    [House Report 110-652]
    [From the U.S. Government Publishing Office]

    110th Congress                                            Rept. 110-652
                            HOUSE OF REPRESENTATIVES
     2d Session                                                      Part 2

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

     DUNCAN HUNTER NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2009

                                    _______

      May 20, 2008.--Committed to the Committee of the Whole House on the
                  State of the Union and ordered to be printed

                                    _______

       Mr. Skelton, from the Committee on Armed Services, submitted the
                                   following

                              SUPPLEMENTAL REPORT

                            [To accompany H.R. 5658]

        This supplemental report shows the cost estimate of the
    Congressional Budget Office with respect to the bill (H.R.
    5658), as reported, which was not included in part 1 of the
    report submitted by the Committee on Armed Services on May 16,
    2008 (H. Rept. 110-652, pt. 1).
                                         U.S. Congress,
                                   Congressional Budget Office,
                                          Washington, DC, May 20, 2008.
    Hon. Ike Skelton,
    Chairman, Committee on Armed Services,
    House of Representatives, Washington, DC.
        Dear Mr. Chairman: The Congressional Budget Office has
    prepared the enclosed cost estimate for H.R. 5658, the National
    Defense Authorization Act for Fiscal Year 2009.
        If you wish further details on this estimate, we will be
    pleased to provide them. The CBO staff contact is Kent
    Christensen.
                Sincerely,
                                             Robert A. Sunshine
                                       (For Peter R. Orszag, Director).
        Enclosure.

    H.R. 5658--National Defense Authorization Act for Fiscal Year 2009

        Summary: H.R. 5658 would authorize appropriations totaling
    $602 billion for fiscal year 2009 for the military functions of
    the Department of Defense (DoD), for certain activities of the
    Department of Energy (DOE), and for other purposes. That total
    includes $70 billion for military operations in Iraq and
    Afghanistan. The bill also would authorize $1.6 billion in 2008
    supplemental appropriations, primarily for military
    construction projects. In addition, H.R. 5658 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 would result in
    additional outlays of $596 billion over the 2008-2013 period.
        Including outlays from funds previously appropriated,
    spending for defense programs authorized by the bill would
    total about $600 billion in 2009, CBO estimates. That figure,
    however, excludes outlays from the likely enactment of
    supplemental appropriations for 2008 that are not authorized by
    the bill. Including the effects of those additional
    supplemental appropriations for 2008 now being considered by
    the Congress, spending in 2009 would total more than $630
    billion.
        The bill also contains provisions that would both increase
    and decrease costs of discretionary defense programs in years
    after 2009. Most of those provisions would affect force
    structure, compensation, and benefits. In total, such
    provisions would raise costs by about $3 billion annually,
    assuming appropriation of the necessary amounts.
        The bill contains provisions that would both increase and
    decrease direct spending, primarily from changes in the TRICARE
    pharmacy benefit and retirement programs, and from the sale of
    assets from the National Defense Stockpile. We estimate that
    those provisions combined would increase direct spending by $2
    million in 2009, but would decrease such spending by $13
    million over the 2009-2013 period and $75 million over the
    2009-2018 period. Enacting the bill would not affect federal
    revenues.
        Section 4 of the Unfunded Mandates Reform Act (UMRA)
    excludes from the application of that act any legislative
    provisions that enforce the constitutional rights of
    individuals. CBO has determined that section 591 would fall
    within that exclusion because it would modify the authority of
    the President to employ the armed services to protect
    individuals' civil rights. Therefore, CBO has not reviewed that
    section of the bill for mandates.
        Other provisions of H.R. 5658 contain both
    intergovernmental and private-sector mandates, but CBO
    estimates that the annual cost of those mandates would not
    exceed the thresholds established in UMRA ($68 million for
    intergovernmental mandates in 2008 and $136 million for
    private-sector mandates in 2008, adjusted annually for
    inflation).
        Estimated cost to the Federal Government: The estimated
    budgetary impact of H.R. 5658 is summarized in Table 1. Most of
    the costs of this legislation fall within budget function 050
    (national defense).
        Basis of estimate: For this estimate, CBO assumes that H.R.
    5658 will be enacted near the start of fiscal year 2009 and
    that the authorized amounts will be appropriated.

    Spending subject to appropriation

        The bill would specifically authorize appropriations
    totaling $602 billion in 2009 (see Table 2). Almost all of
    those authorizations fall within budget function 050 (national
    defense); $70 billion would be for DoD's costs associated with
    continuing operations in Iraq and Afghanistan. The total also
    includes funds authorized for activities in other budget
    functions. They include: $63 million for the Armed Forces
    Retirement Home (function 600--income security); $19 million
    for the Naval Petroleum Reserves (function 270--energy); and
    $136 million for the Maritime Administration (function 400--
    transportation).
        In addition, the bill would authorize such sums as may be
    necessary to the Department of State for activities that would
    include the creation of a response readiness corps and a
    civilian reserve corps, which would aid in reconstruction and
    stabilization operations. CBO estimates that authorization,
    plus additional foreign assistance that would be authorized by
    the bill, would require appropriations of about $650 million
    over the 2009-2010 period. Those costs would fall within budget
    function 150 (international affairs).
        For 2008, the bill would authorize $1.6 billion in
    supplemental appropriations, primarily for military
    construction programs. Assuming those appropriations will be
    provided near the end of 2008, CBO estimates outlays from that
    additional funding would begin in 2009. Estimated outlays from
    authorizations of regular appropriations for 2009 and 2010 are
    based on historical pending patterns.
        The bill also contains provisions that would both increase
    and decrease various costs, mostly for changes in end strength,
    military compensation, and health benefits, that would be
    covered by the fiscal year 2009 authorization and by
    authorizations in future years. Those estimated authorizations
    are shown in Table 3 and discussed below. The following
    discussion does not address the timing of outlays from those
    estimated authorizations.
        Force Structure. The bill would affect force structure by
    setting end-strength levels for the various military services.
        Title IV would authorize active and reserve end-strength
    levels for 2009 and would set the minimum end-strength
    authorization in permanent law.
        The bill would specifically authorize regular
    appropriations of $124.7 billion for the costs of military pay
    and allowances in 2009. For related costs due to operations in
    Iraq and Afghanistan, the bill would authorize an additional
    $1.2 billion for 2009.
        Under title IV, the authorized end strengths in 2009 for
    active-duty personnel and personnel in the selected reserves
    would total about 1,370,000 and 850,000, respectively. Of those
    selected reservists, about 79,600 would serve on active duty in
    support of the reserves. In total, active-duty end strength
    would decrease by about 3,300 and selected-reserve end strength
    would increase by about 100 when compared with levels
    authorized in 2008.
        Section 401 would authorize 7,000 additional active-duty
    personnel for the Army and 5,000 additional active-duty
    personnel for the Marine Corps--which CBO estimates would
    increase costs to DoD by about $2 billion in 2009 and about
    $11.5 billion over the 2009-2013 period. Those costs include
    the pay and benefits of the additional personnel, as well as
    costs for operation and maintenance, procurement, and
    construction.

          TABLE 1.--BUDGETARY IMPACT OF H.R. 5658, THE NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------
                                                       2008       2009       2010       2011       2012       2013
    ----------------------------------------------------------------------------------------------------------------
                                            SPENDING SUBJECT TO APPROPRIATION

    Spending Under Current Law for Programs
     Authorized by H.R. 5658:
        Budget Authority 1A\1\....................    581,460          0          0          0          0          0
        Estimated Outlays.........................    567,251    220,708     80,368     28,382     11,404      4,810
    Proposed Changes:
        Authorization of Supplemental
         Appropriations for 2008 for DoD:
            Authorization Level...................      1,642          0          0          0          0          0
            Estimated Outlays.....................          0        109        678        496        172         94
        Authorization of Appropriations for 2009,
         primarily for the Departments of Defense
         and Energy:
            Authorization Level...................          0    531,651          0          0          0          0
            Estimated Outlays.....................          0    341,453    123,102     41,432     13,498      5,359
        Authorization of Appropriations for 2009
         for Military Operations in Iraq and
         Afghanistan:
            Authorization Level...................          0     70,000          0          0          0          0
            Estimated Outlays.....................          0     37,382     20,111      8,255      2,577        872
        Authorization of Appropriations for the
         Department of State:
            Estimated Authorization Level.........          0        350        302          0          0          0
            Estimated Outlays.....................          0        236        256         75         33         21
            Subtotal, Proposed Changes:
                Estimated Authorization Level.....      1,642    602,001        302          0          0          0
                Estimated Outlays.................          0    379,180    144,147     50,258     16,280      6,346
    Total--Including Spending Authorized by H.R.
     5658:
        Estimated Authorization Level.............    583,102    602,001        302          0          0          0
        Estimated Outlays.........................    567,251    599,888    224,515     78,640     27,684     11,156

                                            CHANGES IN DIRECT SPENDING 1A\2\

    Estimated Budget Authority....................          0        -38        155        -24        -52        -49
    Estimated Outlays.............................          0          2        155        -24        -52       -94
    ----------------------------------------------------------------------------------------------------------------
    \1\The 2008 level is the amount appropriated for programs authorized by the bill.
    \2\In addition to the direct spending effects shown here, enacting the bill would have additional effects on
      direct spending after 2013 (see Table 4). In total, CBO estimates that enacting the bill would reduce direct
      spending by $75 million over the 2009-2018 period.
    Notes.The President has requested $103 billion in supplemental defense appropriations for 2008, primarily for
      military operations in Iraq and Afghanistan. Aside from the $1.6 billion in additional 2008 funding that would
      be authorized for military construction and family housing projects, the bill would not authorize the
      supplemental funding requested by the President. If, however, the Congress ultimately provides the entire $103
      billion, CBO estimates that additional outlays from those appropriations would total $28 billion in 2008, $36
      billion in 2009, and smaller amounts in subsequent years.
    For 2009, the authorization levels under ``Proposed Changes'' include amounts specifically authorized by the
      bill, as well as the effect of an indefinite (i.e., unspecified) authorization for the Department of State.
      For 2010, the amount also reflects the effect of that same indefinite authorization. The bill also implicitly
      authorizes some activities from 2010 through 2013; those authorizations are not included above (but are shown
      in Table 3) because funding for those activities would be covered by specific authorizations in future years.

        Section 401 also would decrease the Navy's active-duty end
    strength by 2,775 and decrease the Air Force's active-duty end
    strength by 12,513. CBO estimates that the decrease in end
    strength for the Navy and the Air Force combined would cut
    costs for salaries and other expenses by about $1 billion in
    the first year and about $2 billion annually in subsequent
    years.
        Sections 411 and 412 would authorize the end strengths for
    the reserve components, including those who serve on active
    duty in support of the reserves. Under this bill, the selected
    reserve would experience a net increase in end strength of 100,
    with the Navy Reserve and Air Force Reserve losing personnel
    while the Army National Guard would see an increase. The number
    of full-time reservists who serve on active duty in support of
    the reserves would increase by about 4,000. CBO estimates that
    the net result of implementing those provisions would be an
    increase in costs for salaries and other expenses for selected
    reservists of $241 million in 2009 and about $500 million a
    year thereafter as compared with the authorized end-strength
    levels for 2008.

                          TABLE 2.--SPECIFIED AUTHORIZATIONS IN H.R. 5658 FOR FISCAL YEAR 2009
    ----------------------------------------------------------------------------------------------------------------
                                                                      By fiscal year, in millions of dollars--
                             Category                         ------------------------------------------------------
                                                                  2009       2010       2011       2012       2013
    ----------------------------------------------------------------------------------------------------------------
    Authorization of Regular Appropriations
        Department of Defense Military Personnel:\1\
            Authorization Level..............................    124,660          0          0          0          0
            Estimated Outlays................................    118,926      5,236        125         12          0
        Operation and Maintenance
            Authorization Level..............................    180,559          0          0          0          0
            Estimated Outlays................................    132,133     37,524      6,999      1,874        751
        Procurement
            Authorization Level..............................    104,198          0          0          0          0
            Estimated Outlays................................     28,629     38,593     21,737      7,977      3,173
        Research and Development
            Authorization Level..............................     79,725          0          0          0          0
            Estimated Outlays................................     43,636     28,730      4,801      1,149        363
        Military Construction and Family Housing:
            Authorization Level..............................     24,457          0          0          0          0
            Estimated Outlays................................      4,084      8,602      6,844      2,483      1,071
        Revolving Funds and Other:\2\
            Authorization Level..............................      1,613          0          0          0          0
            Estimated Outlays................................      2,806        126         16          3          1
                Subtotal, Department of Defense:\3\
                    Authorization Level......................    515,212          0          0          0          0
                    Estimated Outlays........................    330,214    118,811     40,522     13,498      5,359
        Atomic Energy Defense Activities:\4\
            Authorization Level..............................     16,221          0          0          0          0
            Estimated Outlays................................     11,066      4,256        899          0          0
        Other Programs:\5\
            Authorization Level..............................        218          0          0          0          0
            Estimated Outlays................................        173         35         11          0          0
                Subtotal, Authorization of Regular
                 Appropriations:
                    Authorization Level......................    531,651          0          0          0          0
                    Estimated Outlays........................    341,453    123,102     41,432     13,498      5,359
    Authorization of Appropriations for Military Operations
     in Iraq and Afghanistan:
        Military Personnel:
            Authorization Level..............................      1,194          0          0          0          0
            Estimated Outlays................................      1,189          0          0          0          0
        Operation and Maintenance:
            Authorization Level..............................     56,267          0          0          0          0
            Estimated Outlays................................     33,964     15,763      4,798      1,038        322
        Procurement:
            Authorization Level..............................     12,151          0          0          0          0
            Estimated Outlays................................      1,882      4,233      3,473      1,564        569
        Research and Development:
            Authorization Level..............................        388          0          0          0          0
            Estimated Outlays................................        207        145         24          5          1
        Special Transfer Authority:
            Authorization Level..............................          0          0          0          0          0
            Estimated Outlays................................        140        -30        -40        -30        -20
                Subtotal, Iraq and Afghanistan:
                    Authorization Level......................     70,000          0          0          0          0
                    Estimated Outlays........................     37,382     20,111      8,255      2,577        872
    Total Specified Authorizations:
        Authorization Level..................................     601,65          1          0          0          0
        Estimated Outlays....................................    378,835    143,213     49,687     16,075     6,231
    ----------------------------------------------------------------------------------------------------------------
    \1\For purposes of this estimate, CBO assumes that the authorization of appropriation in section 421 for
      military personnel includes $10,351 million for accrual payments for the TRICARE For Life program.
    \2\This authorization includes the effect of section 1403, which would authorize the transfer of up to $1.3
      billion of unobligated balances from the National Defense Stockpile Transaction Fund to the Defense Health
      Program. That transfer from the stockpile, which would be subject to appropriation action, would lower the
      2009 authorization level for the revolving funds by an estimated $1.3 billion. However, the transfer would not
      affect outlays in the revolving funds over the 2009-2013 period because under current law those balances are
      unlikely to be spent.
    \3\Estimated outlays for DoD reflect a $4 billion limit in general transfer authority, as stated in the
      committee's report for the bill.
    \4\This authorization is primarily for atomic energy activities within the Department of Energy.
    \5\These authorizations are for the Maritime Administration, the Armed Forces Retirement Home, and the Naval
      Petroleum Reserves.
    Notes: This table summarizes the authorizations of appropriations explicitly stated in the bill--generally in
      specified amounts. The bill also would explicitly authorize the appropriation of unspecified amounts, such as
      the authorization in title XVI of ``such sums as may be necessary'' for activities of the Department of State.
      The latter authorizations, along with amounts implicitly authorized by the bill, are not shown here, but are
      included in Table 3.

                TABLE 3.--ESTIMATED AUTHORIZATIONS OF APPROPRIATIONS FOR SELECTED PROVISIONS IN H.R. 5658
    ----------------------------------------------------------------------------------------------------------------
                                                                By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------
                       Category                                                                              2009-
                                                       2009       2010       2011       2012       2013       2013
    ----------------------------------------------------------------------------------------------------------------
                                                     FORCE STRUCTURE

    Army and Marine Corps Active-Duty End               2,046      2,516      2,529      2,273      2,172     11,536
     Strengths....................................
    Navy and Air Force Active-Duty End Strengths..     -1,047     -1,939     -1,999     -2,065     -2,133     -9,183
    Reserve Component End Strengths...............        241        481        496        513        528      2,259
    Reserve Technicians...........................         33         68         70         72         74        317

                                             COMPENSATION AND BENEFITS (DoD)

    Pay Raises....................................        324        778      1,260      1,770      2,316      6,448
    Expiring Bonuses and Allowances...............         54         25          9          2          1         91
    Housing Allowance for Senior Enlisted                  11         46         47         48         50        202
     Personnel....................................
    Transportation Allowances.....................         79        126        128        129        130        592
    Stabilization Pay.............................          1          4          7          9         11         32
    Education for Military Spouses................         40         64         89        117        146        456
    Foreign Language Pay..........................         24         48         49         51         52        224
    Critical Wartime Health Specialties...........         14         12         11         11          2         50
    Loan Repayment for Reserves...................         24          8          2          0          0         34

                                                 DEFENSE HEALTH PROGRAM

    Waiver of Cost Sharing for Preventive Services         67        130        130        134        142        603
    Prohibition on Increase in Pharmacy Copayments         75        210          0          0          0        285
    Smoking Cessation Program.....................         23         42         42         43         45        195
    Prohibition on Increase in Enrollment Fee.....         47         87          0          0          0        134
    TRICARE Reserve Select Premiums...............          3          9         15         22         29         78
    Chiropractic Care.............................          2         11         11         12         13         49
    Research Program on Extremity Injuries........          5          5          5          5          5         25
    Center of Excellence for Auditory Injuries....          5         10         10         10         10         45
    Preventive Health Allowance...................          3         12         12          9          0         36
    Health Risk Management Demonstration..........          2          8          8          6          0         24

                                           MATTERS RELATING TO FOREIGN NATIONS

    DoD Provisions................................        500        495         45         45         45      1,130
    Department of State Provisions................        350        302          0          0          0       652
    ----------------------------------------------------------------------------------------------------------------
    Notes:For every item in this table except for the authorizations for the Department of State, the 2009 levels
      are assumed to be included in the amount specifically authorized to be appropriated by the bill. Excluding the
      authorizations for the Department of State, amounts shown in this table for 2010 through 2013 are not included
      in Table 1, because authorizations for those amounts would be covered by specific authorizations in future
      years.
    Figures shown here may not add to numbers in the text because of rounding.

        In addition, sections 413 and 414 would authorize the
    minimum end-strength levels for military technicians, who are
    federal civilian personnel required to maintain membership in a
    selected reserve component as a condition of their employment.
    Under this bill, the required number of technicians would
    increase by 847 relative to the levels currently authorized.
    CBO estimates the costs in civilian salaries and expenses that
    would result from additional military technicians would be
    about $33 million in 2009 and about $70 million annually
    thereafter, as compared with the minimum end-strength levels
    for technicians in 2008.
        The bill also would authorize an end strength of 10,000
    servicemembers in 2009 for the Coast Guard Reserve. Because
    this authorization is the same as that under current law, CBO
    does not estimate any additional costs for this provision.
        Compensation and Benefits. H.R. 5658 contains several
    provisions that would affect military compensation and benefits
    for uniformed personnel.
        Pay Raises. Section 601 would raise basic pay for all
    individuals in the uniformed services by 3.9 percent, effective
    January 1, 2009. CBO estimates the total cost of a 3.9 percent
    military pay raise in 2009 would be about $2.5 billion.
    Compared with current law (under which CBO estimates the
    across-the-board increase that would go into effect on January
    1 would be 3.4 percent), this section would increase the pay
    raise in 2009 by an additional 0.5 percent. CBO estimates the
    incremental cost of this larger raise would be $324 million in
    2009 and total about $2.2 billion over the 2009-2013 period.
        In addition, section 608 would guarantee pay raises that
    are one-half of one percentage point higher than amounts
    required by current law for fiscal years 2010 through 2013. CBO
    estimates that the incremental cost associated with those
    larger pay raises would be $337 million in 2010 and $4.3
    billion over the 2009-2013 period.
        Together, sections 601 and 608 would cost $324 million in
    2009 and about $6.4 billion over the 2009-2013 period.
        Expiring Bonuses and Allowances. Sections 611 through 615
    would extend DoD's authority to pay certain bonuses and
    allowances to military personnel for another year. Most of
    those bonuses and allowances have dual authorities, established
    in section 661 of the National Defense Authorization Act for
    Fiscal Year 2008 (Public Law 110-181), which already extend
    through December 2009. Several of the benefits, including some
    without dual authority, are scheduled to expire in December
    2008. Based on DoD's budget material, CBO estimates that
    extending those authorities through December 2009 would cost
    $54 million in 2009 and $91 million over the 2009-2013 period.
        Housing Allowance for Senior Enlisted Personnel. Section
    603 would increase the housing standard for enlisted members
    with dependents in the rank of E-8 to the higher standard in
    effect for E-9s with dependents. The basic allowance for
    housing (BAH) is calculated using the housing standard assigned
    to each rank. Based on information from DoD, CBO estimates that
    this section would increase monthly BAH rates by about $130 on
    average for the roughly 27,500 E-8s with dependents. The
    increase would not become effective until June 30, 2009, and
    CBO estimates the section would cost $202 million over the
    2009-2013 period.
        Transportation Allowances. Sections 604, 631, and 632 would
    increase various travel and relocation benefits for military
    servicemembers. Based on information from DoD, CBO estimates
    those sections would cost $592 million over the 2009-2013
    period.
        Stabilization Pay. Section 606 would extend stabilization
    pay to officers who are reassigned to lower grades. According
    to DoD, this authority would primarily be used to allow
    officers to maintain their existing level of pay should they
    leave their current field to enter medical school. Under
    current law, officers with several years in the service who
    leave their current career track to become medical
    professionals lose rank and pay when they enter medical school.
    Based on information from DoD, CBO estimates that under section
    606 about 100 additional officers would receive stabilization
    pay annually, with an average first-year benefit of about
    $27,000. That amount would gradually decline, as those officers
    earned promotions in their new career field. This section would
    cost about $1 million in 2009 and $32 million over the 2009-
    2013 period, CBO estimates.
        Education for Military Spouses. Section 582 would give the
    Secretary of Defense the authority to establish a program to
    help military spouses acquire education and training, and to
    provide tuition assistance. According to DoD, this authority
    would be used narrowly to reimburse military spouses for the
    cost of obtaining an associates degree, or the necessary
    licenses or other credentials to support a one-time change to a
    career that can be readily transferred to a new location, such
    as nursing, bookkeeping, or teaching. In addition, DoD would
    limit the program to pay a maximum of $6,000 for two years of
    education or training. CBO estimates that about 16,500 military
    spouses would receive an average annual benefit of about $2,400
    in the program's first year and that the program would
    eventually grow to fund education benefits for over 60,000
    military spouses a year. This section would cost $40 million in
    2009 and $456 million over the 2009-2013 period, CBO estimates.
        Foreign Language Pay. Section 619 would authorize the
    Secretary of Defense to establish a pilot program to encourage
    members of the Senior Reserve Officer Training Corps (SROTC) to
    study certain critical foreign languages. Under this program,
    DoD could pay bonuses, subsistence allowances, and incentive
    pay to qualified students. Based on information from DoD, CBO
    estimates that about 15,000 SROTC students would participate in
    the program each year and earn about $200 each month in
    incentive pay. In addition, CBO estimates that DoD would pay
    bonuses averaging $2,000 to first-year students upon entering
    the foreign language program as well as monthly subsistence
    allowances of about $250 to a small portion of those first-year
    students. On that basis, CBO estimates that the pilot program
    would cost $24 million in 2009 and about $50 million a year
    until the program expires in 2013.
        Critical Wartime Health Specialties. Section 620 would
    designate registered nurses, psychologists, and other mental
    health professionals as possessing wartime specialties in
    critically short supply. Under current law, the Secretary of
    Defense may pay an annual bonus of up to $100,000 for each year
    an officer with such a specialty agrees to serve in the
    military. Based on information from DoD, CBO estimates that
    under section 620 DoD would pay lump-sum bonuses to about 50
    psychologists and 25 other mental health practitioners of
    $70,000 and $50,000, respectively. Also, about 300 nurses would
    receive $30,000 a year over four years for a four-year
    obligation to serve in the military. DoD's authority to enter
    into such agreements will expire on December 31, 2009. CBO
    estimates section 620 would cost $14 million in 2009 and $50
    million over the 2009-2013 period.
        Loan Repayment for Reserves. Section 546 would increase the
    amount of their education loans that DoD can repay for health
    care professionals in the reserves. This section would increase
    the current repayment amount of $20,000 up to the $60,000 that
    active-duty servicemembers may receive. Based on information
    from DoD, CBO estimates that under section 546 about 750
    reservists would receive an average increase in loan repayments
    equaling $32,400. The authority to pay this benefit would
    expire December 31, 2009, and CBO estimates the provision would
    cost $24 million in 2009 and total $34 million over the 2009-
    2013 period.
        Defense Health Program. Title VII contains several
    provisions that would affect DoD's health care benefits.
        Waiver of Cost Sharing for Preventive Services. Section 711
    would authorize the Secretary of Defense to waive all
    copayments and deductibles for preventive health services. The
    waiver would apply to all active duty and retiree beneficiaries
    and their dependents who are not Medicare-eligible. In total,
    CBO estimates that section 711 would cost about $600 million
    over the 2009-2013 period.
        This waiver would primarily affect the out-of-pocket costs
    for beneficiaries covered by TRICARE Standard, a fee-for-
    service plan. Beneficiaries enrolled in TRICARE Prime, an HMO
    option, would be unaffected, since they are not required to
    make copayments for preventive services.
        Based on data from DoD, CBO estimates that beneficiaries
    covered by TRICARE Standard make about 10 million visits to
    health care providers each year, with average out-of-pocket
    costs of about $75 per visit. Data from the Centers for Disease
    Control and Prevention (CDC) indicate that about 15 percent of
    all outpatient visits per year are for preventive services.
    Assuming this percentage applies to TRICARE beneficiaries, CBO
    estimates that waiving copayments and deductibles for
    preventive care services would shift $110 millionper year in
    costs from beneficiaries to DoD. Those costs would increase over time
    because of inflation, but would be lower in the first year (about $57
    million) because of the time needed to issue new regulations and
    negotiate new agreements with TRICARE contractors.
        Although Medicare-eligible beneficiaries would be excluded
    from the waiver, section 711 would allow the Secretary to
    reimburse those beneficiaries for any out-of-pocket costs they
    may incur for preventive health care services. That
    reimbursement authority would expire after fiscal year 2009.
    Medicare-eligible beneficiaries are already covered by the
    TRICARE For Life benefit, which generally pays the remainder of
    any costs not paid under parts A and B of Medicare, including
    amounts for preventive services. However, some preventive
    services covered by TRICARE are not covered by parts A and B of
    Medicare--most notably the shingles vaccine.\1\ In those cases,
    regular TRICARE Standard copayments and deductibles apply.
    ---------------------------------------------------------------------------
        \1\The shingles vaccine is covered by Medicare Part D. However,
    beneficiaries of TRICARE For Life generally do not participate in part
    D because they already have pharmacy benefits under TRICARE.
    ---------------------------------------------------------------------------
        Based on information from DoD, CBO estimates that as many
    as 100,000 beneficiaries per year would seek reimbursement for
    the shingles vaccine at an average cost of about $175 per
    beneficiary, or almost $18 million per year. In addition,
    TRICARE For Life beneficiaries may seek reimbursement for
    preventive care received overseas, preventive breast cancer
    MRIs, and other services not covered by Medicare. In total, CBO
    estimates reimbursements to TRICARE For Life beneficiaries for
    preventive services in 2009 would eventually total about $20
    million, although CBO estimates only half of the payments would
    be made in 2009 and that the rest would occur in 2010, because
    of the time needed to write regulations and process claims.
        Prohibition on Increase in Pharmacy Copayments. Section 702
    would prohibit DoD from increasing the cost-sharing amounts
    that beneficiaries pay for pharmaceutical drugs for one year,
    until 2010. For fiscal year 2009, the Administration is
    proposing to increase the copayment for drugs purchased at
    retail pharmacies from the current level of $3 to $15 for a
    one-month supply of generic drugs and from $9 to $25 for the
    same amount of brand-name drugs. The Administration is also
    proposing to increase copayments for brand-name drugs purchased
    through its mail order program from the current level of $9 to
    $15, and to decrease copayments for generic prescriptions
    purchased through the mail order program from $3 to zero. Those
    copayment amounts would apply to active-duty dependents and all
    retirees and their dependents.
        Health care costs for active-duty dependents and non-
    Medicare eligible retirees and their dependents are
    discretionary costs and are covered under this part of the
    estimate. Health care costs for Medicare-eligible retirees and
    their dependents are covered by the TRICARE For Life benefit,
    which is classified in the budget as a mandatory (i.e., direct
    spending) program. CBO's evaluation of the pharmacy costs for
    that group of retirees is discussed in the ``Direct Spending''
    section of the estimate.
        Based on data provided by DoD, CBO estimates that in 2009
    about 59 million prescriptions will be filled at retail, mail-
    order, and DoD pharmacies by active-duty dependents and non-
    Medicare eligible retirees. At the current level of copayments,
    those prescription drugs will cost DoD about $3.5 billion that
    year. If implemented, CBO estimates that the Administration's
    proposed new copayments would reduce that cost by almost $570
    million in the first full year. About three-quarters of this
    savings to DoD would occur because beneficiaries would bear a
    larger portion of the costs through higher copays. The
    remainder of the savings would result from reductions in
    overall demand and other behavioral changes--increased use of
    generic drugs, for example--brought about by the higher
    copayments.
        The Administration has the authority to implement the
    proposed copayment changes under current law. However, in each
    of the past several years, the Congress has prohibited DoD from
    making such changes. The current prohibition expires on
    September 30, 2008. Given this history, CBO assumes that there
    is a 50 percent probability that DoD will implement its
    proposed copayment structure in fiscal year 2009 absent any
    direction from the Congress. Therefore, we estimate that
    extending the prohibition through September 30, 2009, would
    increase costs relative to current law by $285 million--50
    percent of $570 million--over the 2009-2010 period. If DoD
    implemented its proposed changes, the full effect of the
    savings would not be realized until the second year, due to the
    time needed to inform beneficiaries of policy changes, time
    lags in the processing of claims, and gradual shifts in
    beneficiaries' behavior.
        Smoking Cessation Program. Section 713 would require the
    Secretary of Defense to create a smoking cessation program
    within TRICARE. The program would be available to all
    beneficiaries of the TRICARE system who are not eligible for
    Medicare. The program would provide a toll-free help line,
    Internet-based educational material, and access to nicotine
    replacement products and the prescription drug buproprion. CBO
    used budget data from a DoD demonstration program--TRICARE's
    TOBACCO-FREE ME--to estimate the cost of the help line and
    Internet materials, as well as program management. That program
    currently receives about $4 million per year and covers about
    15,000 beneficiaries. Thus, CBO estimates the cost of extending
    a toll-free help line, outreach, and management to all TRICARE
    beneficiaries would cost about $25 million per year.
        In addition, CBO estimates that the cost of providing
    nicotine replacement products and buproprion would be about $15
    million per year, based on data from the demonstration program,
    as well as an analysis of current consumer spending on products
    and pharmaceuticals related to smoking cessation. CBO also
    adjusted its estimates to account for the fact that military
    personnel have a higher propensity to smoke, relative to the
    national average.
        Although Medicare-eligible beneficiaries would be excluded
    from this program, section 713 would allow the Secretary of
    Defense to compensate those beneficiaries for any out-of-pocket
    costs related to smoking cessation in fiscal year 2009.
    Counseling for smoking cessation is currently covered under
    Medicare Part B. Therefore, Medicare-eligible retirees in the
    TRICARE system currently have their coinsurance for this
    service covered. However, pharmaceuticals such as buproprion
    are typically covered under Medicare Part D, which retirees in
    the TRICARE system typically do not participate in. Using the
    same methodology discussed above, CBO estimates the cost of
    refunding 2009 expenditures for buproprion and other products
    related to smoking cessation would be about $6 million, of
    which half would be reimbursed in fiscal year 2009 and the
    remainder in 2010. In total, CBO estimates the cost to
    implement section 713 would total about $195 million over the
    2009-2013 period.
        Prohibition on Increase in Enrollment Fee. Section 701
    would prohibit DoD from increasing fees or deductibles for
    military retirees enrolled in TRICARE Prime, an HMO option, for
    an additional year. (Section 701 of the National Defense
    Authorization Act for Fiscal Year 2008 prohibits any increases
    in fees or deductibles through fiscal year 2008.) Current
    annual enrollment fees for military retirees enrolled in
    TRICARE Prime are $230 for individuals and $460 for families.
    (Active-duty members and their families do not pay enrollment
    fees to participate in TRICARE Prime.) The Administration is
    proposing to increase enrollment fees for retirees enrolled in
    Prime to amounts ranging from $364 to $594 per year for
    individuals and $720 to $1,118 for families. The size of the
    fee would be based on the size of individuals' retirement
    annuities. The increase would apply to over 600,000 retiree
    households with almost 1.5 million beneficiaries. CBO estimates
    that the total savings to DoD from increasing those enrollment
    fees for one year would be about $264 million, and that the
    effect of the fee increase would be spread across two fiscal
    years due to the time needed to implement the changes.
        However, because the Congress has prohibited DoD from
    increasing TRICARE Prime enrollment fees for the last several
    years, it is not clear whether DoD would increase the fees
    absent any legislative action. Given this history, CBO assumes
    that the probability that DoD would increase the TRICARE Prime
    enrollment fees under current law is 50 percent. Therefore, we
    estimate the cost of prohibiting the Prime enrollment fee
    increase for another year would be about $132 million over the
    2009-2010 period.
        In addition, section 701 would extend by one year the
    current prohibition on increasing the amount of the cost-share
    that TRICARE beneficiaries pay for hospital stays. CBO
    estimates that extending the prohibition for another year would
    cost $2 million. In total, CBO estimates that section 701 would
    cost $134 million over the 2009-2010 period.
        TRICARE Reserve Select Premiums. Section 705 would prohibit
    DoD from increasing premiums for participation in the TRICARE
    Reserve Select (TRS) health benefit. This benefit provides
    health coverage to part-time reserve members. Current premiums
    are $972 per calendar year for individuals and $3,036 for
    family coverage, which are supposed to be set to cover 28
    percent of the total cost per beneficiary.\2\ Under current
    law, DoD has the authority to increase those premiums each year
    to reflect rising medical costs. Assuming that current premiums
    accurately reflect 28 percent of the total cost, CBO estimates
    that premiums would need to increase an average of 6 percent
    per year to maintain that same cost percentage, resulting in
    additional collections of about $160 million over the 2009-2013
    period.
    ---------------------------------------------------------------------------
        \2\Although 10 U.S.C. 1076d sets TRS premiums at 28 percent of the
    total estimated cost per beneficiary, there is some dispute about
    whether DoD has been accurately estimating those costs. See Government
    Accountability Office (GAO), Military Health Care: Cost Data Indicate
    That TRICARE Reserve Select Premiums Exceeded the Costs of Providing
    Program Benefits, GAO-08-104 (December 2007). DoD has not announced any
    major changes to TRS premiums as a result of this GAO report. For this
    cost estimate, CBO assumes there will be no major downward adjustment
    of the current premiums.
    ---------------------------------------------------------------------------
        However, in each of the last several years, the Congress
    has used the annual Defense Authorization Act to prohibit DoD
    from increasing TRS premiums. The current prohibition expires
    on September 30, 2008. Given this history, CBO assumes there is
    a 50 percent probability that DoD will increase TRS premiums in
    fiscal year 2009 absent any direction from the Congress.
    Therefore, we estimate that extending the prohibition
    indefinitely would increase costs relative to current law by
    almost $80 million 50 percent of $160 million over the 2009-
    2013 period.
        Chiropractic Care. Section 704 would require DoD to provide
    chiropractic services to all current active-duty members.
    Currently, chiropractic care is only available to active-duty
    members at 49 military treatment facilities (MTFs). Based on an
    analysis of current military base population reports, CBO
    estimates that about 700,000, or roughly half, of the 1.4
    million active-duty members are currently able to receive
    chiropractic services.
        To estimate the cost of providing care to the rest of the
    active-duty population, CBO used information from the final
    report of DoD's chiropractic health care demonstration
    program,\3\ which took place between 1995 and 1999. Based on
    that information and adjusting for inflation since then in
    health care costs, CBO estimates that extending chiropractic
    care to the remainder of the active-duty population would
    result in 200,000 additional visits to chiropractors each year,
    at a cost of about $105 per visit, or just over $21 million per
    year.
    ---------------------------------------------------------------------------
        \3\ Birch and Davis Associates, Inc., Chiropractic Health Care
    Demonstration Program: Final Report (report submitted to the Office of
    the Assistant Secretary of Defense (Health Affairs), February 2000).
    ---------------------------------------------------------------------------
        However, evidence suggests that many individuals who seek
    out chiropractic care do so as a substitute for more
    traditional forms of care, such as visits to primary care
    physicians, and other forms of physical therapy. Based on
    information in the Final Report, the reduced usage of those
    other forms of care could offset the added cost of chiropractic
    care by about one-half. Therefore, CBO estimates the added cost
    of providing chiropractic care to the remainder of the active-
    duty population would be about $11 million per year, or about
    $49 million over the 2009-2013 period. Costs would be lower in
    the first year because of the time needed to set up
    chiropractic clinics at other MTFs and the time needed to
    negotiate contracts with private-sector providers.
        Other Health Care Provisions. CBO estimates that other
    provisions in title VII would increase DoD health care costs by
    about $130 million over the 2009-2013 period. Those other
    provisions would:
               Establish a peer-reviewed research program
            to study injuries to extremities,
               Create a center of excellence in the
            prevention and treatment of auditory injuries,
               Authorize a demonstration program centered
            around a monthly allowance to encourage servicemembers
            to use preventive health services, and
               Require a three-year demonstration program
            on health risk management.
        Matters Relating to Foreign Nations. The bill contains
    several provisions that would affect spending on matters
    relating to foreign nations.
        DoD Provisions. Several provisions in title XII would
    affect DoD's activities involving foreign nations. CBO
    estimates that the costs for those programs would total $500
    million in 2009 and about $1.1 billion over the 2009-2013
    period. Various sections of title XII would modify
    authorization levels for existing programs by:
               Extending by two years, through 2010, the
            current authorization of $75 million a year to develop
            the capacity of the Pakistan Frontier Corps,
               Extending by two years, through 2010, the
            current authorization of $300 million a year to expand
            the capacity of foreign military forces to conduct
            counterterrorism operations,
               Extending by two years, through 2010, the
            current authorization of $100 million a year for U.S.
            efforts to secure and stabilize foreign countries,
               Increasing the authorization level to $35
            million a year for U.S. efforts to provide special
            operations forces to combat terrorism ($25 million is
            currently authorized through 2010 for that purpose),
               Increasing the authorization level to $35
            million a year for foreign officials to receive
            training under the Regional Defense Counterterrorism
            Fellowship Program ($25 million is currently authorized
            for that purpose),
               Extending by one year, through 2009, the
            current authorization of $5 million to participate in
            multinational military centers of excellence meetings.
        Department of State Provisions. Title XVI would establish
    an Office of the Coordinator for Reconstruction and
    Stabilization within the Department of State to conduct
    reconstruction and stabilization operations. The bill would
    authorize the Secretary of State to establish and maintain a
    response readiness corps and a civilian reserve corps and would
    authorize the appropriation of such sums as may be necessary
    over the 2007-2010 period for personnel, education and
    training, equipment, travel, and deployment costs. The bill
    also would authorize the President to provide assistance of up
    to $100 million a year over the 2008-2010 period to stabilize
    and rebuild a country or region that is in, or emerging from,
    conflict or civil strife. CBO estimates that those programs
    would cost about $650 million over the 2009-2013 period.

    Direct spending

        The bill contains provisions that would affect direct
    spending, and CBO estimates that those provisions combined
    would increase such spending by $2 million in 2009, but would
    decrease such spending by $13 million over the 2009-2013 period
    and $75 million over the 2009-2018 period (see Table 4). The
    largest budgetary effects would result from changes in the
    TRICARE pharmacy benefit and retirement programs, and the sale
    of assets from the National Defense Stockpile.
        Stockpile Sales. Enacting the bill would lead to increased
    receipts from the sale of material in the National Defense
    Stockpile. Section 1412 would increase by $410 million the
    target contained in the National Defense Authorization Act for
    Fiscal Year 1999 (Public Law 105-261, as most recently amended
    by Public Law 110-181) for continual sales of tungsten from the
    National Defense Stockpile, and it would extend sales through
    fiscal year 2016. CBO estimates that there would be sufficient
    quantities of tungsten in the stockpile to achieve additional
    receipts of $410 million over the 2009-2016 period.
        Section 1412 also would extend by one year the period to
    sell materials from the National Defense Stockpile as
    previously authorized in the National Defense Authorization Act
    for Fiscal Year 1998 (Public Law 105-85 and most recently
    revised by Public Law 107-107). These sales are set to expire
    on September 30, 2008, and CBO believes that all materials will
    be sold by that date. Thus, CBO estimates that no additional
    receipts would be achieved by extending the sales through 2009.
        Prohibition on Increase in Pharmacy Copayments. Section 702
    would prohibit DoD from increasing the cost-sharing amounts
    that beneficiaries pay for pharmaceutical drugs until 2010. For
    fiscal year 2009, the Administration is proposing to increase
    copayments for drugs purchased at retail pharmacies from the
    current level of $3 to $15 for a one-month supply of generic
    drugs and from $9 to $25 for the same amount of brand-name
    drugs. The Administration is also proposing to increase
    copayments for brand-name drugs purchased through its mail
    order program from the current level of $9 to $15, and to
    decrease copayments for generic prescriptions purchased through
    the mail order program from $3 to zero. Those copayment amounts
    would apply to active-duty dependents and all retirees and
    their dependents.
        Medicare-eligible retirees and their dependents are covered
    by DoD's TRICARE For Life benefit, which is classified in the
    budget as a mandatory (i.e., direct spending) program, and is
    covered under this part of the estimate. Health care costs for
    active-duty dependents and non-Medicare eligible retirees are
    discretionary costs. CBO's evaluation of the pharmacy costs for
    that group of beneficiaries is discussed in the ``Spending
    Subject to Appropriation'' section of the estimate.

                                                   TABLE 4.--ESTIMATED IMPACT OF H.R. 5658 ON DIRECT SPENDING
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      By fiscal year, in millions of dollars--
                                                       -----------------------------------------------------------------------------------------------------
                                                                                                                                          Total      Total
                                                         2009    2010    2011    2012    2013    2014    2015    2016    2017    2018   2009-2013  2009-2018
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Stockpile Sales:
        Estimated Budget Authority....................     -70     -70     -60     -50     -50     -50     -50     -10       0       0      -300       -410
        Estimated Outlays.............................     -70     -70     -60     -50     -50     -50     -50     -10       0       0      -300       -410
    Prohibition on Increase in Pharmacy Copayments:
        Estimated Budget Authority....................      75     230      40       0       0       0       0       0       0       0       345        345
        Estimated Outlays.............................      75     230      40       0       0       0       0       0       0       0       345        345
    Delayed Retirement for Military Technicians:
        Estimated Budget Authority....................      -5      -7      -7      -6      -6      -6      -5      -5      -5      -4       -31        -56
        Estimated Outlays.............................      -5      -7      -7      -6      -6      -6      -5      -5      -5      -4       -31        -56
    Shift of Payments from the Military Retirement
     Fund:
        Estimated Budget Authority....................       0       0       0       0       0       0       0       0       0       0         0          0
        Estimated Outlays.............................       0       0       0       0     -45      45       0       0       0       0       -45          0
    Transfer from the National Defense Stockpile Fund:
        Estimated Budget Authority....................     -40       0       0       0       0       0       0       0       0       0       -40        -40
        Estimated Outlays.............................       0       0       0       0       0       0       0       0       0       0         0          0
    Survivor Allowance:
        Estimated Budget Authority....................       3       3       4       4       5       5       5       2       0       0        19         31
        Estimated Outlays.............................       3       3       4       4       5       5       5       2       0       0        19         31
    Retired Pay for Reserve Members Wounded in Action:
        Estimated Budget Authority....................       *       1       2       2       3       3       3       4       4       5         8         27
        Estimated Outlays.............................       *       1       2       2       3       3       3       4       4       5         8         27
    Retirement Age of Certain Reserve Officers:
        Estimated Budget Authority....................      -1      -2      -2      -1      -1      -1      -1      -1      -1      -1        -7        -12
        Estimated Outlays.............................      -1      -2      -2      -1      -1      -1      -1      -1      -1      -1        -7        -12
    Education Benefits for Reserve Component Members:
        Estimated Budget Authority....................      -1      -1      -1      -1      -1      -1      -1      -1      -1      -1        -5        -10
        Estimated Outlays.............................      -1      -1      -1      -1      -1      -1      -1      -1      -1      -1        -5        -10
    Retirement of Warrant Officers:
        Estimated Budget Authority....................       1       1       *       *       1       1       1       1       1       1         3          8
        Estimated Outlays.............................       1       1       *       *       1       1       1       1       1       1         3          8
    Minimum Service for Retirement as an Officer:
        Estimated Budget Authority....................       0       0       0       0       0       1       1       *       *       *         0          2
        Estimated Outlays.............................       0       0       0       0       0       1       1       *       *       *         0          2
    Correction of Military Records:
        Estimated Budget Authority....................       1       0       0       0       0       0       0       0       0       0         1          1
        Estimated Outlays.............................       1       0       0       0       0       0       0       0       0       0         1          1
    Sale of Floating Drydock:
        Estimated Budget Authority....................      -1       0       0       0       0       0       0       0       0       0        -1         -1
        Estimated Outlays.............................      -1       0       0       0       0       0       0       0       0       0        -1         -1
        Total--Changes in Direct Spending:
            Estimated Budget Authority................     -38     155     -24     -52     -49     -48     -47     -10      -2       0        -8       -115
            Estimated Outlays.........................       2     155     -24     -52     -94      -3     -47     -10      -2       0       -13       -75
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: * = less than $500,000.

        Based on data provided by DoD, CBO estimates that by 2009
    about 58 million prescriptions will be filled at retail, mail-
    order, and DoD pharmacies by TRICARE For Life beneficiaries. At
    the current level of copayments, those prescription drugs will
    cost DoD about $3.9 billion per year. If implemented, CBO
    estimates that the Administration's proposed copayment amounts
    would reduce that cost by almost $690 million in the first full
    year. About three-quarters of that savings would occur because
    the beneficiaries would bear a larger portion of the cost
    through higher copayments. The remainder of the savings would
    result from reductions in overall demand and other behavioral
    changes--increased use of generic drugs, for example--brought
    about by the higher copayments.
        CBO assumes there is a 50 percent probability that DoD will
    implement its proposed copayment structure in fiscal year 2009
    absent any direction from the Congress. Therefore, we estimate
    that extending the prohibition through September 30, 2009,
    would increase costs relative to current law by $345 million--
    50 percent of $690 million--over the 2009-2011 period. If DoD
    implemented its proposed changes, the full effect of the
    savings would not be realized until the second year, due to the
    time needed to inform beneficiaries of policy changes, time
    lags in the processing of claims, and gradual shifts in
    beneficiaries' behavior. Therefore, the cost of an additional
    one-year prohibition would affect costs over several years.
        Delayed Retirement for Military Technicians. Dual-status
    military technicians are civilian employees of DoD who are
    required to hold concurrent positions in the reserves. Under
    current law, some technicians in the Air Force Reserve and Air
    National Guard are forced to retire from their civil service
    positions because they have both reached the maximum years-of-
    service for officers in their grade and become eligible for an
    unreduced civil service retirement, usually at age 55.
        Section 511 would direct the Secretary of the Air Force to
    allow those technicians to remain in the reserves until they
    reach age 60, thus allowing them to continue in their civil
    service positions. Under this section, some technicians who
    would otherwise retire at age 55 would instead choose to delay
    their retirements by one or more years, reducing direct
    spending for civil service retirement and health care. (Because
    military retirement benefits for reservists do not begin until
    they reach age 60, there would not be a similar reduction in
    spending for military retirements.)
        Based on information from DoD, CBO estimates that in 2009,
    about 90 military technicians would delay their retirements by
    one or more years. Each year, a new cohort of technicians could
    choose to stay in the civilian workforce and delay retirement,
    eventually resulting in about 250 fewer retirements each year.
    CBO estimates that this section would result in a net reduction
    in direct spending for civil service retirement annuities and
    health care benefits of $56 million over the 2009-2018 period.
        Shift of Payments from the Military Retirement Fund.
    Section 1004 would reduce by 1 percent all payments scheduled
    to occur in September 2013 from the Military Retirement Fund.
    Annuitants would be reimbursed for this one-time reduction in
    October 2013. Based on the amounts of current outlays from the
    fund, and taking into account expected inflation and changes in
    the number of retirees, CBO estimates that this provision would
    shift about $45 million in outlays from fiscal year 2013 to
    2014, but would not affect total spending over the 2013-2018
    period.
        Transfer from the National Defense Stockpile Fund. Section
    1004 also would require the Secretary of Defense to transfer
    $40 million from the unobligated balances of the National
    Defense Stockpile Transaction Fund to the U.S. Treasury, where
    they would be deposited as miscellaneous receipts. CBO
    estimates that the transfer would not affect federal spending
    over the 2009-2018 period because under current law those
    balances are unlikely to be spent over the next 10 years.
        Survivor Allowance. The National Defense Authorization Act
    for Fiscal Year 2008 (Public Law 110-181) authorized a monthly
    allowance to be paid to those recipients of Survivor Benefit
    Plan (SBP) payments who have their annuities reduced dollar-
    for-dollar by the amount of Dependency and Indemnity
    Compensation they receive from the Department of Veterans
    Affairs. The amount of that monthly allowance will be $50 in
    fiscal year 2009, increasing by $10 each year until it reaches
    $100 per month in 2014. The allowance is scheduled to be
    terminated five months into fiscal year 2016. As originally
    written, Public Law 110-181 excluded the survivors of members
    who died on active duty from receiving the allowance. Section
    643 would eliminate this exclusion. Based on data from DoD's
    Office of the Actuary, CBO estimates that almost 4,500
    additional survivors would receive the allowance under this
    section, which would increase direct spending for military
    retirement by $31 million over the 2009-2016 period.
        Retired Pay for Reserve Members Wounded in Action. Section
    641 would allow reserve members who retired from the military
    because of wounds received in combat to have their retirement
    annuities calculated as if their years of service had all been
    spent on full-time active duty. (Under current law, such
    annuities are based on a combination of active and part-time
    reserve duty.) Based on data from DoD's Office of the Actuary
    and the Defense Manpower Data Center, CBO estimates that such a
    change would increase the amount of annual compensation paid to
    those members by about 50 percent, from an average of $10,000
    per year to about $15,000 per year. Based on recent casualty
    statistics, CBO estimates that about 220 new disability
    retirees would benefit each year from that change in the
    annuity calculation. Direct spending for military retirements
    would increase by about $27 million over the 2009-2018 period,
    CBO estimates.
        Retirement Age of Certain Reserve Officers. Section 514
    would allow officers serving in the National Guard in state
    headquarters positions to remain in an active status until age
    62. Currently, they must retire at age 60. CBO estimates that
    this change would decrease spending from the Military
    Retirement Fund because some officers would begin receiving
    retirement annuities at a later date than they otherwise would
    have. Based on information from DoD, we estimate that, under
    section 514, about 25 officers each year would delay their
    retirements by one year and would forgo about $70,000 in
    annuities, reducing retirement expenditures by about $2 million
    annually. The annual savings would decrease over time however,
    as those officers would receive larger annuities when they do
    retire. In total, CBO estimates this section would reduce net
    direct spending for military retirements by $12 million over
    the 2009-2018 period.
        Education Benefits for Reserve Component Members. Section
    545 would limit the use of education benefits by members of the
    selected reserve who separate from the reserves after serving
    on active duty in support of a contingency operation. Those
    individuals would have to complete their service contract under
    honorable conditions to remain eligible to receive benefits
    after they separate. CBO estimates that this section would
    decrease the number of reservists receiving benefits by about
    200 per year, thereby reducing direct spending for veterans'
    education benefits by $10 million over the 2009-2018 period.
        Retirement of Warrant Officers. Section 501 would allow the
    Navy and Marine Corps to require warrant officers who have at
    least 30 years of active-duty service to retire. This provision
    would increase spending from the Military Retirement Fund in
    two ways. First, CBO estimates it would result in the
    retirement of an additional 30 warrant officers in 2009 who
    would otherwise not have retired, based on data from the
    Defense Manpower Data Center. Also, since most warrant officers
    with over 30 years of service are in the grade of W-5, it would
    open up the ranks and allow more officers in the grade of W-4
    to receive a promotion to W-5 before they retire. A retirement
    annuity for a member who retires at W-5 is about $15,000 per
    year higher than an annuity for a member that retires at W-4.
    In total, CBO estimates this section would increase outlays
    from the Military Retirement Fund by $8 million over the 2009-
    2018 period.
        Minimum Service for Retirement as an Officer. Officers who
    began their military career as an enlisted servicemember must
    complete at least 10 years of commissioned service to retire as
    an officer. Those with less than 10 years commissioned service
    will have their retirement annuities based on the highest
    enlisted grade the member achieved. Section 503 would allow
    members to retire as officers with a minimum of eight years of
    commissioned service. This authority would apply to fiscal year
    2014 only. Based on information from the services, CBO
    estimates that about 35 officers would be allowed to retire
    under this authority in 2014. Because those officers would
    retire earlier than they otherwise would have, section 503
    would increase costs to the Military Retirement Fund by about
    $2 million over the 2014-2018 period.
        Correction of Military Records. Section 592 would authorize
    the Secretary of Defense to pay interest on certain financial
    awards arising from the correction of military records. That
    section provides retroactive authority to pay interest on
    claims for lost pay, allowances, and other pecuniary benefits
    awarded by a Correction Board ruling on or after October 1,
    2007, to set aside a prior court-martial conviction. According
    to DoD, four individuals have received such rulings since that
    date. Those cases were from a 1944 mass court-martial that
    resulted in 31 convictions.
        Section 592 also would specify the rate to use in
    calculating the interest payment for financial awards. Based on
    information from DoD, CBO assumes an interest rate of 10
    percent and estimates that each of these four veterans would
    receive roughly $350,000. Because these payments are mandatory,
    this section would increase direct spending by about $1 million
    in 2009.
        Drydock Sales. Section 1011 would allow the Navy to convey
    a floating drydock (known as AFDL-23), located in Aransas Pass,
    Texas, to Gulf Copper Ship Repair and would require Gulf Copper
    to pay the U.S. government an amount equal to the drydock's
    fair-market value.
        Based on information from the Navy, CBO estimates that the
    sale of this drydock would generate about $1 million in
    offsetting receipts in 2009.
        Other Provisions. The following provisions would have an
    insignificant effect on direct spending, primarily because they
    would affect few individuals or because they authorize both the
    collection and spending of funds so that the net budgetary
    impact is quite small:
               Sections 515 and 516 would delay some
            retirements by allowing lieutenant generals in the
            reserves to remain in an active status until age 66 and
            by allowing medical officers and chaplains in the
            Reserves to remain in an active status until age 68.
               Section 544 would increase--from 25 to 125--
            the number of defense industry employees who
            participate in the Defense Product Development Program
            at the Naval Postgraduate School. The Navy has the
            authority to collect and spend any tuition they
            collect.
               Section 642 would allow certain survivors
            who previously transferred their SBP benefits to their
            children to begin receiving their benefits again.
               Section 644 would allow certain active-duty
            members who are eligible for retirement and who join
            the selected reserves to have their retirement
            annuities recalculated at age 60.
               Section 645 would allow reserve retirees to
            have their annuities recalculated for any additional
            time served in an active status after the age of 60.
               Section 646 would correct an inadvertent
            reduction to the annuities of certain survivors that
            resulted from the phase-out of Supplemental SBP.
               Section 647 would allow the survivors of
            military retirees kidnapped in Iraq or Afghanistan to
            continue to receive that retiree's full annuity for up
            to seven years.
               Section 842 would expand the authority of
            Secretaries of Defense and Homeland Security to retain
            and spend fees received from trademark licensing.
               Section 911 would extend a pilot program
            that allows DoD to provide satellite tracking services
            to non-U.S. government entities. Under this program DoD
            is allowed to charge fees to cover the costs of
            providing such services and to spend such fees.
               Section 942 would permit the Secretary of
            Defense to waive the reimbursement of costs associated
            with personnel from nongovernmental and international
            organizations attending DoD's Regional Centers for
            Security Studies. DoD has the authority to retain and
            spend such reimbursements.
               Title XVI would allow the Department of
            State to designate volunteers for the civilian reserve
            corps as temporary federal employees, which could
            result in small costs or savings to federal retirement
            programs.
               Section 3111 would allow the Secretary of
            Energy to receive and spend contributions made to
            assist in the disposition of excess weapons grade
            plutonium in the Russian Federation. This authority
            would expire on December 31, 2013.
        Intergovernmental and Private-sector Impact: Section 4 of
    the Unfunded Mandates Reform Act excludes from the application
    of that act any legislative provisions that enforce the
    constitutional rights of individuals. CBO has determined that
    section 591 would fall within that exclusion because it would
    amend the authority of the President to employ the armed
    services to protect individuals' civil rights. Therefore, CBO
    has not reviewed that section of the bill for mandates.
        Other provisions of H.R. 5658 contain both
    intergovernmental and private-sector mandates, but CBO
    estimates that the annual cost of those mandates would not
    exceed the thresholds established in UMRA ($68 million for
    intergovernmental mandates and $136 million for private-sector
    mandates in 2008, adjusted annually for inflation).

    Increasing the end strength of the Armed Services

        Sections 401 and 412 combined would increase the costs of
    complying with existing intergovernmental and private-sector
    mandates as defined in UMRA by increasing the number of
    servicemembers and reservists on active-duty. Those additional
    servicemembers would be eligible for protection under the
    Servicemembers Civil Relief Act (SCRA), including the right to
    maintain a single state of residence for purposes of state and
    local personal income taxes and the right to request a deferral
    in the payment of certain state and local taxes and fees. SCRA
    also requires creditors to reduce the interest rate on
    servicemembers' obligations to 6 percent when such obligations
    predate active-duty service and allows courts to temporarily
    stay certain civil proceedings, such as evictions,
    foreclosures, and repossessions. Extending these existing
    protections would constitute intergovernmental and private-
    sector mandates and could result in lost revenues to government
    and private-sector entities.
        The number of active-duty servicemembers covered by SCRA
    would increase by less than 1 percent. CBO expects that
    relatively few of these servicemembers would take advantage of
    the deferrals in certain state and local tax payments; the lost
    revenues to those governments would be insignificant.
        CBO does not have sufficient information to estimate
    precisely the increased costs of complying with the existing
    private-sector mandates in SCRA. Servicemembers' utilization of
    the various provisions of the SCRA depends on a number of
    uncertain factors, including how often and how long they are
    deployed. Nonetheless, because the increase in the number of
    active-duty servicemembers covered by SCRA would be so small,
    CBO expects that the increased costs also would be small.

    Providing benefits to state and local governments

        This bill contains several provisions that would benefit
    state and local governments. Some of those provisions would
    authorize aid for certain local schools that serve dependents
    of defense personnel and convey certain parcels of land to
    state and local governments. Any costs to those governments
    would be incurred voluntarily as a condition of receiving
    federal assistance.
        Previous CBO estimates: On March 4, 2008, CBO transmitted a
    cost estimate for H.R. 1084, the Stabilization and
    Reconstruction Civilian Management Act of 2008, as ordered
    reported by the House Committee on Foreign Affairs on February
    27, 2008. Title XVI of H.R. 5658 contains provisions that are
    similar to those in H.R. 1084, and CBO's estimate of the costs
    for title XVI is identical to our estimate of the costs for
    H.R. 1084.
        Estimate prepared by: Federal costs: Defense Outlays--Kent
    Christensen; Military construction and multiyear procurement--
    David Newman; Military and civilian personnel--Dawn Regan;
    Military retirement and health care--Matthew Schmit; Operation
    and maintenance--Jason Wheelock; Reserve education benefits--
    Camille Woodland; Stockpile sales and foreign affairs--Raymond
    J. Hall.
        Impact on state, local, and tribal governments: Neil Hood.
        Impact on the private sector: Daniel Frisk.
        Estimate approved by: Theresa Gullo, Deputy Assistant
    Director for Budget Analysis.

                 Shipbuilding and Conversion, Navy (Correction)

        The budget request contained $920.0 million for procurement
    of two Littoral Combat Ships. The committee understands that
    the Navy owns residual materials procured under the cancelled
    contracts for LCS-3 and LCS-4, which could be provided as
    government furnished equipment for the construction of at least
    one of the ships to be procured in fiscal year 2009. The
    Shipbuilding and Conversion, Navy, tables in title I of part 1
    of the committee report (H. Rept. 110-652) accompanying the
    Duncan Hunter National Defense Authorization Act for Fiscal
    Year 2009 incorrectly indicated that the committee recommended
    a decrease of $80.0 million for one Littoral Combat Ship. The
    committee recommends $840.0 million, a decrease of $80.0
    million, for two Littoral Combat Ships. The corrected table
    follows:

            Research, Development, Test, and Evaluation (Correction)

        The Tactical Airborne Reconnaissance table in title II,
    Research, Development, Test and Evaluation, Navy of the
    committee report (H. Rpt. 110-652) accompanying the Duncan
    Hunter National Defense Authorization Act for Fiscal Year 2009
    incorrectly indicated that the committee recommended a $5.0
    million increase for the Peer-Reviewed Research Extremity War
    Injuries within this account. The Medical Advanced Technology
    table in title II, Research, Development, Test and Evaluation,
    Army, should be increased by $5.0 million to reflect the
    amendment passed by the committee on May 14, 2008. The
    corrected tables follow:

                  Compliance With House Rule XXI (Correction)

        Pursuant to clause 9 of rule XXI of the Rules of the House
    of Representatives, the committee is required to include a list
    of congressional earmarks, limited tax benefits, or limited
    tariff benefits, as defined in clause 9(d), 9(e), or 9(f) of
    Rule XXI of the Rules of the House of Representatives, which
    are in the bill or the report.
        The following supplemental list represents those items
    omitted from the list contained in part 1 of the committee
    report (H. Rept. 110-652) accompanying the Duncan Hunter
    National Defense Authorization Act for Fiscal Year 2009 due to
    inadvertent clerical oversight. This list does not include any
    new programs or projects, but rather a list of member requests
    that duplicate a request for a program or project which was
    made by other members and disclosed in the original report. The
    committee notes that although the Rules of the House of
    Representative do not require that the list of congressional
    earmarks, limited tax benefits, or limited tariff benefits be
    comprehensive, in the interest of transparency, the committee
    strives to include all such member requests in its list.

                            Record Votes (Appended)

        Pursuant to Rule 17(d) of the Committee on Armed Services
    rules, the following pages contain four appended record votes
    contained in part 1 of the committee report (H. Rept. 110-652)
    accompanying the Duncan Hunter National Defense Authorization
    Act for Fiscal Year 2009 to reflect the members of the
    committee who were unable to vote during the committee markup
    because they were in attendance at other committee,
    subcommittee, or conference committee meetings. The members are
    noted by asterisks.