Thank you, Mr. Chairman, Senator McCain, members of the Committee. As the chairman said, I would like just to begin by introducing four representative members of this great army that we have.

First, I'd introduce Mrs. Donna Engeman. Donna's husband, John, was killed in Iraq four years ago, and she currently runs our Survivor Outreach Services programs. It's a program we put in place about two years ago to increase what we were doing for surviving family members. Her son, Patrick, is on his second tour in Iraq.

... Thank you, Donna.

Next to her is Staff Sergeant Christian Hughes. He was wounded in Afghanistan in October. He's recovering from his wounds in Walter Reed, and he looks forward to rejoining his unit as soon as he can.

Thank you.

Next is Sergeant First Class Shana Tinsely. Her husband, Arthur, is a master sergeant. He leaves for Afghanistan on Thursday, I think. And she will be here with her children, working here with us in the Pentagon.

And lastly, Sergeant First Class Jeff Lawson. He has recently completed a program at the University of Pennsylvania that qualifies him to be a Master Resilience Trainer. And this is an important part of our Comprehensive Soldier Fitness program that I will talk about a bit later. He's got three tours in Iraq himself.

So thank you all very much for coming out ...

Now, if I could, Mr. Chairman, as you noted I've been saying for the past three years that the Army is out of balance, that we're so weighed down by our current commitments that we can't do the things we know we need to do to sustain this All-Volunteer Force and to prepare to do other things. I can tell you that with the help of the Committee we've made progress over the last year to get back in balance, but we're not quite out of the woods yet.

That said, this 2011 budget completes the procurement funding to finish our conversion to modular organizations that we began in 2004 and the growth that we began in 2007. It also contains the military construction funding to complete the base realignment and closure [BRAC] moves of 2005. So your continued support will allow us to meet the goals we set six years ago to build an Army that is both relevant to 21st Century challenges and back in balance.

This plan that we put in place to get ourselves back in balance was centered on four imperatives. We had to sustain our Soldiers and Families -- the heart and soul of the force. We had to continue to prepare our Soldiers for success in the current conflict. We had to reset them effectively when they returned. And then we had to continue to transform for an uncertain future. Let me just give you a short progress report on where we are.

Our first objective was to finish our growth, and you'll recall the Administration in January of 2007 directed that we increase the size of the Army by 74,000. Originally, we were going to do that by 2012. With Secretary Gates' and your support, we completed it last spring. When that did not prove to be sufficient, we were granted a temporary increase of 22,000 Soldiers. And we will evaluate later this year whether we need that entire amount.

This growth -- coupled with the drawdown in Iraq -- has allowed us to meet the need for additional forces in Afghanistan without returning to 15-month deployments and without going back on Stop Loss.

Our second key objective was to increase the time our Soldiers spent at home. And I will tell you after almost three years on the job, I'm more convinced than ever that this is the most important element of putting ourselves back in balance, and for several reasons:

One, our Soldiers need time to recover from repeated combat deployments. What we continue to see across the forces are the cumulative effects of these deployments. And we recently completed a study that demonstrates what we intuitively knew -- that it takes two to three years to recover from a one-year combat deployment.

That's why it's so important for us to meet our near-term objective of two years at home between deployments for the active force, and four years at home between deployments for our Reserve Components. As demand decreases, we plan to move to more sustainable goals of three and five years, respectively, between deployments.

More time at home also gives us more stable preparation time for the next mission and more time to prepare to do other things. When you're only home for a year, you barely have time to finish your leave before you have to begin preparing to go back.

I recently visited units that had 18 months home, and the difference between 18 months at home and 12 months at home at the pace ... the optempo that they're on ... is significant.

Additionally, as time at home increases, we'll be able to see more units training for the full spectrum of operations, and we will gradually rekindle some of the skills that have atrophied over the past several years.

Our third objective was to move away from our Cold War formations to organizations that are more relevant for the challenges we'll face in the 21st Century. In 2004, we set out to convert all 300-plus brigades in our Army to modular organizations. Today we're almost 90 percent complete, and these formations are demonstrating their versatility and their value in Iraq and Afghanistan every day.

We also set out to rebalance the skills resident in these formations. These involved converting, retraining and equipping around 150,000 Soldiers from all components to new jobs.

By way of example, in the last six years, we have stood down around 200 tank companies, artillery batteries and air defense batteries, and we've stood up a corresponding number of military police, engineers, civil affairs and Special Forces companies. This has paid tremendous benefits in the current operations.

So together, the rebalancing and the modular conversions represent the largest organizational transformation of the Army since World War II, and we will have done this while fighting two wars.

Fourth, we are moving to put the whole Army on a rotational readiness model much like the Navy and Marine Corps have been on for many years. This model will allow us to more efficiently and effectively provide a sustained flow of land forces that are trained for the full spectrum of operations to our Combatant Commanders.

It will also allow us to have forces available to hedge against the unexpected contingencies that you spoke of. And it will also allow us to do this in a way that is predictable and sustainable for this All-Volunteer Force.

Our fifth objective was to complete our re-stationing, and we're just over halfway through these efforts. We are on track to complete the 2005 BRAC by the end of 2011. This will affect over 380,000 Soldiers, Family members and Civilians. And while it's a lot of turbulence, the construction on these new installations will significantly improve the quality of life for our Soldiers and Families.

So the bottom line, Mr. Chairman, is we've made progress, but we still face challenges as we work to restore balance and set the conditions for the future.

Now, I'd like to conclude my remarks with comments on three areas that are very important to us, and I would hope also important for this Committee.

First of all, sustaining our people. This budget contains money for housing, barracks, child care, youth centers, Warrior Transition Units and surviving spouse programs -- all critically important to sustaining our Soldiers, Civilians and Families through a period in which our country is asking so much of them. In general, we're strengthening our programs to build resiliency into the force to help them deal, not only with the challenges of the past, but with the challenges of the future.

We've all seen the manifestations of the stresses of eight and-a-half years at war. Elevated suicide rates, increased demand for behavioral health counseling and drug and alcohol counseling, increased divorce rates, increased numbers of Soldiers temporarily non-deployable from nagging injuries from previous deployments. And we've been moving aggressively to give our Soldiers and Families the skills they need to deal with these challenges.

In October, we began a program that we had been working on for more than 18 months with some of the best [psychology] experts in the country. The program is called Comprehensive Soldier Fitness. I've spoken about it here before.

And it's designed to give mental fitness the same level of effort that we give to physical fitness. We intended to provide our force the resiliency skills that they need to succeed in an era of persistent conflict. This program consists of four components: an online self-assessment to identify resiliency strengths. This assessment has already been taken by over 250,000 Soldiers.

Next, online self-help modules; third, Master Resilience Trainers like Sergeant Lawson. And these are designed to conduct resiliency training down to the unit level. We've trained over 600 Sergeant Lawsons at University of Pennsylvania already.

And finally, there will be resiliency training at every Army leader development school. This program shows great promise, and I'd be happy to discuss it further in the questions and answers.

Second, the reset of our equipment will be increasingly important as we complete the drawdown in Iraq over the next two years and for two-to-three years after the conclusion of combat operations. It's important to note that our reset efforts have been a key factor in maintaining the high operational readiness rates for ground and air systems in Iraq and Afghanistan. This budget provides almost $11 billion to reset our equipment. And sustained funding for reset will be essential to the long-term health of the force.

Finally, this budget, as you mentioned, Chairman [Levin], contains a significant adjustment to our modernization strategy. I believe that we are in a period of continuous and fundamental change and that we must continually adapt to deal with evolving threats. So in conjunction with the Secretary of Defense, we have transitioned away from the Future Combat Systems program to what we believe is an achievable, affordable modernization program for our brigade combat teams.

This program leverages the lessons that we've learned at war and the lessons that we learned from the Future Combat Systems program itself. It contains four elements: first of all, incrementally modernizing our networks over time to take advantage of rapid advances in technology; second, incrementally fielding capability packages to put the best equipment into the hands of our Soldiers as rapidly as it is available; third, incorporating MRAPs into our force; and then lastly, rapidly developing and fielding a new ground combat vehicle that meets the requirements of a 21st Century Army.

We intend to make this program a model for the Weapons Systems Acquisition Reform Act. And we look forward to working with the committee on it.

In closing, I'd like to reiterate how proud I am of what the men and women of this great Army continue to accomplish at home and around the world. We've made progress in restoring balance, but we still face a tough road ahead. And we could not have done it without the Committee's support.

Thank you very much. And the Secretary [John McHugh] and I look forward to your questions.