, U.S. Senator From Texas:
    Opening Statements of...............................1, 89, 139, 183
    Questions Submitted by................................114, 175, 179

Johnson, Senator Tim, U.S. Senator From South Dakota:
    Prepared Statement of........................................   188
    Questions Submitted by.......................................   129
    Statement of.................................................   187
Jonas, Hon. Tina W., Under Secretary of Defense, Comptroller, 
  Department of Defense..........................................     1
    Prepared Statement of........................................     5
    Summary Statement of.........................................     4
Kuhn, Fred W., Deputy Assistant Secretary of the Air Force 
  Installations, Department of the Air Force, Department of 
  Defense........................................................   165
    Prepared Statement of........................................   166
    Questions Submitted to.......................................   175

Landrieu, Senator Mary L., U.S. Senator From Louisiana:
    Prepared Statements of......................................24, 187
    Questions Submitted by.......................................   131
    Statements of...............................................23, 186
Less, Vice Admiral Anthony A., United States Navy (Ret.), 
  Department of Defense..........................................   183
Likins, Rose, Acting Assistant Secretary of State, Bureau of 
  Political-Military Affairs, Department of Defense..............   205
    Statement of.................................................   207

Martin, Brigadier General Keith, Pennsylvania Army National Guard 
  (Ret.), Department of Defense..................................   183
McClain, Hon. Tim, General Counsel, Office of the Secretary, 
  Department of Veterans Affairs.................................    89
Miller, Major General Geoffrey D., Assistant Chief of Staff, 
  Installation Management, Department of the Army, Department of 
  Defense........................................................   139
Murray, Senator Patty, U.S. Senator From Washington:
    Questions Submitted by.......................................   136
    Statement of.................................................    91
Nicholson, Hon. R. James, Secretary, Office of the Secretary, 
  Department of Veterans Affairs.................................    89
    Prepared Statement of........................................    96
    Statement of.................................................    93

Penn, Hon. B.J., Assistant Secretary of the Navy, Installations 
  and Environment, Department of the Navy, Department of Defense.    69
    Prepared Statement of........................................    70
Perlin, Jonathan B., M.D., Ph.D., MSHA, FACP, Acting Under 
  Secretary for Health, Veterans Health Administration, 
  Department of Veterans Affairs.................................    89
Profit, Brigadier General Gary M., Deputy Chief, Army Reserve, 
  Department of the Army, Department of Defense..................   139
Prosch, Geoffrey G., Principal Deputy Assistant Secretary of the 
  Army for Installations and Environment, Department of the Army, 
  Department of Defense..........................................   139
    Prepared Statement of........................................   144
    Statement of.................................................   143
Pudlowski, Major General Walter F., Special Assistant to the 
  Director, Army National Guard, Department of the Army, 
  Department of Defense..........................................   139

Reed, Rita A., Deputy Assistant Secretary for Budget, Office of 
  the Secretary, Department of Veterans Affairs..................    89

Shear, Rear Admiral Wayne ``Greg'', Jr., Deputy Director, Ashore 
  Readiness Division, United States Navy, Department of Defense..    69

Taylor, Lieutenant General H.G., United States Army (Ret.), 
  Department of Defense..........................................   183

Wannemacher, Richard A., Acting Under Secretary for Memorial 
  Affairs, National Cemetery Administration, Department of 
  Veterans Affairs...............................................    89
Williams, Brigadier General Willie, Assistant Deputy Commandant, 
  Installations and Logistics (Facilities), U.S. Marine Corps, 
  Department of Defense..........................................    69


                             SUBJECT INDEX

                              ----------                              

                         DEPARTMENT OF DEFENSE

                                                                   Page
A Complex Undertaking............................................   206
Army Military Construction.......................................    27
Base Realignment and Closure Overview............................    31
BRAC 2005........................................................    34
Budget Summary...................................................    34
Buffer Area Around Fort Carson, Colorado.........................    22
Business Transformation..........................................    15
Chemical Weapons Demilitarization................................    19
DOD Base Realignment and Closure.................................    31
Environmental Management.........................................    14
Facilities and Family Housing....................................     5
Fiscal Year:
    2005 Supplemental Appropriations.............................     6
    2006 BRAC Funding............................................    30
Global Defense Strategy and Process..............................   205
Homeowners Assistance Program....................................    54
Keeping Military Families Together...............................    26
Managing Infrastructure..........................................     9
Marine Corps Restructuring.......................................    29
Military Compensation and Health Care............................     5
More Specificity for BRAC Funding................................    17
Perchlorate Contamination........................................    61
Permanent Construction at Guantanamo Bay.........................    64
Proceeds From Sales of Closed Facilities.........................    18
Renewable Energy Assessment of DOD Bases.........................    61
Restructuring U.S. Basing........................................     5
Revenue From the Sale of Land and Facilities.....................    54
Selling Excess Properties and Applying the Proceeds..............    60
Status of Global Rebasing........................................    60
Taking Into Account Other Federal Agencies in BRAC Analysis......    25

                      Department of the Air Force

Accommodate New Missions.........................................   169
Additional Committee Questions...................................   175
Budget Overview..................................................   175
Continue Demolition of Excess, Obsolete Facilities...............   168
Family Housing...................................................   175
Foreign Currency Exchange........................................   180
Goodfellow Air Force Base, Texas.................................   174
Housing Privatization............................................   170
Invest in Quality of Life Improvements...........................   168
Joint Funding/Joint Basing.......................................   175
Lowry Air Force Base:
    Hazardous Waste..............................................   176
    Privatization Initiative.....................................   177
NATO Precautionary Prefinance Statement..........................   173
Optimize Use of Public and Private Resources.....................   170
Recapitalization Rate............................................   179
Spangdahlem Air Base, Germany....................................   172
Supplemental Request/Kuwaiti Aerial Port.........................   177
Sustain, Restore, and Modernize Our Infrastructure...............   168
Sustainment/Base Operations Support (BOS)........................   179
Vandenberg AFB/McClellan AFB.....................................   180

                         Department of the Army

Additional Committee Questions...................................   162
Army:
    Family Housing:
        Construction (AFHC)......................................   148
        Operations (AFHO)........................................   149
    Installation Strategies......................................   146
    Modularity...................................................   163
Barracks.........................................................   162
Base Realignment and Closure (BRAC)..............................   149
    Environmental................................................   163
Decreased Budget Request.........................................   153
Defense Installations Strategic Plan.............................   145
Easements to Prevent Urban Encroachment..........................   151
Fiscal Year 2005 Supplemental Budget Request.....................   150
Fort Ord Burn--Remediation Funding...............................   154
Global Restationing Funding......................................   156
Guantanamo Prison................................................   163
Homeowners Assistance Fund, Defense..............................   150
Joint:
    Basing--Ellingston Field.....................................   159
    Facilities...................................................   160
Milcon Projects in Supplemental..................................   161
Military Construction Army.......................................   147
    National Guard (MCNG)........................................   148
    Reserve (MCAR)...............................................   148
Modular Facilities...............................................   161
Operation and Maintenance........................................   149
Overhead:
    And Compartment Protection Locations.........................   157
    Cover Locations--Iraq........................................   158
Overview.........................................................   144
RCI Program......................................................   153
Reserves Training--California....................................   155
Restationing Facility Requirements--Fort Carson..................   152
Supplemental Funding.............................................   156
The Way Ahead....................................................   145
Weapons of Mass Destruction Civil Support Teams Funding..........   155

                         Department of the Navy

BRAC 2005........................................................    80
Efficiencies.....................................................    77
El Toro Land Auction.............................................    84
Facilities.......................................................    76
Family Housing...................................................    83
Fiscal Year 2006 Budget Overview.................................    71
Housing..........................................................    72
Joint Reserve Center.............................................    84
Marine Corps Force Restructuring.................................    85
Military Construction............................................    75
Outlying Landing Field...........................................    86
Prior BRAC Cleanup and Property Disposal.........................    79
Second Infantry Battalion........................................    86
VXX..............................................................    76

                       OVERSEAS BASING COMMISSION

BRAC.............................................................   202
Cost...........................................................200, 202
Forward Operating Sites..........................................   201
Geopolitical Considerations......................................   192
Mobility.........................................................   199
Overseas Savings.................................................   201
Overview.........................................................   190
Quality of Life..................................................   191
Stryker Brigade..................................................   200
Timing...........................................................   203
    And Synchronization..........................................   191
    Of Implementation............................................   197
Troop:
    Levels.......................................................   192
    Movement.....................................................   198

                     DEPARTMENT OF VETERANS AFFAIRS

                        Office of the Secretary

Additional Committee Questions...................................   113
Burial...........................................................   102
Capital Asset Realignment for Enhanced Services (CARES)..........   100
Colorectal Cancer................................................   128
Dallas VA Medical Center.........................................   111
Enrollment Fees..................................................   126
Grants for State Extended Care Facilities........................   106
Homelessness.....................................................   117
Increased Costs For Middle-Income Vets/Ban On Priority 8s........   137
Major Challenges and Goals.......................................   114
Management:
    Efficiencies.................................................   117
    Improvements.................................................   103
Medical:
    And Prosthetic Research...............................100, 110, 124
    Care.........................................................    97
        Programs.................................................   124
    Health Care..................................................   129
Mefloquine (Lariam) Use..........................................   125
Per Diem Payment Policy to State Homes...........................   108
Pharmacy Co-pay Increase.........................................   126
Prescription Drugs...............................................   122
Priority 7 and 8 Veterans........................................   117
Proposed Beckley VA Medical Center Nursing Home..................   134
Real:
    Effects of Increasing Out-of-Pocket Costs....................   137
    Health Care Increase.........................................   136
Returning Troops.................................................   126
Services.........................................................   119
State:
    Extended Care Facilities Grants Program......................   123
    Home:
        Construction.............................................   118
        Per Diem Proposals.......................................   122
    Veterans Homes: On the Chopping Block........................   138
Third Party Collections..........................................   104
Transitional Pharmacy Benefit Pilot Program......................   109
VA-DOD Collaboration.............................................   119
VA Nursing Homes: Also On the Chopping Block.....................   138
Veterans:
    Benefits.....................................................   101
    Returning From Iraq and Afghanistan..........................   114
VISN Structure...................................................   118
Waco and Big Spring, Texas Sites.................................   112

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