WASHINGTON (April 18, 2013) -- As Defense Department leaders defend before Congress the president's $526.6 billion base defense budget request for fiscal year 2014, DOD officials are preparing a review that reassesses assumptions driving the Pentagon's investment and force structure decisions, Defense Secretary Chuck Hagel said, April 17.
In testimony before the Senate Armed Services Committee, Hagel said the review, conducted by Deputy Defense Secretary Ash Carter and Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, is expected to be complete by May 31.
Rather than accommodate the Budget Control Act's abrupt and severe budget cuts, known as sequestration, the 2014 Defense Authorization Request contains an alternative that proposes $150 billion in added defense savings over the next decade as part of a balanced deficit-reduction package, Hagel said.
The cuts would occur in the years beyond fiscal year 2018, he added, giving the department "time to implement such reductions wisely, carefully [and] responsibly."
But the secretary said DOD must plan for more reductions to the defense budget that could result from an agreement by Congress and the administration on a deficit-reduction plan, or for sequester-level cuts that persist for another year or over the long term.
"Consequently," Hagel told the Senate panel, "I directed a strategic choices and management review in order to assess the potential impact of further reductions, up to the level of full sequester."
The review, which includes the service secretaries, service chiefs, Office of the Secretary of Defense principals and combatant commanders as essential participants, will identify strategic choices and further institutional reforms that may be required, including reforms that should be pursued regardless of fiscal pressures, he said.
Such a review will help to sort out the challenges, articulate the risks and look for opportunities for reform and efficiencies presented by resource constraints, the secretary said, adding that the results of the review will inform DOD's fiscal year 2015 budget request and serve as the foundation for the Quadrennial Defense Review due to Congress in February.
Hagel said the review will put everything on the table, including roles and missions, planning, business practices, force structure, personnel, compensation, acquisition and modernization investments, along with how the department operates and maintains readiness.
"It is already clear to me, Mr. Chairman," Hagel told Michigan Sen. Carl Levin, "that achieving significant additional budget savings without unacceptable risk to national security will require not just tweaking or chipping away at existing structures and practices, but, if necessary, fashioning entirely new ones that better reflect 21st-century realities. And that will require the partnership of Congress."
The fiscal year 2013 DOD appropriations bill that Congress enacted last month allocated DOD funding more in line with the president's budget request, giving DOD authorities to start new programs and proceed with important military construction projects, the secretary said.
"Nonetheless, the bill still left in place the deep and abrupt cuts associated with sequester, as much as $41 billion in spending reductions over the next six months," he noted, adding that military pay and benefits are exempt from sequester.
If the sequester provision remains intact, Hagel said, DOD funding will be cut by $52 billion in fiscal year 2014 and by about $500 billion over the next nine years.
In his description of the budget request, Hagel said the president's $526.6 billion DOD base budget request for fiscal year 2014 continues to implement President Barack Obama's defense strategic guidance issued in January 2012 and enhances DOD efforts at institutional reform.
"Most critically," the secretary added, "it sustains the quality of the all-volunteer force and the care we provide our service members and their families, which underpins everything we do as an organization."
The budget request also contains a placeholder request for overseas contingency operations at the fiscal year 2013 level of $88.5 billion, he said.
The submission does not include a formal overseas contingency operations request because Afghanistan force level and deployment decisions for this year were delayed to give commanders time to fully assess responsibilities and requirements, the secretary explained.
The base budget targets growing costs in areas of support, acquisition and pay and benefits before cutting military capabilities and force structure, and identifies new savings of about $34 billion in fiscal year 2014 through 2018, the secretary said, including $5.5 billion in fiscal year 2014 from these areas.
To eliminate excess infrastructure, the budget request calls for one round of base realignment and closure, called BRAC, in 2015, Hagel told the senators.
"BRAC is a comprehensive and fair tool that allows communities to have a role in reuse decisions for their property and provides development assistance," he said. "BRAC, as we all know, is imperfect, and there are up-front costs. The future-year defense program adds $2.4 billion to pay for those costs. But in the long term, there are significant savings. The previous five rounds of BRAC are saving $12 billion annually, and those savings will continue."
The department continues to streamline its acquisition programs and processes, and over the past four years it has realized significant cost savings as a result of reforms implemented by the Weapons System and Acquisition Reform Act of 2009, he said.
In the current budget request, Hagel added, DOD has achieved $8.2 billion in savings from weapons program terminations and restructuring, and will substitute a new package of military compensation proposals that save about $1.4 billion in fiscal year 2014 and $12.8 billion in fiscal year 2014 through 2018.
"This package includes a modest slowing of the growth of military pay by implementing a 1 percent pay raise for service members in 2014," he added.
The department seeks more changes to the TRICARE program in fiscal year 2014 to bring beneficiary costs closer to levels envisioned when the health care plan was implemented, particularly for working-age retirees, the secretary said, adding that "survivors of military members who died on active duty or medically retired members would be excluded from all TRICARE increases."
Even after the proposed fee changes, Hagel said, TRICARE will remain a substantial benefit.
"These adjustments to pay and benefits were among the most carefully considered and most difficult choices in the budget," he added, "[and] they were made with strong support of the Joint Chiefs of Staff and the senior enlisted leadership."
Cuts and changes to capabilities, force structure and modernization programs all will be required, based on priorities and parameters set in the strategic guidance, he said.
Last year, the department proposed reductions of about 100,000 in military end-strength between fiscal year 2012 and 2017, the secretary said.
"By the end of 2014," he said, "we will have completed almost two-thirds of the drawdown of our ground forces, and the drawdown should be fully complete by fiscal 2017."
This budget request continues to put a premium on rapidly deployable, self-sustaining forces and seeks to leverage new concepts of operations enabled by advances in space, cyberspace, special operations, global mobility, precision strike, missile defense and other capabilities, the secretary said.
It also includes $137.1 billion for military personnel and $49.4 billion for military medical care, Hagel said, and the department continues to support service members and their families, spending $8.5 billion on initiatives that include transition assistance and veterans' employment assurance, behavioral health, family readiness, suicide prevention, sexual assault prevention and response.
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