[Congressional Record (Bound Edition), Volume 148 (2002), Part 8]
[Senate]
[Pages 10640-10653]
[From the U.S. Government Publishing Office, www.gpo.gov]




        NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2003

  Mr. DASCHLE. Mr. President, I now ask unanimous consent the Senate 
proceed to Calendar No. 370, S. 2514, the Department of Defense 
authorization bill; that there be debate only on the bill during 
today's session; further, that the Senate resume consideration of the 
bill at 11 o'clock on Wednesday, June 19.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the bill by title.
  The assistant legislative clerk read as follows:

       A bill (S. 2514) to authorize appropriations for fiscal 
     year 2003 for military activities of the Department of 
     Defense, for military construction, for defense activities of 
     the Department of Energy, to prescribe personnel strengths 
     for such fiscal year for the Armed Forces, and for other 
     purposes.
  The PRESIDING OFFICER. The Senator from Michigan.
  Mr. LEVIN. Mr. President, in behalf of the Armed Services Committee, 
I am pleased to bring the National Defense Authorization Act for Fiscal 
Year 2003 to the floor.
  This bill would fully fund the fiscal year 2003 budget request of the 
administration of $393.3 billion for the national security activities 
for the Department of Defense and the Department of Energy.
  In the first 41 days of congressional session this year, the Armed 
Services Committee held 41 hearings to examine the administration's 
budget request and related issues. Last month, after meeting in markup 
for 3 days, the committee approved S. 2514, the National Defense 
Authorization Act for Fiscal Year 2003.
  I thank all the members of committee for their hard work on this 
bill.
  There were two close votes on two funding issues that caused a few of 
our members to vote against the bill at the end, which, of course, we 
regret. But except for those two issues, I think we probably would have 
had a unanimous vote on our committee.
  As we take up this bill, America's Armed Forces are engaged around 
the world as never before. In the months since September 11, we have 
dispatched troops not only to Afghanistan but also to Pakistan, the 
Philippines, the countries of central Asia and the Persian Gulf. We 
called up the National Guard to assist in contingency operations and to 
assist in safeguarding our borders and protecting our airports.
  All of this has been done without relieving our soldiers, sailors, 
airmen, and marines of ongoing deployments in Korea, the Balkans, 
Colombia, and elsewhere.
  This year, as much as ever before, we owe it to our men and women in 
uniform to act on this bill with dispatch. The events following 
September 11 have once again shown that the U.S. military is the most 
capable fighting force in the world. The success of our forces in 
Afghanistan has been remarkable. Osama bin Laden--if he is alive--is on 
the run and in hiding. Many of his al-Qaida terrorists have been 
captured or killed. The Taliban regime that harbored them is no more, 
and a new government is in place. Nations around the world have been 
put on notice: America is determined to protect itself from more 
attacks and to bring terrorists to justice.
  From Europe to the Persian Gulf to the Korean Peninsula, the presence 
of U.S. military forces and their contributions to regional peace and 
security continue to reassure our allies and deter potential 
adversaries. Over the last decade, U.S. forces have excelled in every 
mission assigned to them, including not only Operation Enduring 
Freedom, but also the 1999 NATO air campaign over Kosovo and ongoing 
enforcement of the no-fly zones over Iraq; humanitarian operations from 
Central America to Africa; and peacekeeping operations from the Balkans 
to East Timor.
  The excellence behind that success was not built in months. The 
success of our forces in Afghanistan is a tribute to the men and women 
of the Armed Forces and the investments in national defense that 
Congress and the Department of Defense have made over many years. 
Future success on the battlefield will likewise depend upon the success 
of Congress and the Department in preparing, training, and equipping 
our military for tomorrow's missions.
  The National Defense Authorization Act for Fiscal Year 2003 builds on 
the considerable strengths of our military forces and their record of 
success. The Armed Services Committee identified five priorities to 
guide us in preparing this bill. These were to:
  No. 1, continue the improvements in the compensation and quality of 
life of the men and women in the Armed Forces, retirees and their 
families;
  No. 2, sustain the readiness of the military services to conduct the 
full range of their assigned mission, including current and future 
operations against international terrorism;
  No. 3, improve the efficiency of Defense Department programs and 
operations and apply the savings toward high-priority programs;
  No. 4, improve the ability of the Armed Forces to meet nontraditional 
threats, including terrorism and weapons of mass destruction; and
  No. 5, promote the transformation of the Armed Forces to meet the 
threats of the 21st century.
  First, compensation and quality of life:
  The bill reflects the committee's highest priority--ensuring that our 
men and women in uniform, retirees and their families receive the 
compensation and quality of life they deserve. Toward that end, we 
added more than $1.2 billion to the budget request for pay and quality 
of life initiatives. Specifically, the bill includes a 4.1 percent 
across-the-board pay raise for all military personnel, with an 
additional targeted pay raise for the mid-career force; adds $640 
million above the budget request to improve and replace facilities on 
military installations; and authorizes a new assignment incentive pay 
of up to $1,500 per month to reward military members who agree to serve 
in difficult-to-fill assignments.
  The bill would also begin to address a longstanding inequity in the 
compensation of military retirees by authorizing the concurrent receipt 
of retired pay and veterans' disability compensation for military 
retirees with disabilities rated at 60% or more. During our markup, the 
committee approved a separate amendment that would authorize concurrent 
receipt of retired pay and veterans' disability compensation for all 
disabled military retirees for non-disability retirement. Senator 
Warner and I plan to offer this amendment on behalf of the committee at 
the earliest possible point in the debate of this bill.

[[Page 10641]]

  With regard to readiness, we propose to set aside $10 billion, as 
requested by the administration, to fund ongoing operations in the war 
against international terrorism during fiscal year 2003. The President 
requested that this money be reserved for the continuance of the war 
against international terrorism, and we believe that there is no more 
important purpose to which this funding could be dedicated.
  However, the Department is not yet in a position to state how long 
the war on terrorism will continue, or in what form, or to specify the 
specific programs for which the requested funds would be used. For this 
reason, the provision recommended by the committee would authorize for 
appropriation the $10 billion requested by the President upon receipt 
of a budget request which: No. 1, designates the requested amount as 
being essential to the continued war on terrorism; and No. 2, specifies 
how the administration proposes to use the requested funds, consistent 
with the Authorization for the Use of Military Force, P.L. 107-40.
  In addition, the bill would add funding to address shortfalls in a 
number of key readiness accounts and help lessen the burden on some of 
the Department's high demand, low density assets.
  These funding increases include $126 million to protect and enhance 
military training ranges; $232 million for aircraft, ship, and Navy gun 
depot maintenance; $176 million for improvements to Air Force and Army 
facilities; $51 million for ammunition to meet new training 
requirements and supplement war reserve stocks; $55 million to address 
the Army's aviation training backlog; $110 million for the purchase of 
an additional EC-130J Commando Solo aircraft; and $114 million for 
modifications to help improve the readiness of the EA-6B electronic 
warfare aircraft fleet.
  Relative to combating terrorism, the bill before us would take a 
significant step towards addressing nontraditional threats by providing 
in excess of $10 billion for combating terrorism initiatives, as 
requested by the Department, including more than $2 billion for force 
protection improvements to DOD installations around the world.
  In addition, the bill would provide increases of $200 million to 
enhance the security of our nuclear materials and nuclear weapons in 
the Department of Energy, $43 million in funding for the U.S. Special 
Operations Commands, and $30 million for defense against chemical and 
biological weapons and other efforts to combat weapons of mass 
destruction.
  We have also included two important legislative initiatives that 
would require the Department of Defense to take a more comprehensive 
approach to installation preparedness for weapons of mass destruction 
attacks and authorize the Secretary of Defense to expand cooperative 
threat reduction activities beyond the countries of the former Soviet 
Union.
  Relative to transformation, the bill would provide significant funds 
to promote the transformation of the Armed Forces to meet the threats 
of the 21st century. In particular, the bill would add more than $1.1 
billion to the Navy's shipbuilding accounts to refuel a nuclear 
submarine and pay for advance procurement of an aircraft carrier, a 
Virginia-class submarine, a DDG-51 class destroyer, and an LPD-17 class 
amphibious transport dock.
  Our bill would add $105 million for funding for research and 
development on the Army's Future Combat System and more than $100 
million for science and technology needed to help the Army achieve its 
Objective Force.
  It would fully fund the $5.2 billion requested by the Department for 
the F- 22, the $3.5 billion requested for continued research and 
development on the Joint Strike Fighter, and more than $600 million 
requested for Air Force unmanned aerial vehicles.
  It would add more than $300 million to the Department's science and 
technology budget, bringing the Department closer to the Secretary's 
goal of devoting 3 percent of all defense funds to the programs that 
promise to bring us the revolutionary technologies that will be needed 
to prevail in future conflicts.
  Relative to the Crusader Artillery System, in the middle of our 
committee markup of this bill the Secretary of Defense announced that 
he intended to terminate the Crusader Artillery System. This is a 
system which the Department of Defense had strongly supported until 
just a few days earlier. Because the committee had no opportunity to 
review the reasons for this sudden reversal, we did not address this 
issue in our markup. Instead, we scheduled a hearing with the Secretary 
of Defense and the Army Chief of Staff to consider the merits of the 
program.
  At that hearing, the Secretary of Defense favored termination. The 
Army Chief of Staff testified that the system was very important and 
very necessary and, as a matter of fact, an important part of 
transformation. The Chief of Staff is a very strong supporter of 
transformation.
  I think we all--as we perhaps will be debating the Crusader System--
should recognize the contribution of the Army Chief of Staff to the 
transformation of the Army. He is not one who has resisted 
transformation. He has been a very strong supporter of transformation, 
and he views the Crusader Artillery System--or viewed this at the time 
he testified--as an important part of that transformation.
  On June 13, the committee met to discuss the Crusader Artillery 
System. At that time, the committee voted 13 to 6 to recommend an 
amendment that would do two things. First, it would take the $475 
million out of the Crusader program and put the money into a separate 
funding line for future combat systems research and development. This 
is the Army's armored systems modernization line. Second, we would 
require the Army Chief of Staff, in our amendment, to conduct an 
analysis--or finish his analysis--of alternatives for the Army's 
artillery needs and to submit his findings to the Secretary of Defense 
no later than 1 month after the date of enactment of this act.
  This approach would enable the Secretary of Defense to terminate the 
Crusader program following the receipt of the Army's analysis which was 
truncated. The Army, in late April, was told that it could complete its 
analysis by the end of this fiscal year. And then, in early May, it was 
told that it could have until the end of May to complete this analysis.
  I emphasize the importance of this analysis. The Army's analysis is 
intended to answer seven questions. I am not going to go through them 
all, but I am simply going to say these are important questions. These 
are important questions for the future well-being of the men and women 
in the Army. They are critical questions. They have to do with risk. 
What are the risks in proceeding? What are the risks in canceling?
  These are questions which the Army was in the middle of analyzing 
when suddenly, a few days into May, despite the earlier decision to 
allow the completion of this analysis by the end of May, the Secretary 
of Defense simply said: We are going to terminate.
  Seven questions were to be answered. And I emphasize, these are 
questions which can be life-and-death questions for the men and women 
in the future armies of this country. They were going to analyze these 
questions in six combat scenarios. They were going to look at four 
different alternatives. We believe the answers to those questions in 
that analysis should be completed. The amendment, which I will offer on 
behalf of the committee, as I promised to the committee I would offer 
early in this debate, was adopted, as I said, by a 13-to-6 vote.
  We hope the Senate will approve this amendment. We think it is the 
correct balance. Not only should we have that information before we or 
the Defense Department--either one of us--finally decide on 
termination, that analysis is important as to how best to spend that 
money. Where should we jump to? Even if we, this Nation, decide to jump 
from Crusader, even if we take whatever risks are involved--and there 
are risks involved in that--the decision also involves, Where do we 
then allocate those funds? How do we allocate those funds? And that 
analysis is critically important to that issue as well. We

[[Page 10642]]

hope our amendment will address both those issues in a rational, 
thoughtful way.
  Congress has a responsibility also to ensure that the resources our 
taxpayers provide for national defense are spent wisely. The 
administration has not complied with statutory requirements to provide 
Congress with a national security strategy and an annual report 
outlining detailed plans for the size, structure, shape, or 
transformation of the military. In the absence of that planning, again, 
required by law, the Department of Defense is going to have difficulty 
establishing a clear vision for the future for our Armed Forces.
  But a year ago, the Secretary of Defense testified before us saying: 
``We have an obligation to taxpayers to spend their money wisely.'' He 
said that he had ``never seen an organization, in the private or public 
sector,'' to use his words, ``that could not, by better management, 
operate at least five percent more efficiently if given the freedom to 
do so. Five percent of the DOD budget,'' he pointed out, ``is over $15 
billion!''
  He testified that that $15 billion of savings from management 
efficiencies could be used to: increase ship procurement from six to 
nine ships a year; to procure several hundred additional aircraft 
annually rather than 189. He could meet the target of a 67-year 
facility replacement rate, and those savings could increase defense-
related science and technology funding from 2.7 percent to 3 percent 
for the Department of Defense budget.
  To this date, it has been disappointing that the Department has 
identified less than $150 million of the $15 billion annual savings 
projected by the Secretary. Despite the largest proposed increase in 
defense spending in 20 years, the budget request would fund just 5 
ships and 166 aircraft, way below the goals; replace facilities at a 
122-year rate instead of the 67-year rate, which is desirable. It would 
leave the rate of defense-related science and technology unchanged at 
just 2.7 percent of the Department of Defense budget instead of the 3-
percent target which is desirable.
  In short, despite the proposed $48 billion increase in defense 
spending, management efficiencies are needed now more than ever to 
ensure the taxpayers' money is well spent.
  Our bill includes a number of provisions to help address this 
problem, including a major initiative, based on recommendations of the 
Defense Science Board and the DOD Director of Operational Test and 
Evaluation, to address budget shortfalls and organizational 
shortcomings in the Department's test and evaluation infrastructure 
that have led to inadequate testing of major weapons systems.
  It would provide for a continuation of last year's initiative by the 
committee to improve the way in which the Department manages its $50 
billion of services contracts with resulting savings of $850 million. 
We include a provision that would address the Department's inability to 
produce reliable financial information and achieve $400 million of 
savings by deferring spending on new financial systems that would be 
inconsistent with a comprehensive financial management enterprise 
architecture currently being developed by the Department. We include a 
provision requiring the Department to establish new internal controls 
to address recurring problems with the abuse of purchase cards and 
travel cards by military and civilian personnel.
  In the area of missile defense, the bill would reallocate $812 
million for missile defense expenditures that appear to be unjustified 
or duplicative to higher priority areas. The bill would transfer $690 
million from missile defense activities to fund advanced procurement of 
a second Virginia-class submarine as soon as fiscal year 2005; advanced 
procurement for a second LPD-17 amphibious transport dock in fiscal 
year 2004; and advanced procurement for a third DDG-51 Arleigh Burke-
class destroyer in fiscal year 2004.
  Every defense budget requires choices, as every other budget of every 
other Department. Even with more than $390 billion to spend for 
national security activities, the administration was not able to fund 
every important national security priority. Each of the military 
services came to us with a long list of unfunded priorities, items not 
included in their budget, which they believe to be important to the 
national defense.
  There was unanimous agreement among the members of the Armed Services 
Committee that the President's budget did not provide adequate 
resources to maintain the Navy's surface fleet or attack submarines. 
The committee received extensive testimony from DOD witnesses and 
numerous DOD and Navy reports indicating that the Navy should be 
building 8 to 10 ships per year to recapitalize its current fleet. A 
number of Navy witnesses, including the chief of naval operations, have 
indicated they believe that the Navy should be building a fleet with as 
many as 375 ships in order to meet the requirements the Navy faces 
today.
  Two years ago, the Navy's shipbuilding plan called for 23 ships 
between 2003 and 2005. This year's plan calls for only 17 ships during 
that period.
  The Department's proposed budget for missile defense was not even 
reviewed by the Joint Chiefs of Staff. Earlier this year, each of the 
four service chiefs testified before the Armed Services Committee that 
they had not been asked for their views on the funding for missile 
defense programs relative to other priorities in the budget--all those 
unmet requirements that they told us about. They were not asked to 
weigh the importance of the missile defense budget against those other 
needed items.
  The committee, and the subcommittee chaired by Senator Jack Reed, 
conducted an exhaustive examination of the proposed missile defense 
budget, holding two strategic subcommittee hearings alone on missile 
defense, reviewing 400 pages of missile defense budget documentation, 
and participating in more than 25 hours of staff briefings by the 
Department of Defense. Based on this lengthy review, the committee 
recommended funding the vast majority of the Department's missile 
defense requests, an amount that is sufficient to aggressively fund all 
of the specific systems that the Department has said it wants to 
develop.
  However, at the same time the committee identified $810 million of 
the missile defense request, which is 11 percent of the total request, 
that could not adequately be justified by the Department despite a 
detailed review of available documentation and repeated requests at 
hearings and in briefings.
  For example, the budget request included $1.1 billion in the 
ballistic missile defense program element. That is an increase of $250 
million over the current funding level. The major purpose of this 
program element is to develop an integrated architecture of BMD 
systems. While this is an important goal, most of the systems that will 
comprise the BMD architecture are years away from being deployed, 
making the development and definition of a detailed BMD architecture 
impossible at this point.
  After receiving more than $800 million for this program element in 
fiscal year 2002, the Missile Defense Agency has yet to provide to 
Congress any indication what the overall ballistic missile defense 
architecture might be. In fact, the committee learned that of the $800 
million appropriated for that program element in fiscal year 2002, only 
$50 million had been spent by the end of March, halfway through the 
fiscal year.
  Because of this slow execution, the Missile Defense Agency informed 
us that $400 million of these fiscal year 2002 funds will be available 
for expenditure in 2003. So half of the money that we appropriated in 
2002 for that program element is not going to be spent. It is going to 
be available next year. Under those circumstances, it is hard to see 
why the Department would need a $250 million increase in that program 
element in fiscal year 2003.
  In short, we made a choice to make careful, well-justified reductions 
in missile defense programs to fund increases to the Department's 
shipbuilding accounts, and other critically important accounts, which 
are strongly supported by most members of the

[[Page 10643]]

uniformed Navy and by members of the committee. The choice was the 
right one.
  One of the things we used the money for, one of the important areas 
that we used that funding for, was greater security of our Department 
of Energy nuclear facilities. The greatest threat we face is a 
terrorist threat. Those facilities are not adequately protected. We 
found some additional money--about $100 million--in those reductions in 
the missile defense accounts which we believed could not be justified, 
not just to build more ships, which are necessary, but also to give 
greater security to our Department of Energy nuclear facilities which 
are so critically important to be defended.
  Secretary Rumsfeld has written us that the Department opposes these 
changes and he would recommend that the President veto the bill if this 
change in missile defense funding remains in the bill. But again, this 
veto threat not only is addressed at the funding cuts in the bill but, 
in effect, is addressed at the items that we added in the bill which 
are so important to the national security of this country.
  We believe our bill would provide the Missile Defense Agency as much 
money as can reasonably be executed for the missile defense program in 
this year and would ensure that this money is expended in a sound 
manner.
  Mr. President, finally, I wish to say a few words on two items that 
are not included in this bill. First, the budget request of the 
administration included $15 million in the Department of Energy to 
begin studying the feasibility of the new robust nuclear earth 
penetrator. We had doubts about the need for this new nuclear weapon, 
particularly at a time when we are trying to convince other countries 
to forgo the development of nuclear weapons, and we adopted an 
amendment deleting funding for the robust nuclear penetrator and 
instead we directed the Department of Defense, in consultation with the 
Secretary of Energy, to submit a report to Congress on the requirements 
for this new nuclear weapon--how it would be deployed, what categories 
of targets it would be used against, and whether conventional weapons 
could effectively address such targets.
  Second, less than a month before we began our markup, the Department 
of Defense sent us a legislative proposal to exempt certain military 
installations and activities from the Endangered Species Act, the 
Migratory Bird Treaty Act, the Marine Mammal Protection Act, the Clean 
Air Act, the Solid Waste Disposal Act, and the Comprehensive 
Environmental Response and Compensation Liability Act, or CERCLA.
  We did not consider those proposals because all those statutes fall 
outside the jurisdiction of the Armed Services Committee. We did 
include two environmentally sound provisions in the Department's 
proposal that were in our committee's jurisdiction. These provisions 
authorize the Department of Defense to enter into agreements with non-
Federal entities to manage lands adjacent to military installations and 
to create buffer zones between training areas and the surrounding 
population.
  America's Armed Forces are ready to help keep the peace, to deter 
traditional and nontraditional threats to our security and our vital 
interests around the world, and to win any conflict decisively. Our 
bill builds on the considerable strength of our military forces and 
their record of success by preserving a high quality of life for U.S. 
forces and their families, sustaining readiness, transforming the Armed 
Forces to meet the threats and challenges of tomorrow.
  I hope our colleagues will join us in supporting this important 
legislation.
  Mr. President, the Congressional Budget Office is required to prepare 
a cost estimate for spending legislation reported by committees. The 
cost estimate for the bill reported by the committee, S. 2514, was not 
finished at the time the report on this bill was filed. The CBO cost 
estimate is now available. I ask unanimous consent that the 
Congressional Budget Office cost estimate for the Defense authorization 
bill reported by the Committee on Armed Services be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                                    U.S. Congress,


                                  Congressional Budget Office,

                                     Washington, DC, May 21, 2002.
     Hon. Carl Levin,
     Chairman, Committee on Armed Services, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 2514, the National 
     Defense Authorization Act for Fiscal Year 2003.
       The CBO staff contact is Kent Christensen. If you wish 
     further details on this estimate, we will be pleased to 
     provide them.
           Sincerely,
                                                 Barry B. Anderson
                                   (For Dan L. Crippen, Director).
       Enclosure.
     S. 2514--National Defense Authorization Act for Fiscal Year 
         2003
       Summary: S. 2514 would authorize appropriations totaling 
     $392 billion for fiscal year 2003 and an estimated $14 
     billion in additional funding for 2002 for the military 
     functions of the Department of Defense (DoD) and the 
     Department of Energy (DOE). It also would prescribe personnel 
     strengths for each active-duty and selected reserve component 
     of the U.S. armed forces. CBO estimates that appropriation of 
     the authorized amounts for 2002 and 2003 would result in 
     additional outlays of $402 billion over the 2002-2007 period.
       The bill also contains provisions that would raise the 
     costs of discretionary defense programs over the 2004-2007 
     period. CBO estimates that those provisions would require 
     appropriations of $6.8 billion over those four years.
       The bill contains provisions that would increase direct 
     spending by an estimated $5.6 billion over the 2003-2007 
     period and $17.6 billion over the 2003-2012 period, primarily 
     from the phase-in of concurrent payment of retirement 
     annuities with veterans' disability compensation to retirees 
     from the military and the other uniformed services who have 
     service-connected disabilities rated at 60 percent or 
     greater. Because it would affect direct spending, the bill 
     would be subject to pay-as-you-go procedures.
       S. 2514 contains no intergovernmental or private-sector 
     mandates as defined in the Unfunded Mandates Reform Act 
     (UMRA) and would impose no costs on state, local, or tribal 
     governments.
       Estimated cost to the Federal Government: The estimated 
     budgetary impact of S. 2514 is shown in Table 1. Most of the 
     costs of this legislation fall within budget function 050 
     (national defense).


       TABLE 1.--BUDGETARY IMPACT OF S. 2514, THE NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2003
----------------------------------------------------------------------------------------------------------------
                                                      By fiscal year, in millions of dollars--
                                   -----------------------------------------------------------------------------
                                        2002         2003         2004         2005         2006         2007
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
 
Spending Under Current Law for
 Defense Programs:
 
    Budget Authority\1\...........      346,319            0            0            0            0            0
    Estimated Outlays.............      346,900      116,372       38,931       13,267        5,535        2,723
Proposed Changes:
 
    Authorization of Supplemental
     Appropriations for 2002:
        Estimated Authorization          14,048            0            0            0            0            0
         Level\2\.................
        Estimated Outlays\2\......        5,345        5,782        1,941          660          174           79
    Authorization of
     Appropriations for 2003:
        Estimated Authorization               0      391,543            0            0            0            0
         Level....................
        Estimated Outlays.........            0      259,711       88,543       28,227        8,201        2,856
Spending Under S. 2514 for Defense
 Programs:
    Estimated Authorization Level.      360,367      391,543            0            0            0            0
    Estimated Outlays.............      352,245      381,865      129,415       42,154       13,910        5,658
 
                                           CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority........            0          359          674        1,081        1,533        1,936

[[Page 10644]]

 
Estimated Outlays.................            0          359          674        1,081        1,533       1,936
----------------------------------------------------------------------------------------------------------------
\1\The 2002 level is the amount appropriated for programs authorized by S. 2514.
\2\The estimates shown for the 2002 supplemental are amounts contained in the Administration's supplemental
  request for defense programs. The outlay estimate for 2003 includes $5,684 million of spending from funds
  requested as emergency appropriations. Excluding emergency spending would lower total outlays in 2003 to
  $376,181 million.
Note.--This table excludes estimated authorizations of appropriations for years after 2003. (Those additional
  authorizations are shown in Table 3.)

     Basis of estimate
       Spending subject to appropriation
       The bill would specifically authorize appropriations 
     totaling $391.5 billion in 2003 (see Table 2) and additional 
     amounts as may be necessary for supplemental appropriations 
     for defense in 2002, which CBO estimates would total $14 
     billion based on the Administration's request. Most of those 
     costs would fall within budget function 050 (national 
     defense). S. 2514 also would specifically authorize 
     appropriations of $70 million for the Armed Forces Retirement 
     Home (function 600--income security).
       The estimate assumes that the estimated authorization 
     amount for 2002 is appropriated by the end of June 2002, and 
     that the amounts authorized for 2003 will be appropriated 
     before the start of fiscal year 2003. Outlays are estimated 
     based on historical spending patterns.
       The bill also contains provisions that would affect various 
     costs, mostly for personnel, that would be covered by the 
     fiscal year 2003 authorization and by authorizations in 
     future years. Table 3 contains estimates of those amounts. In 
     addition to the costs covered by the authorizations in the 
     bill for 2003, these provisions would raise estimated costs 
     by $6.8 billion over the 2004-2007 period. The following 
     sections describe the provisions identified in Table 3 and 
     provide information about CBO's cost estimates for those 
     provisions.

                                  TABLE 2.--SPECIFIC AUTHORIZATIONS IN S. 2514
----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year, in millions of dollars--
                    Category                    ----------------------------------------------------------------
                                                     2003         2004         2005         2006         2007
----------------------------------------------------------------------------------------------------------------
Military Personnel:
    Authorization Level\1\.....................       94,297            0            0            0            0
    Estimated Outlays..........................       89,205        4,432          283           94            0
Operation and Maintenance:
    Authorization Level........................      139,938            0            0            0            0
    Estimated Outlays..........................      103,010       28,058        6,279        1,395          478
Procurement:
    Authorization Level........................       72,818            0            0            0            0
    Estimated Outlays..........................       20,599       27,458       15,289        5,193        1,808
Research, Development, Test, and Evaluation:
    Authorization Level........................       55,686            0            0            0            0
    Estimated Outlays..........................       31,375       20,110        3,240          587          153
Military Construction and Family Housing:
    Authorization Level........................       10,129            0            0            0            0
    Estimated Outlays..........................        2,686        3,805        2,259          805          327
Atomic Energy Defense Activities:
    Authorization Level........................       15,895            0            0            0            0
    Estimated Outlays..........................       10,667        4,245          853           74           55
Other Accounts:
    Authorization Level........................        2,688            0            0            0            0
    Estimated Outlays..........................        1,736          501          174          128           60
General Transfer Authority:
    Authorization Level........................            0            0            0            0            0
    Estimated Outlays..........................          350          -75         -150          -75          -25
Total:
    Authorization Level\2\.....................      391,451            0            0            0            0
    Estimated Outlays..........................      259,628       88,534       28,227        8,201       2,856
----------------------------------------------------------------------------------------------------------------
\1\This authorization is for discretionary appropriations and does not include $55 million for mandatory
  payments from appropriations for military personnel.
\2\These amounts comprise nearly all of the proposed changes for authorizations of appropriations for 2003 shown
  in Table 1; they do not include the estimated authorization of $92 million for the Coast Guard Reserve, which
  is shown in Table 3.


             TABLE 3.--ESTIMATED AUTHORIZATIONS OF APPROPRIATIONS FOR SELECTED PROVISIONS IN S. 2514
----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year, in millions of dollars--
                    Category                    ----------------------------------------------------------------
                                                     2003         2004         2005         2006         2007
----------------------------------------------------------------------------------------------------------------
                                              MULTIYEAR PROCUREMENT
 
C-130J Aircraft................................           15          -63         -121         -142         -162
 
                                                 FORCE STRUCTURE
 
DoD Military Endstrengths......................           87          180          186          192          198
Coast Guard Reserve Endstrengths...............           92            0            0            0            0
 
                                         COMPENSATION AND BENEFITS (DoD)
 
Military Pay Raises............................          276          381          398          415          430
Expiring Bonuses and Allowances................          706          796          417          234          152
Assignment Incentive Pay.......................            1           14           32            0            0
Education and Training.........................            3            5            9           13           11
Concurrent Receipt.............................            0          588          610          631          650
National Call to Service Program...............            0           10           19           28           29
 
                                             DEFENSE HEALTH PROGRAM
 
TRICARE Prime Remote...........................            4            4            4            5            5
Transitional Health Care.......................            7            5            3            2            1
 
                                                OTHER PROVISIONS
 
Voluntary Separation and Early Retirement                  0          121          212          211            0
 Incentives (DoD and DOE)......................
Federal Employees Health Benefits Program......            0            2            3            3            3
School Impact Aid..............................          (a)          (a)          (a)           14           15
Arctic and Western Pacific Environmental                   7            8            6            5            3
 Cooperation Program...........................
Revitalizing DoD Laboratories..................          (a)          (a)          (a)          (a)            0
Contracting for Environmental Remediation......           -2           -4           -5           -7           -9
 
                                         TOTAL ESTIMATED AUTHORIZATIONS
 
Estimated Authorization Level..................        1,196        2,047        1,773        1,605       1,326
----------------------------------------------------------------------------------------------------------------
aLess than $500,000.
 
Note.--For every item in this table except the authorization for the Coast Guard Reserve, the 2003 levels are
  included in the amounts specifically authorized to be appropriated in the bill. Those amounts are shown in
  Table 2. Amounts shown in this table for 2004 through 2007 are not included in Table 1.


[[Page 10645]]

       Multiyear Procurement. In most cases, purchases of weapon 
     systems are authorized annually, and as a result, DoD 
     negotiates a separate contract for each annual purchase. In a 
     small number of cases, the law permits multiyear procurement; 
     that is, it allows DoD to enter into a contract to buy 
     specified annual quantities of a system for up to five years. 
     In those cases, DoD can negotiate lower prices because its 
     commitment to purchase the weapons gives the contractor an 
     incentive to find more economical ways to manufacture the 
     weapon, including cost-saving investments. Annual funding is 
     provided for these multiyear contracts, but potential 
     termination costs are covered by an initial appropriation.
       Section 131 would authorize the Secretary of the Air Force 
     to enter into a multiyear contract to purchase C-130J 
     aircraft beginning in 2003 after the Secretary certifies that 
     the C-130J has been cleared for worldwide, over-water 
     capability. Based on information provided by the Air Force, 
     CBO assumes that DoD will procure 64 aircraft over the 2003-
     2008 period--40 CC-130J aircraft for the Air Force and 24 KC-
     130J aircraft for the Marine Corps. CBO also assumes that the 
     CC-130J and KC-130J aircraft would be purchased under one 
     contract administered by the Air Force and covering six years 
     of production beginning in 2003. CBO estimates that savings 
     from buying these aircraft under a multiyear contract would 
     total $473 million, or about $95 million a year, over the 
     2003-2007 period. CBO also estimates that additional savings 
     of $182 million would accrue in 2008. Funding requirements to 
     purchase these aircraft would total just under $3.4 billion 
     over the 2003-2007 period (instead of the almost $3.9 billion 
     that would be needed under annual contracts).
       Multiyear procurement of C-130Js would raise costs in 2003 
     because the KC-130J did not receive advance procurement in 
     2002 in anticipation of multiyear procurement starting in 
     2003, and because the Air Force would need to provide advance 
     procurement for the aircraft that it would purchase in 2004.
       Military Endstrength. The bill would authorize active and 
     reserve endstrength levels for 2003. The authorized 
     endstrengths for active-duty personnel and personnel in the 
     selected reserve would total about 1,390,000 and 865,000, 
     respectively. Of those selected reservists, about 68,500 
     would serve on active duty in support of the reserves. The 
     bill would specifically authorize appropriations of about $94 
     billion for the costs of military pay and allowances in 2003. 
     The authorized endstrength represents a net increase of 2,200 
     servicemembers that would boost costs for salaries and other 
     expenses by $87 million in the first year and about $190 
     million annually in subsequent years, compared to the 
     authorized strengths for 2002.
       The bill also would authorize an endstrength of 9,000 in 
     2003 for the Coast Guard Reserve. This authorization would 
     cost about $92 million and would fall under budget function 
     400 (transportation).
       Section 402 would allow the Secretary of Defense to 
     increase endstrength by 2 percent above the level authorized 
     by the Congress. The provision would also allow an increase 
     in endstrength equal to the number of personnel within the 
     reserve components that are on active duty in support of a 
     contingency operation. While there is the potential for 
     increased costs, CBO believes that DoD would still have to 
     manage their resources given the finite amount of money 
     appropriated each year for military personnel. As such, CBO 
     estimates that this provision would not significantly 
     increase costs.
       Compensation and Benefits. S. 2514 contains several 
     provisions that would affect military compensation and 
     benefits for uniformed personnel.
       Military Pay Raises. Section 601 would raise basic pay by 
     4.1 percent across-the-board and authorize additional 
     targeted pay raises, ranging from 0.9 percent to 4.4 percent, 
     for individuals with specific ranks and years of service at a 
     total cost of about $2.3 billion in 2003. Because the pay 
     raises would be above those projected under current law, CBO 
     estimates that the incremental costs associated with the 
     larger pay raise would be about $276 million in 2003 and 
     total $1.9 billion over the 2003-2007 period.
       Expiring Bonuses and Allowances. Several sections would 
     extend DoD's authority to pay certain bonuses and allowances 
     to current personnel. Under current law, most of these 
     authorities are scheduled to expire in December 2002, or 
     three months into fiscal year 2003. The bill would extend 
     these authorities through December 2003. Based on data 
     provided by DoD, CBO estimates that the costs of these 
     extensions would be as follows:
       Payment of reenlistment bonuses for active-duty personnel 
     would cost $327 million in 2003 and $191 million in 2004; 
     enlistment bonuses for active-duty personnel would cost $133 
     million in 2003 and $361 million in 2004;
       Various bonuses for the Selected and Ready Reserve would 
     cost $99 million in 2003 and $114 million in 2004;
       Special payments for aviators and nuclear-qualified 
     personnel would cost $67 million in 2003 and $72 million in 
     2004;
       Retention bonuses for officers and enlisted members with 
     critical skills would cost $29 million in 2003 and $19 
     million in 2004;
       Accession bonuses for new officers with critical skills 
     would cost $14 million in 2003 and $5 million in 2004; and
       Authorities to make special payments and give bonuses to 
     certain health care professionals would cost $37 million in 
     2003 and $34 million in 2004.
       Most of these changes would result in additional, smaller 
     costs in subsequent years because payments are made in 
     installments.
       Assignment Incentive Pay. Section 617 would authorize a new 
     incentive pay to servicemembers who volunteer for difficult-
     to-fill jobs or less-than-desirable locations. The authority 
     would expire three years after the enactment date of this 
     bill. Based on information from DoD, CBO expects that only 
     the Navy would use this authority. Based on information 
     provided by the Navy, CBO assumes that the special incentive 
     pay would average $300 a month and that 11,250 servicemembers 
     would receive this special pay by 2005. Given expected 
     personnel turnover, CBO estimates that this provision would 
     cost $1 million in 2003 and $46 million over the 2003-2005 
     period.
       Education and Training. Section 521 would allow the 
     military services to increase the number of students at each 
     of the service academies from the current ceiling of 4,000 to 
     4,400 students. Based on information from DoD, CBO expects 
     that only the Navy would significantly increase its service-
     academy strength and that it would bring on about 100 extra 
     academy students a year, so that the student body would 
     increase, after several years, to about 4,400 students. Based 
     on information provided by DoD, CBO assumes the other service 
     academies would each increase their enrollments by an 
     insignificant number of students a year.
       According to DoD, the additional cost to bring on 400 extra 
     students at the Naval Academy would be about $29,000 per 
     student each year. These additional students would not be 
     used to increase overall officer endstrength, but rather to 
     offset a desired draw down in the number of officers 
     commissioned through the Officer Candidate School (OCS) 
     program, according to the Navy. Thus, the actual cost of the 
     increase for the academy students would be offset somewhat by 
     the cost of the OCS graduates they would replace. Because the 
     OCS program lasts less than one year, the offsetting costs 
     would not begin to affect net outlays until 2007, when the 
     first of the additional academy students would graduate and 
     be commissioned. CBO estimates the cost of implementing this 
     provision would be $1 million in 2003 and $31 million over 
     the 2003-2007 period, assuming appropriation of the necessary 
     amounts.
       Section 652 would extend the period during which eligible 
     reservists may use their education benefits from 10 years to 
     14 years. In 2001, over 82,000 reservists trained under this 
     program and received an average annual benefit of $1,653. 
     These benefits are paid by the Secretary of Veterans Affairs 
     from the DoD Education Benefits Fund. Each month, DoD pays 
     into the fund the net present value of the education benefit 
     granted to each person who enlisted in the previous month. 
     Based on information from DoD about current contributions to 
     the fund and expected accessions, CBO estimates implementing 
     section 652 would increase payments into the fund by about $2 
     million each year. (CBO estimates that there also would be 
     direct spending of about $24 million over the 2003-2012 
     period for increased outlays from the fund. CBO's estimate of 
     those costs is discussed below under the heading of ``Direct 
     Spending.'')
       Concurrent Receipt. Section 641 would phase in over five 
     years total or partial concurrent payment of retirement 
     annuities together with veterans' disability compensation to 
     retirees from the uniformed services who have service-
     connected disabilities rated at 60 percent or greater. The 
     uniformed services include all branches of the U.S. military, 
     the Coast Guard, and uniformed members of the Public Health 
     Service (PHS) and the National Oceanic and Atmospheric 
     Administration (NOAA).
       Under current law, disabled veterans who are retired from 
     the uniformed services cannot receive both full retirement 
     annuities and disability compensation from the Department of 
     Veterans Affairs (VA). Because of this prohibition on 
     concurrent receipt, such veterans forgo a portion of their 
     retirement annuity equal to the nontaxable veterans' benefit. 
     This section would phase in concurrent receipt of both 
     benefits so that, beginning in 2007, individuals who have 
     significant service-connected disabilities and have a 
     retirement annuity based on years of service, would receive 
     both benefits in full without the reduction called for under 
     current law. Individuals whose retirement pay is based on 
     their degree of disability would continue to forgo retirement 
     pay equal to the VA compensation payment, but only to the 
     extent that their disability had entitled them to a larger 
     retirement annuity than they would have received based on 
     years of service.
       The military retirement system is financed in part by an 
     annual payment from appropriated funds to the military 
     retirement trust fund, based on an estimate of the system's 
     accruing liabilities. If this provision is enacted, the 
     yearly contribution to the military retirement trust fund (an 
     outlay in budget function 050) would increase to reflect the 
     added liability from the expected

[[Page 10646]]

     increase in annuities to future retirees. Using information 
     from DoD, CBO estimates that implementing this provision 
     would increase such payments by $588 million in 2004 and $2.5 
     billion over the 2004-2007 period. Because the phase-in of 
     concurrent receipt benefits would not take effect until 
     January 1, 2003, the accrual payment for fiscal year 2003 
     would not be affected. CBO estimates that there also would be 
     direct spending of about $17.3 billion over the 2003-2012 
     period for increased outlays from the fund. CBO's estimate of 
     those costs is discussed below under the heading of ``Direct 
     Spending.''
       National Call to Service. Section 541 would give the 
     Secretary of Defense authority to establish an enlistment 
     program in which a participant, in exchange for a specified 
     incentive, would enlist in the armed forces for a period of 
     15 months plus training time followed by service in the 
     reserves, the Peace Corps, Americorps, or another national 
     service program. The specified incentives would consist of 
     either a cash bonus of $5,000, payment of student loans not 
     to exceed $18,000, or education benefits similar to those 
     provided for in the Montgomery GI Bill (MGIB) education 
     program.
       Based on information from DoD, CBO estimates that DoD would 
     seek to recruit about 1 percent of annual enlisted accessions 
     (an average of about 2,000 enlistees a year) under the 
     National Call to Service program. CBO assumes that all (or 
     nearly all) participants would choose the $5,000 cash bonus 
     option since DoD has indicated that the amount it would 
     probably offer for the repayment of student loans would be 
     less than or equal to $5,000. Moreover, while the education 
     benefits offered under this program would be worth more than 
     $5,000, CBO believes that few enlistees would choose these 
     benefits because a participant who selected the cash bonus 
     would also have the potential to be eligible for active-duty 
     or reserve MGIB benefits. Thus, CBO estimates that the cost 
     for providing the cash bonus to participants who enlist under 
     the National Call to Service program would be about $10 
     million a year once the program was implemented. Based on 
     information provided by DoD, CBO assumes that it would take 
     about one year for DoD to implement this program.
       CBO also estimates that there would be an additional cost 
     associated with administering this program. Since 
     servicemembers who would enlist under the National Call to 
     Service program would leave the military one year sooner than 
     the average enlisted member who leaves after his or her 
     initial obligation is fulfilled, DoD would need to induct 
     more people into the military to maintain endstrength. CBO 
     estimates that DoD would need to induct 1,000 additional 
     enlistees a year to make up for the accelerated loss in 
     personnel. With an average training period of about six 
     months, DoD would need to add these enlistees about half a 
     year earlier. Thus, the first bonuses would not be paid out 
     until 2004 and the first replacements would not have to be 
     inducted until 2005.
       Based on information from DoD, CBO estimates that the 
     average cost for each additional enlistee would be about 
     $16,250 in fiscal year 2003, which includes the cost of 
     providing new uniforms, travel expenses, and six months of 
     salary and benefits during training. After adjusting for 
     inflation and assuming that new participants are brought into 
     the program evenly throughout the first year, CBO estimates 
     that the cost of these additional accessions would be $9 
     million in 2005 and an average of $20 million per year 
     thereafter.
       Therefore, CBO estimates that the total costs for the 
     National Call to Service program would be $10 million in 
     2004, $19 million in 2005, and about $85 million over the 
     2004-2007 period.
       Defense Health Program. Title VII contains several 
     provisions that would affect DoD health care and benefits. 
     Tricare is the name of DoD's health care program; Tricare 
     Prime and Tricare Prime Remote are managed care programs, and 
     Tricare Standard is a fee-for-service program.
       Tricare Prime Remote. Section 703 would affect dependents 
     of servicemembers on active duty who live in a remote area, 
     which is defined as roughly a one-hour-or-more driving 
     distance from a military treatment facility. Under certain 
     conditions, this section would allow dependents of personnel 
     on active duty who live in a remote area to participate in 
     Tricare Prime Remote if the servicemember is transferred to a 
     different duty station and is not allowed to bring his or her 
     family. Under current law, dependents of personnel on active 
     duty living in remote areas must reside with the active-duty 
     member to participate in Tricare Prime Remote. If the active-
     duty servicemember is transferred to a duty station where he 
     or she cannot bring family members, the family can no longer 
     participate in the Tricare Prime Remote program.
       Based on information provided by DoD, CBO estimates that 
     about 27,000 dependents of personnel on active duty would be 
     affected by this provision. According to DoD, about 40 
     percent of those dependents who would be eligible for Tricare 
     Prime Remote under this section already participate in 
     Tricare Standard. Based on data provided by the department, 
     CBO estimates that the additional incremental cost of 
     providing Tricare Prime Remote to those individuals would be 
     $113 per person. In addition, CBO estimates that the new 
     benefit would attract about 1,350 dependents to Tricare Prime 
     Remote who had not previously used any Tricare program at an 
     estimated annual cost of $1,900 per person. Thus, CBO 
     estimates that the cost of providing Tricare Prime Remote to 
     more individuals would be $4 million in 2003 and $22 million 
     over the 2003-2007 period, assuming appropriation of the 
     estimated amounts.
       Transitional Health Care. Under section 707, family members 
     of reservists who were called to active duty for more than 30 
     days would be eligible for health care coverage under Tricare 
     for 60 days after the reservist is released from active duty. 
     Under current law, only the reservist is eligible for health 
     care coverage under Tricare for the 60 days after he or she 
     is released from active duty. While there are currently more 
     than 80,000 reservists on active duty, CBO assumes for this 
     estimate that the number of reserves will fall to about 
     65,000 in 2003 and 10,000 by 2006. If the number of 
     reservists remains at current levels over the 2003-2007 
     period, the estimated costs would be correspondingly higher.
       Based on data from DoD and the General Accounting Office, 
     CBO estimates that about 50 percent of the reservists have 
     families and that about 40 percent of those families would 
     use the transitional health care. CBO further estimates that 
     providing an additional 60 days of health care coverage to 
     those families would cost, on average, about $600 per family. 
     After accounting for inflation and the assumed decline in the 
     level of reservists called to active duty, CBO estimates that 
     this provision would cost $7 million in 2003, and $18 million 
     over the 2003-2007 period, assuming appropriation of the 
     estimated amounts.
       Voluntary Separation and Early Retirement Incentives. S. 
     2514 contains several provisions that would allow DoD and the 
     Department of Energy to offer voluntary retirement incentives 
     to their civilian employees. Taken together, CBO estimates 
     implementing these provisions would cost $121 million in 2004 
     and $544 million over the 2004-2006 period.
       Section 1102 would provide DoD with the authority to offer 
     voluntary retirement incentives of up to $25,000 to its 
     civilian employees who voluntarily retire or resign through 
     September 30, 2006. Current buyout authority for DoD is 
     scheduled to expire on September 30, 2003. Based on 
     discussions with DoD staff, CBO assumes that about 16,500 DoD 
     employees would participate in the buyout program in 2004 
     through 2006. CBO estimates that the buyout payments would 
     cost $88 million in 2004 and $414 million over the 2004-2006 
     period, assuming appropriation of the estimated amounts. DoD 
     also would be required to make a payment to the Civil Service 
     Retirement and Disability Fund (CSRDF) for every employee who 
     takes a buyout. The payments would equal 15 percent of the 
     final basic pay of each employee and come out of the agency's 
     appropriated funds. Assuming an average final salary for the 
     affected workers of $45,000, CBO estimates these payments 
     would cost DoD $24 million in 2004 and $118 million over the 
     2004-2006 period. (CBO estimates that enacting this section 
     also would increase direct spending for federal retirement 
     and retiree health care benefits by a total of $188 million 
     over the 2004-2012 period. CBO's estimate of those outlays is 
     discussed below under the heading of ``Direct Spending.'')
       Section 3163 would provide DOE with authority to offer 
     voluntary retirement incentives of up to $25,000 to employees 
     who voluntarily retire or resign in calendar year 2004. 
     Current buyout authority for DOE is scheduled to expire on 
     December 31, 2003. Based on information from DOE, CBO assumes 
     that about 350 DOE employees would participate in the buyout 
     program in calender year 2004. CBO estimates that the cost of 
     the buyout payments would total $6 million in 2004 and $2 
     million in 2005. DOE would also be required to make a payment 
     to the CSRDF for every employee who takes a buyout. The 
     payments would equal 15 percent of the final pay of each 
     employee and come out of the agency's appropriated funds. 
     Assuming an average final salary for the affected workers of 
     $75,000, CBO estimates these payments would cost DOE $3 
     million in 2004 and $1 million in 2005. (CBO estimates that 
     enacting this section also would increase direct spending for 
     federal retirement and health care benefits by a total of $8 
     million over the 2004-2012 period. CBO's estimate of those 
     outlays is discussed below under the heading of ``Direct 
     Spending.'')
       Federal Employees Health Benefits (FEHB) Program. Section 
     1103 would extend a provision of law into fiscal year 2007 
     that allows DoD and certain Department of Energy employees 
     whose employment is terminated because of a reduction-in-
     force action to continue to participate in the FEHB health 
     insurance program and only pay the regular employee's share 
     of the insurance premium. The respective departments would be 
     responsible for paying the normal employer's share of the 
     premium. Under current law, this provision expires in fiscal 
     year 2004. Based on information from DoD and the Office of 
     Personnel Management, CBO estimates that this provision would 
     affect about 500 people a year at an average annual cost of 
     $5,500 per

[[Page 10647]]

     person over the 2003-2007 period. CBO estimates that 
     extending this provision into fiscal year 2007 would cost $2 
     million in 2004, and $11 million over the 2004-2007 period, 
     assuming appropriation of the estimated amounts.
       School Impact Aid. Section 1064 would allow school 
     districts with a large percentage of children from military 
     families to continue to receive heavy impact aid when 
     military families are temporarily relocated. Heavy impact aid 
     is federal funding earmarked for school districts with large 
     military populations. Many military families in those school 
     districts live on federal installations and do not contribute 
     to the local property tax base that is used to help finance 
     school operations. Heavy impact aid helps to offset this loss 
     of local tax revenue. Under current law, schools can only 
     receive heavy impact aid if they meet strict criteria for 
     numbers of federal students located in their districts, local 
     tax rates, and per pupil expenditures. Because of population 
     relocations associated with certain military housing 
     initiatives, some school districts will temporarily be unable 
     to meet these criteria and will lose their heavy impact aid 
     for several years.
       Based on data from the Department of Education and the 
     Military Impacted Schools Association, CBO estimates that 
     about four school districts would initially be affected by 
     housing privatization and that these school districts receive 
     about $18 million in heavy impact aid annually. Because 
     applications for heavy impact aid are based on school 
     district statistics from three years prior, CBO estimates 
     that the cost of implementing this section would not occur 
     until 2006. After adjusting for the changes in student 
     population within the affected districts, CBO estimates that 
     restoration of this aid would cost about $14 million per 
     year. Since the requirements of the School Impact Aid program 
     are not always fully funded, CBO expects that the Department 
     of Education would likely fund this increase through 
     reductions in aid to other school districts. CBO expects this 
     cost would reoccur annually only for the duration of the 
     housing privatization effort within the affected school 
     districts, which CBO estimates to be about three years.
       Section 1064 also would allow coterminous school districts 
     (school districts whose boundaries are the same as a military 
     base) to change the way in which they include students living 
     off the base in their heavy impact aid calculations. CBO 
     estimates that implementing this provision would change the 
     calculation of heavy impact aid for 200 students in two 
     school districts and that the impact aid for these students 
     would increase by about $2,300 per student. CBO estimates 
     allowing coterminous school districts to change the method 
     for calculating heavy impact aid would cost slightly less 
     than $500,000 each year beginning in 2003.
       Arctic and Western Pacific Environmental Cooperation 
     Program. Section 1214 would authorize the Department of 
     Defense, with the concurrence of the Secretary of State, to 
     assist in mitigating the impact of military operations on the 
     environment of the arctic and western Pacific regions, 
     particularly nuclear or radiological impacts. Based on 
     information from DoD, CBO estimates that implementing this 
     provision would cost $29 million over the 2003-2007 period, 
     assuming appropriation of the estimated amounts.
       Revitalizing DoD Laboratories. Section 241 would allow DoD 
     to establish a new three-year pilot program beginning in 
     March 2003 at various DoD laboratories to pursue improved 
     efficiencies for performing research and development work at 
     these laboratories. The section also would extend through 
     2006 authorizations for similar pilot projects that will 
     expire in 2003. Finally, section 241 would permit 
     laboratories participating in this new pilot program to enter 
     into public-private partnerships and other business 
     arrangements with private firms to achieve improved 
     efficiencies. The authority to enter into such partnerships 
     would expire in 2006. Under section 241, one of the public-
     private partnerships could be established as a limited 
     liability corporation where the federal and nonfederal 
     partners could contribute capital, services, or facilities to 
     the corporation.
       Under the new pilot program, DoD would be authorized to 
     waive certain restrictions not required by law that hinder 
     the objective of achieving improved efficiencies. The 
     department also would be authorized to use innovative methods 
     of personnel management and technology development. According 
     to information provided by DoD, the laboratories 
     participating in the existing pilot program were granted 
     similar authorities. DoD reported that these laboratories did 
     not substantially change their business practices because, in 
     their view, they already had the authority to waive non-
     statutory regulations. Thus, CBO assumes that any 
     laboratories selected for the new program would not change 
     their business practices substantially. CBO estimates that 
     spending under these new and extended authorities would not 
     be significant--probably less than $500,000 annually over the 
     2003-2006 period. (CBO estimates that the provision allowing 
     a limited liability corporation also would increase direct 
     spending by a total of $15 million over the 2004-2006 period. 
     CBO's estimate of those outlays is discussed below under the 
     heading of ``Direct Spending.'')
       Multiyear Procurement of Environmental Remediation 
     Services. Section 827 would give DoD the authority to enter 
     into multiyear contracts for environmental remediation 
     services. Under current law, the total cost of any multiyear 
     remediation service contract must be fully funded at the 
     beginning of the contract. DoD has found this difficult to do 
     for contracts that are expensive and last several years. 
     Instead, DoD often awards these contracts for environmental 
     remediation to cover work for one year and then extends the 
     contract on a year-to-year basis as funds become available. 
     DoD states that contracting in this manner is generally more 
     expensive because contractors charge higher prices when they 
     don't know whether the contract will continue beyond the 
     current year. Thus, allowing DoD to sign multiyear contracts 
     for environmental remediation would most likely produce some 
     savings. DoD could not provide CBO with the necessary data to 
     produce a precise estimate of the annual savings. However, 
     given the high cost of these contracts, CBO believes these 
     savings could be significant. CBO estimates that DoD 
     currently spends about $1.7 billion each year on 
     environmental cleanup related activities. If 10 percent of 
     future contracts were negotiated as multiyear contracts and 
     those contracts produced savings of about 5 percent on 
     average, multiyear contracting for environmental remediation 
     efforts would save about $10 million annually after a five-
     year phase-in period.
       Disposition of Surplus Plutonium. In January 2002, the 
     Secretary of Energy announced that the federal government 
     plans to convert roughly 34 metric tons of surplus weapons 
     grade plutonium currently located at various DOE facilities 
     into mixed-oxide (MOX) fuel that would be suitable for use in 
     U.S. commercial nuclear reactors. The federal government 
     would ship the surplus plutonium to a MOX fuel fabrication 
     facility at its Savannah River Site in Aiken, South Carolina. 
     DOE plans to start construction of the facility in 2004 and 
     expects that construction would be complete by 2007. The 
     facility would be able to convert about 3.5 metric tons of 
     plutonium a year and would complete the conversion in about 
     12 years.
       Section 3182 would require that the Secretary of Energy pay 
     up to $100 million a year to the state of South Carolina 
     beginning in 2011, if the planned conversion schedule was not 
     met. The federal government could avoid these penalties, 
     however, if it removes at least one metric ton of plutonium a 
     year from South Carolina over the 2011-2016 period and 
     removes all remaining plutonium after 2016.
       Based on delays in developing the construction plans for 
     the proposed MOX facility, and delays in similar programs 
     such as the Nuclear Waste Repository Site at Yucca Mountain, 
     Nevada, and the Waste Isolation Pilot Program at Carlsbad, 
     New Mexico, CBO believes that there is some chance that 
     construction of the MOX facility could be delayed for several 
     years beyond the 2007 planned completion date and that 
     construction would not be completed by 2011. If DOE does not 
     remove the required surplus plutonium from the state of South 
     Carolina, DOE would need to pay up to $100 million a year to 
     the state starting in 2011.
     Direct Spending
       The bill contains provisions that would increase direct 
     spending, primarily from the phase-in of concurrent payment 
     of retirement annuities with veterans' disability 
     compensation to retirees from the military and the other 
     uniformed services who have service-connected disabilities 
     rated at 60 percent or greater. The bill also contains a few 
     provisions with smaller direct spending costs. In total, CBO 
     estimates that enacting S. 2514 would result in an increase 
     in direct spending totaling $5.6 billion over the 2003-2007 
     period (see Table 4).

           TABLE 4.--ESTIMATED DIRECT SPENDING FROM CONCURRENT RECEIPT AND OTHER PROVISIONS IN S. 2514
----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year, in millions of dollars--
                                                ----------------------------------------------------------------
                                                     2003         2004         2005         2006         2007
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING
 
Section 641--Concurrent Receipt:
    Estimated Budget Authority.................          356          628          995        1,439        1,905
    Estimated Outlays..........................          356          628          995        1,439        1,905
Section 651--Education Benefits for the
 Selected Reserves:
    Estimated Budget Authority.................            2            2            2            2            2

[[Page 10648]]

 
    Estimated Outlays..........................            2            2            2            2            2
Section 702--Mental Health Benefits:
    Estimated Budget Authority.................            1            1            1            1            1
    Estimated Outlays..........................            1            1            1            1            1
Section 1102--Voluntary Separation and Early
 Retirement Incentives (DoD):
    Estimated Budget Authority.................            0           31           73           87           28
    Estimated Outlays..........................            0           31           73           87           28
Section 3163--Voluntary Separation and Early
 Retirement Incentives (DOE):
    Estimated Budget Authority.................            0            3            4            1          (a)
    Estimated Outlays..........................            0            3            4            1          (a)
Section 241--Revitalizing DoD Laboratories:
    Estimated Budget Authority.................            0            6            6            3            0
    Estimated Outlays..........................            0            6            6            3            0
Section 2824--Land Conveyance of Navy Property,
 Westover Reserve Air Base:
    Estimated Budget Authority.................            0            3            0            0            0
    Estimated Outlays..........................            0            3            0            0            0
 
                                        TOTAL CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority.....................          359          674        1,081        1,533        1,936
Estimated Outlays..............................          359          674        1,081        1,533       1,936
----------------------------------------------------------------------------------------------------------------
aLess than $500,000.

       Concurrent Receipt. Section 641 would phase in over five 
     years total or partial concurrent payment of retirement 
     annuities together with veterans' disability compensation to 
     retirees from the uniformed services who have service-
     connected disabilities rated at 60 percent or greater. Under 
     section 641, the phase-in of concurrent receipt would not 
     take effect until January 1, 2003.
       Under current law, disabled veterans who are retired from 
     the uniformed services cannot receive both full retirement 
     annuities and disability compensation from VA. Because of 
     this prohibition on concurrent receipt, such veterans forgo a 
     portion of their retirement annuity equal to the nontaxable 
     veterans' benefit. This section would permit, beginning in 
     2007, individuals who have significant service-connected 
     disabilities and have a retirement annuity based on years of 
     service, to receive both benefits in full without the 
     reduction called for under current law. Individuals whose 
     retirement pay is based on their degree of disability would 
     continue to forgo retirement pay equal to the VA compensation 
     payment, but only to the extent that their disability had 
     entitled them to a larger retirement annuity than they would 
     have received based on years of service.
       This section also would repeal, as of January 1, 2003, a 
     program that partially compensates certain severely disabled 
     retirees for this reduction in their retirement annuities. 
     This program currently pays a fixed benefit of $50 to $300 a 
     month, depending on degree of disability. Taken together, CBO 
     estimates that implementing section 641 would increase direct 
     spending for retirement annuities and veterans' disability 
     compensation by a net amount of about $356 million in 2003, 
     $5.3 billion over the 2003-2007 period, and $17.3 billion 
     over the 2003-2012 period (see Table 5).
       Retirement Annuities. Since the proposed legislation would 
     treat retirees differently based on their type of 
     retirement--nondisability or disability, the potential costs 
     of the legislation depend on the number of beneficiaries, 
     their type of retirement, their disability levels, and their 
     benefit amounts.
       Nondisability Retirees. A nondisability retirement is 
     granted based on length of service--usually 20 or more years. 
     Section 641 would allow those longevity retirees whose degree 
     of disability has been rated as 60 percent or greater to 
     receive full retirement annuities and veterans' disability 
     benefits with no offset in 2007, and to receive an increasing 
     portion of their retirement annuities over the 2003-2006 
     period. Data from the uniformed services indicate that in 
     2001 the prohibition on paying both benefits concurrently 
     caused about $1.3 billion to be withheld from the annuity 
     payments of about 74,000 eligible DoD retirees with 
     nondisability retirements, and about 900 eligible Coast 
     Guard, PHS, and NOAA retirees. Using current rates of net 
     growth in the population of new beneficiaries, CBO estimates 
     this caseload would rise to about 78,000 nondisability 
     retirees in 2003, and 96,000 nondisability retirees by 2012. 
     CBO assumes that future benefit payments will increase 
     consistent with current rates of growth in average disability 
     levels and also increase from cost-of-living adjustments. 
     After phasing the benefits in over five years as specified in 
     the provision, CBO estimates that enacting the legislation 
     would increase direct spending on retirement annuities for 
     nondisability retirees of the uniformed services by $342 
     million in 2003, $4.7 billion over the 2003-2007 period, and 
     $15.2 billion over the 2003-2012 period.

                          TABLE 5.--ESTIMATED CHANGES IN RETIREE BENEFITS UNDER S. 2514
----------------------------------------------------------------------------------------------------------------
                                                             By fiscal year, in millions of dollars--
        Description of benefits program         ----------------------------------------------------------------
                                                     2003         2004         2005         2006         2007
----------------------------------------------------------------------------------------------------------------
Retirement Annuities:
    Nondisability..............................          342          582          861        1,223        1,654
    Disability.................................           56           92          127          172          223
Veterans Compensation Payments.................            0           13           67          104           89
Survivor Benefit Plan Payments.................            7            7            8            9            9
Special Compensation for Severely Disabled.....          -49          -66          -68          -69          -70
                                                ----------------------------------------------------------------
      Total Changes in Retiree Benefits........          356          628          995        1,439        1,905
----------------------------------------------------------------------------------------------------------------

       Disability Retirees. Servicemembers who are found to be 
     unable to perform their duties because of service-related 
     disabilities may be granted a disability retirement. Section 
     641 would allow eligible disability retirees to receive 
     retirement annuities based on their years of service and 
     veterans' disability benefits with no offset in 2007, and 
     partial concurrent receipt of these payments in 2003 through 
     2006. Disability retirees would be eligible to obtain 
     concurrent receipt of their retirement annuity and veterans' 
     disability compensation if they served 20 or more years in 
     the uniformed services and had a disability rating of 60 
     percent or greater.
       Data from the uniformed services indicate that in 2001, the 
     prohibition on paying both benefits concurrently caused about 
     $200 million to be withheld from annuity payments of about 
     11,400 eligible DoD retirees with disability retirements, and 
     about 500 eligible Coast Guard, PHS, and NOAA retirees. An 
     analysis of retiree records by DoD indicates that, under the 
     criteria set forth in this section, these retirees would be 
     eligible to receive about 95 percent of their retirement 
     annuity concurrently with their VA disability benefit. 
     Assuming continuation of current trends in population and 
     benefit growth, and phasing the benefit in over five years as 
     specified in this section, CBO estimates that, of the 
     disability retirees who would be receiving VA disability 
     benefits in fiscal year 2003, about 12,100 would be entitled 
     to an additional $56 million in retirement annuities. CBO 
     estimates their retirement annuities would increase by $670 
     million over the 2003-2007 period and $1.9 billion over the 
     2003-2012 period.
       Other Effects of Concurrent Receipt. Enacting section 641 
     also would affect Veterans' Disability Compensation, receipts 
     to the Treasury for Survivor Benefit Payments, Special 
     Compensation to Severely Disabled Retirees, and the level of 
     contributions to the Military Retirement Trust Fund.
       Veterans' Disability Compensation. Data from DoD indicates 
     that an additional 15,100 disability retirees of the 
     uniformed services--14,500 from DoD and about 600 from the 
     other uniformed services--do not currently receive VA 
     disability benefits that they are entitled to receive. Since 
     many disability retirees are not taxed on their annuities, 
     there is no incentive under current law for these retirees to 
     apply for the tax-free VA benefits,

[[Page 10649]]

     as they will be offset, dollar-for-dollar, against their 
     retirement annuities. Section 641 would provide a significant 
     incentive for the more disabled of these individuals to apply 
     for VA disability benefits. CBO estimates that about 7,000 
     disability retirees might be eligible for concurrent receipt 
     under section 641, but, because many of these retirees are 
     both disabled and quite elderly, CBO expects that only about 
     half of that number would become aware of this improved 
     benefit and successfully complete the application process. 
     Based on their DoD-assessed degree of disability, CBO 
     estimates that outlays for VA disability benefits would 
     increase by $13 million in 2004, about $270 million over the 
     2003-2007 period, and $760 million over the 2003-2012 period. 
     Because of the time needed for individuals to prepare and 
     submit their applications and the current backlog in 
     processing applications, CBO estimates that enacting this 
     legislation would not increase outlays for veterans' 
     disability compensation in 2003.
       Survivor Benefit Plan Offsetting Receipts. Many retirees 
     have a Survivor Benefit Plan (SBP) premium payment deducted 
     from their retirement annuity. The SBP was established in 
     Public Law 92-425 to create an opportunity for military 
     retirees to provide annuities for their survivors. Those 
     retirees who are not receiving a paycheck from DoD because 
     their retirement annuity is totally offset by their VA 
     disability benefit may still participate in the SBP by paying 
     the monthly premium to the U.S. Treasury. These payments are 
     recorded as offsetting receipts (a credit against direct 
     spending) to DoD. According to DoD, approximately 34,000 
     military retirees paid $23 million in SBP premiums to the 
     Treasury in 2001. DoD also indicates that about $7 million of 
     that amount was paid by about 8,000 retirees who would begin 
     to receive annuity checks under section 641. CBO's estimate 
     of the increase in retirement outlays presented above assumes 
     that the SBP premiums of retirees who benefit from the 
     legislation would be deducted from the retirees' annuities, 
     and their payments to the Treasury would cease. Assuming 
     continuation of current trends in population and benefit 
     growth, CBO estimates these offsetting receipts would 
     decrease by about $7 million in 2003, $40 million over the 
     2003-2007 period, and $90 million over the 2003-2012 period.
       Repeal of Special Compensation for Severely Disabled 
     Retirees. Section 641 also would repeal a special 
     compensation program that currently pays a fixed benefit of 
     $50 to $300 a month to certain uniformed service retirees who 
     were determined to be 60 percent to 100 percent disabled 
     within four years of their retirement. These special payments 
     would stop on January 1, 2003, under section 641. Based on 
     information from DoD and assuming the population growth 
     trends continue, CBO estimates that about 36,000 DoD retirees 
     and about 600 retirees of the other uniformed services will 
     receive an average monthly benefit of $150 in 2002. Under 
     current law, this benefit is scheduled to increase over the 
     next two years to $172 a month. CBO estimates that the 
     savings from repealing this program would be $49 million in 
     2003, about $320 million over the 2003-2007 period, and $690 
     million over the 2003-2012 period.
       Increased Accrual Payment Financing. The military 
     retirement system is financed in part by an annual payment 
     from appropriated funds (an outlay in budget function 050) to 
     the Military Retirement Fund, based on an estimate of the 
     system's accruing liabilities. If this provision is enacted, 
     the yearly contribution to the fund would increase to reflect 
     the added liability from the expected increase in annuities 
     to future retirees. These discretionary costs were discussed 
     earlier in the ``Spending Subject to Appropriation'' section.
       Education Benefits for the Selected Reserve. Section 651 
     would extend the period during which eligible reservists may 
     use their education benefits from 10 years to 14 years. VA 
     reported that, in 2001, over 82,000 reservists trained under 
     this program and received an average annual benefit of 
     $1,653. This average benefit includes both the basic benefit 
     and a supplemental benefit that DoD can offer to enhance 
     accessions or re-enlistment in critical skill specialties. 
     This benefit increases each year by a cost-of-living 
     adjustment and by the level of supplemental benefits being 
     offered. Based on current usage rates, CBO estimates that 
     enacting this extension would result in an extra 1,500 
     trainees a year. Based on information from DoD and VA, CBO 
     estimates that enacting this legislation would increase 
     education outlays by $2 million in 2003, $10 million over the 
     2003-2007 period and by $24 million over the 2003-2012 
     period. Since DoD makes monthly payments into the DoD 
     Education Benefits Fund in the amount of the net present 
     value of the benefits granted during the previous month, this 
     increase in usage of the education benefit would necessitate 
     an increase in payments to the fund. (The discretionary costs 
     associated with these payments are discussed earlier in the 
     ``Spending Subject to Appropriation'' section under the 
     heading of ``Education and Training.'')
       Mental Health Benefits. Section 702 would remove a 
     statutory requirement that inpatient mental health care be 
     preauthorized for retirees and dependents who are eligible 
     for Medicare. Under current law, Tricare for Life (TFL), 
     another medical program run by DoD, pays all Medicare 
     copayments and deductibles for those benefits that are 
     covered by both programs. Beginning in 2003, TFL spending for 
     Medicare-eligible retirees and dependents will be considered 
     direct spending. Under current law, Medicare does not require 
     a preauthorization for inpatient mental health care but 
     Tricare does. Removing this requirement would make the mental 
     health benefits identical and reduce confusion among 
     beneficiaries and health care providers.
       Although most individuals would seek preauthorization 
     before receiving inpatient mental health care, CBO expects 
     that, under current law, some individuals would fail to 
     obtain the necessary preauthorization from Tricare and would 
     have to pay the copayments and deductibles on their own. 
     Because DoD does not have any available data on the frequency 
     or costs of inpatient mental health care for Medicare-
     eligible retirees and dependents, CBO extrapolated this data 
     from the general Medicare population. Under section 702, CBO 
     estimates that in 2003 TFL would cover the copayments and 
     deductibles for about 600 additional people at an average 
     cost of about $1,700 per person. Thus, CBO estimates section 
     702 would raise direct spending by $1 million in 2003, $5 
     million over the 2003-2007 period, and $15 million over the 
     2003-2012 period.
       Voluntary Separation and Early Retirement Incentives. S. 
     2514 contains several provisions that would allow the DoD and 
     DOE to offer voluntary separation incentives to their 
     civilian employees. Taken together, CBO estimates enacting 
     these provisions would increase direct spending for federal 
     retirement and retiree health care benefits by $34 million in 
     2004 and $196 million over the 2004-2012 period.
       Section 1102 would provide DoD with authority to offer its 
     civilian employees voluntary retirement incentive payments of 
     up to $25,000 for employees who voluntarily retire or resign 
     in fiscal years 2004 thorough 2006. Current buyout authority 
     for DoD is set to expire on September 30, 2003. CBO estimates 
     that enacting section 1102 would increase direct spending for 
     federal retirement and retiree health care benefits by $31 
     million in 2004 and $188 million over the 2004-2012 period.
       Section 3163 would provide DOE with authority to offer 
     payments of up to $25,000 to employees who voluntarily retire 
     or resign in calendar year 2004. Current buyout authority for 
     DOE is scheduled to expire on December 31, 2003. CBO 
     estimates enacting section 3163 would increase direct 
     spending for federal retirement and retiree health care 
     benefits by about $3 million in 2004 and about $8 million 
     during the 2004-2012 period.
       DoD Retirement Spending. CBO assumes that about 16,500 DoD 
     employees would participate in the buyout program over the 
     three-year period and that many workers who take a buyout 
     would begin collecting federal retirement benefits several 
     years earlier than they would under current law. Inducing 
     some workers to retire earlier would result in additional 
     benefits being paid from the Civil Service Retirement and 
     Disability Fund. In later years, annual federal retirement 
     outlays would be lower than under current law because the 
     employees who retire early receive smaller annuity payments 
     than if they had retired later. CBO estimates that enacting 
     section 1102 would increase direct spending for federal 
     retirement benefits by $24 million in 2004 and $136 million 
     over the 2004-2012 period. (The discretionary costs over the 
     2004-2006 period associated with the buyout payments were 
     discussed earlier in the ``Spending Subject to 
     Appropriation'' section under the heading of ``Voluntary 
     Separation and Early Retirement Incentives.'')
       DoD Retiree Health Care Spending. Enacting section 1102 
     also would increase direct spending on federal benefits for 
     retiree health care because many employees who accept the 
     buyouts would continue to be eligible for coverage under the 
     Federal Employee Health Benefits (FEHB) program. The 
     government's share of the premium for these retirees--unlike 
     current employees--is mandatory spending. Because many of 
     those accepting the buyouts would convert from being an 
     employee to being a retiree earlier than under current law, 
     mandatory spending for FEHB premiums would increase. CBO 
     estimates these additional FEHB benefits would increase 
     direct spending by $7 million in 2004 and $52 million over 
     the 2004-2012 period.
       DOE Retirement Spending. CBO assumes that about 350 DOE 
     employees would participate in the buyout program in calender 
     year 2004 and that many workers who take a buyout would begin 
     collecting federal retirement benefits several years earlier 
     than they would under current law. Inducing some workers to 
     retire earlier would result in additional retirement benefits 
     being paid from the CSRDF. In later years, annual federal 
     retirement outlays would be lower than under current law 
     because the employees who retire early receive smaller 
     annuity payments than if they had retired later. Under 
     section 3163, CBO estimates spending for federal retirement 
     benefits would increase by $3 million in 2004 and by $8 
     million over the 2004-2012 period.

[[Page 10650]]

       DOE Retiree Health Care Spending. Section 3163 would also 
     increase spending on federal retiree health benefits because 
     many employees who would accept the buyouts continue to 
     eligible for coverage under the FEHB program. CBO estimates 
     that these additional FEHB benefits would increase direct 
     spending by less than $500,000 a year over the 2004-2006 
     period.
       Revitalizing DoD Laboratories. Section 241 would allow DoD 
     to establish a new three-year pilot program beginning in 
     March 2003 at various DoD laboratories to pursue improved 
     efficiencies for performing research and development work at 
     these laboratories. The section also would extend through 
     2006 authorizations for similar pilot projects that will 
     expire in 2003. Finally, section 241 would permit 
     laboratories participating in this new pilot program to enter 
     into public-private partnerships and other business 
     arrangements with private firms to achieve improved 
     efficiencies. The authority to enter into such partnerships 
     would expire in 2006. Under section 241, one of the public-
     private partnerships could be established as a limited 
     liability corporation where the federal and nonfederal 
     partners could contribute capital, services, or facilities to 
     the corporation.
       CBO has little information about how this limited liability 
     corporation would be structured, but one of the purposes of 
     this corporation would be to finance improvements to DoD's 
     research, test, and evaluation functions. CBO considers such 
     hybrid entities as governmental. Hence, their activities 
     should be recorded in the federal budget. CBO treats the 
     assets that are expected to be contributed by the private 
     party as borrowed by the federal government. Borrowing 
     authority is treated as budget authority in the year and in 
     the amounts that CBO estimates the private party would 
     contribute to the limited liability corporation. This 
     budgetary treatment is consistent with the recommendations of 
     the President's 1967 Commission on Budget Concepts, which 
     suggests that entities jointly capitalized with private and 
     public assets be included in the federal budget until they 
     are completely privately owned.
       CBO assumes that DoD would need about one year to develop 
     the policies and regulations for the new corporation that 
     would be authorized under section 241. Based on information 
     provided by DoD, CBO estimates that the additional expenses 
     of the limited liability corporation could total between $4 
     million and $7 million a year. Assuming costs fall midway 
     within that range, CBO estimates that federal borrowing would 
     be about $6 million starting in 2004 and total about $15 
     million over the 2004-2006 period.
       The budget also would record any cash proceeds collected by 
     the corporation from the public. Any payments from federal 
     agencies would be an intragovernmental transfer and would 
     have no net budgetary impact. In contrast, any proceeds 
     accruing to the corporation from nonfederal entities would be 
     recorded as offsetting collections and would reduce the net 
     cost of the partnership over time. For this estimate, CBO 
     assumes that the government would use most of the services of 
     this corporation. As a result, CBO estimates that proceeds 
     from nonfederal sources would not be significant.
       Land Conveyance and Other Property Transactions. Title 
     XXVIII would authorize a variety of property transactions 
     involving both large and small parcels of land.
       Section 2824 would allow the Secretary of the Navy to 
     convey 30.38 acres and 133 housing units located at Westover 
     Reserve Air Base to the city of Chicopee, Massachusetts, 
     without receiving payment for this property. Under current 
     law, the Navy will soon declare this property excess and 
     transfer it to the General Services Administration (GSA) for 
     disposal. Under normal procedures, GSA sells property not 
     needed by other federal agencies or by nonfederal entities in 
     need of property for public-use purposes such as parks or 
     educational facilities. Information from GSA indicates that 
     the housing and land will likely be sold under current law 
     after the entire parcel is screened for other uses in 2003. 
     As a result, CBO estimates that this conveyance would result 
     in forgone receipts totaling about $3 million in 2004.
       Section 2828 would authorize the Secretary of the Interior 
     to convey to the city of West Wendover, Nevada, and Tooele 
     County, Utah, without consideration, two parcels of federal 
     land located in those states and identified in the bill. 
     According to the Bureau of Land Management, those lands, 
     which are withdrawn for military purposes, currently generate 
     no offsetting receipts and are not expected to in the 
     foreseeable future. Hence, CBO estimates that conveying the 
     lands would not affect offsetting receipts. According to the 
     U.S. Air Force, portions of the lands that could be conveyed 
     have been used as a bombing range by the Air Force. Under the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act, the Air Force would have to remediate any 
     expended and unexploded ordnance prior to conveying those 
     lands. Based on information from the Air Force, we estimate 
     that initial remediation activities would cost at least $2 
     million, assuming appropriation of the necessary amounts. 
     Although we do not have sufficient information to estimate 
     the cost of subsequent remediation activities that may be 
     necessary, CBO expects that such costs could be significant. 
     Any spending for additional remediation would be subject to 
     appropriation.
       CBO estimates that other provisions in title XXVIII would 
     not result in significant costs to the federal government 
     because they would either authorize DoD to convey land for 
     fair market value, to exchange one piece of property for 
     another or would authorize DoD to convey land that under 
     current law is unlikely to be declared excess and sold or is 
     likely to be given away.
       Other Provisions. The following provisions would have an 
     insignificant budgetary impact on direct spending:
       Section 111 would extend through 2004 the authority for a 
     pilot program that allows industrial facilities within the 
     Army to sell manufactured goods to the private sector even if 
     the goods are manufactured in the domestic market. Section 
     111 also would direct that a portion of the sales proceeds in 
     excess of $20 million a year be made available for ammunition 
     demilitarization. CBO estimates, however, that there would 
     likely be less than $5 million in annual sales under this 
     pilot program over the 2003-2004 period, based on data 
     provided by the Army, and that since the industrial 
     facilities are allowed to spend any sales proceeds, the net 
     effect on direct spending would be insignificant.
       Section 642 would increase the retirement annuity of 
     enlisted servicemembers who are retired from a reserve 
     component of the Armed Forces and have been credited by their 
     service secretary with extraordinary heroism in the line of 
     duty. Under section 642, these retirees would be entitled to 
     a 10 percent increase in their retirement annuity. CBO 
     estimates that enacting section 642 would increase direct 
     spending by less than $500,000 a year.
       Section 1063 would extend through 2006 DoD's authority to 
     sell aircraft and aircraft parts for use in responding to oil 
     spills. Based on information from DoD, CBO does not 
     anticipate any transactions would occur under this authority.
       Section 3151 would require that the program to eliminate 
     weapons-grade plutonium production in Russia be transferred 
     from the Department of Defense to the Department of Energy. 
     Funds appropriated for the program for 2000 through 2002 
     would be transferred to DOE and would be made available for 
     obligation until expended. Under current law, those funds 
     have a three-year period of availability, thus this provision 
     could result in a reappropriation because it would extend the 
     availability of some funds that would otherwise lapse. CBO 
     estimates that about $120 million has been appropriated for 
     this program over the 2000-2002 period and that nearly all of 
     those funds will be obligated and spent under current law. As 
     a result, CBO estimates that reappropriations under section 
     3151 would not be significant--probably less than $500,000 
     annually from 2003 through 2005.
       Section 3162 would allow the Department of Energy to 
     penalize contractors operating at DOE facilities for 
     occupational safety violations. These penalties would most 
     likely be levied by reducing the fees owed to the contractor. 
     Based on information about penalties levied over the last few 
     years for nuclear safety violations, CBO estimates that the 
     reduction in contract fees due to occupational safety 
     violations would be less than $500,000 annually.
       Pay-as-you-go considerations: The Balanced Budget and 
     Emergency Deficit Control Act sets up pay-as-you-go 
     procedures for legislation affecting direct spending or 
     receipts. The net changes in direct spending that are subject 
     to pay-as-you-go procedures are shown in Table 6. For the 
     purposes of enforcing pay-as-you-go procedures, only the 
     effects through fiscal year 2006 are counted.

                                          TABLE 6.--ESTIMATED IMPACT OF S. 2514 ON DIRECT SPENDING AND RECEIPTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By fiscal year, in millions of dollars--
                                                                 ---------------------------------------------------------------------------------------
                                                                   2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays..............................................       0     359     674   1,081   1,533   1,936   2,132   2,261   2,391   2,529   2,676
Changes in receipts                                                                                    Not applicable
--------------------------------------------------------------------------------------------------------------------------------------------------------

       Intergovernmental and private-sector impact: S. 2514 
     contains no intergovernmental or private-sector mandates as 
     defined in UMRA and would impose no costs on state, local, or 
     tribal governments.

[[Page 10651]]

       Previous CBO estimate: On May 3, 2002, CBO transmitted a 
     cost estimate for H.R. 4546, the Bob Stump National Defense 
     Authorization Act for Fiscal Year 2003, as ordered reported 
     by the House Committee on Armed Services on May 1, 2002. The 
     House bill would authorize approximately $382 billion in 
     defense funding for fiscal year 2003 ($10 billion less than 
     S. 2514 would authorize for 2003) and an estimated $14 
     billion in additional defense funding for 2002 (as also 
     contained in S. 2514).
       Both H.R. 4546 and S. 2514 would increase direct spending 
     over the 2003-2007 period, but the Senate bill contains about 
     $200 million less spending. Both bills contain provisions 
     that would phase in over five years total or partial payment 
     of retirement annuities together with veterans' disability 
     compensation to retirees from the uniformed services who have 
     service-connected disabilities rated at 60 percent or greater 
     but the provisions specify different rates and schedules for 
     phasing in the increased payments. Differences in the other 
     estimated costs reflect differences in the legislation.
       Estimate Prepared by: Federal Costs: Defense Outlays: Kent 
     Christensen; Defense Laboratories and Department of Energy: 
     Raymond Hall; Military Construction: David Newman; Military 
     and Civilian Personnel: Michelle Patterson and Dawn Regan; 
     Military Retirement and Education Benefits: Sarah Jennings; 
     Health Programs: Sam Papenfuss; Multiyear Procurement: David 
     Newman; Operation and Maintenance: Matt Schmit; Voluntary 
     Separation and Early Retirement Incentives: Geoffrey 
     Gerhardt; Impact on State, Local, and Tribal Governments: 
     Elyse Goldman; Impact on the Private Sector: R. William 
     Thomas.
       Estimate approved by: Peter H. Fontaine, Deputy Assistant 
     Director for Budget Analysis.

  Mr. LEVIN. I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. WARNER. Mr. President, I thank my good friend and colleague, and 
I look forward again--as this will be our 24th year--of working 
together on the authorization bill.
  Mr. President, I simply say to my good friend, the chairman, he 
mentioned that the Bush administration has yet to provide a formal 
national security strategy. I note that the timetable for submitting 
this document is not unusual. The Clinton administration did not submit 
its first national security strategy until well into its second year in 
office. In my contacts with the administration, they will soon be 
submitting that national security strategy.
  I thank Chairman Levin for the work he has done on the bill which is 
before the Senate. I also want to thank my colleagues on the committee 
for their wise counsel and efforts, as well as the tremendous efforts 
of our committee staff. In large measure, this Defense Authorization 
Act for Fiscal Year 2003 is a good bill and an important step forward 
in our war against terrorism. In this time of national emergency it is 
essential that we provide our President and our armed forces the vital 
resources they need to defend our Nation, and to fight the scourge of 
terrorism at home and abroad.
  In the end, I joined with seven of my Republican colleagues on the 
committee in voting against this bill in committee--primarily due to 
the drastic cut of over $800 million in missile defense. Having worked 
hard for a year on the many critical issues related to this bill, I 
considered my vote against the bill necessary, but regrettable.
  Despite the fact that I voted against this bill, I support most of 
what is contained in this legislation. It represents the bipartisan 
work of all committee members--working together to support our men and 
women in uniform, and their families.
  The National Defense Authorization Act for Fiscal Year 2003 contains 
the largest defense increase in over 20 years--an increase of $45.0 
billion over the fiscal year 2002 appropriated level. The good news 
story associated with this much needed increase is that it has the 
full, bipartisan support of the Senate. While there is disagreement 
over how some of the money is allocated in this bill, there is 
virtually no dissent about the need for this significant increase in 
the top line for defense. This is a remarkable display of unity behind 
our President, so important and fitting with our nation at war.
  In line with the request of the President, the bill significantly 
increases all major defense accounts over the fiscal year 2002 
appropriated levels:
  It increases spending on military personnel by over 12 percent, 
including a 4.1 percent pay raise for our servicemen and women.
  It increases funding for operations and maintenance by over 15 
percent, providing the necessary resources to fully fund our war 
effort.
  The bill increases the procurement account by almost 10 percent. This 
will enable our military departments to procure the equipment they need 
to replace aging and heavily used assets, as well as to buy the things 
they need to protect our facilities, infrastructure and people in these 
increasingly uncertain and dangerous times.
  Additionally, the bill increases spending on research and development 
by almost 9 percent, ensuring that investment is being made in the 
future to develop the capabilities we need to deter and defeat emerging 
threats to our national security.
  The bill also sets aside a $10.0 billion reserve fund, as requested 
by the President, to pay for ongoing and future military operations in 
the global war on terrorism.
  The threats to our Nation and the ongoing war on terrorism demand 
this increased investment in national security, both now and in the 
future.
  The bill contains many key provisions which I support to improve the 
quality of life of our men and women in uniform, our retirees, and 
their families. In addition to the 4.1 percent pay raise for our 
uniformed personnel I mentioned earlier, additional funding is included 
for facilities and services that will greatly improve the quality of 
life for our service personnel and their families, at home and abroad. 
The bill includes a legislative provision that calls for the phased 
repeal of the prohibition on concurrent receipt of non-disability 
retired military pay and veterans disability pay for our military 
retirees with disabilities rated at 60 percent or higher. The committee 
also approved a managers' amendment, sponsored by Senator Bob Smith, 
which will soon be considered by the full Senate, to repeal fully and 
immediately, the prohibition on concurrent receipt, a step which will 
allow all nondisability retired veterans with VA disability ratings to 
collect the full amount they have earned. This action is long overdue.
  It is important to note that this bill, with the exception of the 
cuts made to missile defense, supports and fully funds virtually all of 
the priorities established by the Department and the President for the 
development and procurement of major weapons systems, including Joint 
Strike Fighter, F-22 and the Army's future combat system. In addition, 
I was pleased that we were able to add $229 million to the CVN(X) new 
generation aircraft carrier to restore the original development and 
fielding schedule for this essential program. The carrier proved its 
worth once again in Afghanistan--a war which relied on carrier-based 
assets. This bill supports acceleration of this important program.
  Despite the very favorable aspects of this bill, however, I cannot 
support the bill in its current form. I was joined by seven of my 
Republican colleagues in opposing the bill as reported by the 
committee.
  For the second consecutive year, the Senate Armed Services Committee 
divided along party lines primarily over the issue of missile defense. 
Sincere, good-faith efforts were made by Republican Members to find 
common ground and compromise on this issue, but these efforts were 
voted down. The national defense authorization bill for fiscal year 
2003 that we have before us, in my view, fundamentally alters the 
President's national security priorities and fails to send a clear 
message, on the issue of missile defense, to America's allies and 
adversaries that the Congress will provide the resources necessary to 
protect our homeland, our troops deployed overseas and our allies and 
friends from all known threats--including the very real and growing 
threat of missile attack. I will work in the days ahead, and into the 
conference with the House, to restore the cuts made to these important 
programs and to staunchly defend the priorities our President has 
established.
  The world as we knew it changed forever on September 11. We lost not 
only

[[Page 10652]]

many lives and much property that day, but we also lost our uniquely 
American feeling of invulnerability; our feeling of safety within our 
shores, our borders, behind two vast oceans. But from our darkest hour, 
our nation has quickly emerged stronger and more united than ever. Our 
President has rallied our country and many nations around the world to 
fight the evil of terrorism.
  As we begin our floor debate on the national defense authorization 
bill for fiscal year 2003, our nation is at war. U.S. soldiers, 
sailors, airmen, and marines, together with their coalition partners, 
are engaged on the front lines in the global war against terrorism, 
with a mission to root out terrorism at its source in the hopes of 
preventing future attacks. Our armed forces have responded to the call 
of duty in the finest traditions of our nation. It is critical that the 
Congress keep faith with our troops by providing the resources and 
capabilities our President--our Commander in Chief has requested.
  Homeland security is now, without a doubt, our top priority. We have 
a solemn obligation to protect our Nation and our citizens from all 
known and anticipated threats--whatever their source or means of 
delivery. As a candidate and as President, George W. Bush promised our 
Nation that homeland security was his most urgent priority.
  Our President submitted a responsible, prioritized budget request for 
fiscal year 2003 that addressed our most important security needs. The 
bill before us reflects the urgent security needs of our Nation by 
doubling the funding for combating terrorism at home and abroad. It 
invests in new technologies to detect weapons of mass destruction and 
to deter their development. The bill provides funding and authorities 
for the establishment of new organizations within the Department of 
Homeland Defense, including the formation of Northern Command, 
NORTHCOM, to provide coordinated land, sea and air defense of the 
United States. As we re-look and re-evaluate our security needs, it is 
especially important to remember that protection of our nation, our 
citizens, our deployed troops and our allies from ballistic missiles is 
also an integral part of homeland defense and an overall sense of 
security.
  The budget request for missile defense was reasonable. It was a 
request that represented no increase over last year's funding level, 
and a request that was less than two percent of the defense budget. We 
must use these resources to move forward now, without artificial 
limitations--either fiscal or legislative--to develop and deploy 
adequate missile defenses.
  The national defense authorization bill for fiscal year 2003, as 
reported out of committee, contains a drastic reduction, of over $800 
million, from the President's request for missile defense programs, 
including over $400 million in reductions to theater missile defense 
programs. In addition, the bill contains a number of restrictions and 
excessive reporting requirements that will further hamper the rapid 
development of missile defenses. Together, these actions have resulted 
in a letter from the Secretary of Defense informing the Senate that he 
would recommend a veto of this legislation if the reductions and 
restrictions on missile defense remain.
  Three years ago, by a vote of 97 to 3, this body approved the 
National Missile Defense Act of 1999--the Cochran bill. This act 
established two clear goals: to deploy an effective ballistic missile 
defense for the United States, ``as soon as technologically feasible;'' 
and, to seek further negotiated reductions in Russian nuclear forces. 
Last month, President Bush signed a landmark arms control agreement, in 
Moscow, that will ultimately reduce the number of U.S. and Russian 
deployed nuclear warheads by two-thirds over the next 10 years. The 
second goal of the Cochran bill has been achieved.
  This month, the United States formally withdrew from the Anti-
Ballistic Missile Treaty--a 30-year-old treaty--which had hampered the 
U.S. missile defense program. With this action, all artificial 
restraints have been removed from the ability of the United States to 
research, develop and deploy effective missile defense systems. Both 
goals of the Cochran bill that the Senate so overwhelmingly supported 
are in sight. Congress should not now apply new limitations on the 
rapid, cost-effective development of defenses to protect our nation and 
deployed troops from missile attack. The funding reductions and program 
constraints contained in the bill before us are a significant step 
backward in our efforts to improve the security of our nation.
  The threat of missile attack against the United States and U.S. 
interests is real and growing. According to the January 2002 national 
intelligence estimate, NIE, on the missile threat, ``The probability 
that a missile with a weapon of mass destruction will be used against 
U.S. forces or interests is higher today than during most of the cold 
war, and will continue to grow as the capabilities of potential 
adversaries mature.'' Dozens of nations already have short- and medium-
range ballistic missiles in the field that threaten U.S. interests, 
military forces, and allies; and others are seeking to acquire similar 
capabilities, including missiles that could reach the United States. We 
must be prepared to protect our nation.
  I am also concerned with other key areas in the bill, particularly 
the level of funding for shipbuilding. While I understand the tough 
choices that our defense leaders must make in establishing priorities 
and putting forth budget recommendations, shipbuilding was severely 
underfunded in the President's budget request. The bill we are now 
considering provides some additional resources for shipbuilding, but I 
believe more must be done to reverse the downward trend in 
shipbuilding. We all know that we are not currently building enough 
ships to maintain an adequate Navy for the future. Ultimately, there 
will be a high price to pay if this trend is not reversed.
  It is with these concerns in mind that I urge my colleagues to join 
me in constructive dialogue to find a way to restore the President's 
fundamental national security priorities and to ensure we are making 
the right investments in future capabilities. It is imperative that we 
send our President, our fellow citizens and the world a message of 
resolve from the Congress--a national defense authorization bill that 
provides the resources and authorities our Nation's leaders and our 
armed forces require to protect our Nation, our citizens abroad, our 
vital interests, and our international partners who stand with us 
against terrorism.
  I thank the distinguished chairman. I am going to a meeting on this 
bill tonight as to how we can order the amendments tomorrow on which I 
will work with the chairman.
  Mr. THURMOND. Mr. President, one of my most important 
responsibilities throughout my almost 48 years in the Senate has been 
to vote on the annual national defense authorization bill. This bill 
not only provides for our Nation's security but, more importantly, it 
provides for the Nation's most valuable asset, the men and women who so 
proudly wear the uniform and their family members who are an integral 
part of our military. Today, I rise, ever mindful of my 
responsibilities, to offer my views on the last national defense 
authorization bill that I will vote on before I leave the Senate.
  Before discussing the bill, I want to congratulate Chairman Levin, 
and the ranking member, Senator Warner, for their leadership of the 
Senate Armed Services Committee. The challenges they face in pulling 
together this annual bill are immense, yet, year after year they 
prepare a bill that reflects a bipartisan approach to national 
security. There may be differences on individual programs, but their 
leadership and the participation of every member of the committee 
crafted a bill that enhances the security of the country and improves 
the quality of life for our soldiers, sailors, airmen and marines and 
their families.
  The national defense authorization bill for fiscal year 2003, 
supports the President's budget request of $379 million, the largest 
increase to the defense budget in twenty years. It provides significant 
increases in military pay, readiness funding, and military 
construction. The bill includes a provision

[[Page 10653]]

that would address long-standing inequities in the compensation of 
military retirees by authorizing the concurrent receipt of retired pay 
and veterans disability compensation. This is an issue which I have 
supported for some time and I am pleased to see it resolved this year.
  Like all bills there are provisions that cause me concern. The most 
egregious in this bill is the reduction to the President's request for 
missile defense. By reallocating more than $800 million requested for 
missile defense to other programs, the bill fundamentally alters the 
President's priorities and leaves open the possibility that we will not 
adequately defend our Nation against a missile attack. I urge the 
Senate to reverse this flawed provision.
  Mr. President, in closing I remind my colleagues that this bill also 
provides vital funding to support our forces currently engaged in the 
war against terrorism. This war is unlike any faced by my generation. 
It will not be won by large armies, but by dedicated, highly trained 
soldiers, sailors, airmen and marines. I am extremely proud of what our 
military personnel have accomplished and I have no doubt that their 
professionalism and dedication will bring an end to the terrorist 
threat. We owe these men and women the best our Nation can provide and 
we must show them our support by voting for this bill.
  I thank the Chair.
  Mr. LEVIN. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Ms. Cantwell). The clerk will call the roll.
  The legislative assistant proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________