It must be that time of year again - creamed beef, AUSA, we must be getting ready to put the 2012 budget to bed and put it on the Hill and start the process again. It's great to be here with you again. [I'd] just [like] to recognize [former Chiefs of Staff] Carl Vuono, Gordon Sullivan, and Dennis Reimer: it's great to see you.

Many of you who have been in the Army, when I see you, say, "If there's anything I can do to help, let me know." Well, Dennis Reimer has just started an effort to study the role of the Reserve Components in an era of persistent conflict, and give us some insights about how we capture this significant investment in capital and experience that we've gotten from the Guard and Reserve over the last decade. So Dennis, thanks very much for the work that you have done. You've done a great service for us and it's really going to help us move forward.

I just recognized [GEN(Ret)] Lou Wagner sitting over here. Lou also said, "Hey Chief, let me know if I can help you out." So Lou and [former Army Acquisition Executive] Gil Decker are finishing up a study on our acquisition processes. We should get that in the next couple of weeks, and that's going to help us really sharpen our acquisition capabilities. So, Lou, thanks to you and Gil Decker for doing that.

Sergeant Major of the Army Ken Preston: We said we weren't going to do this to each other, but this is the Sergeant Major's last [AUSA] breakfast He will retire as the longest serving Sergeant Major of the Army. You have been a primary reason why the Noncommissioned Officers Corp has held together over this last decade, so Sergeant Major we are going to miss you sorely. But, thankfully, you have grown a strong bench behind you. So, Ken, good luck. (Applause)

I've just returned from a couple of trips that I would like to share with you. I was out at Fort Leonard Wood yesterday. Fort Leonard Wood got hit by a fairly significant tornado. And, I was thinking to myself, I can't remember in my time in the Army that an Army Installation was struck by a natural disaster that had such an impact on Families. We lost about 50 homes - some of them down to the floor. In fact, in one house, the only thing standing above the foundation was the heater. So what I saw out there amazed me. I have never seen tornadoes like that. But, the path of a tornado is very precise and anything in the path is demolished. If you are 20 yards on the outside of the path, nothing happens. But this thing went right through a housing area. There were about 50 Families displaced - about 300 total folks They've done a magnificent job out there putting it all back together. And you see the resilience of Army Families. One of the reporters told me, "You know -- we've had some people killed outside of here, and no one was killed on the base." Well, when you talk to these young Soldiers and Leaders -- they have their emergency radios, they have their drills that they practiced. They knew what they were supposed to do.

Then, I finished [my holiday troop visit] trip around the world on Christmas Eve. I had my last Christmas in the Army in Baghdad, and had dinner with the troops. Alaska, Japan, Korea, Pakistan, Afghanistan, Kuwait, Iraq, and Germany -- everywhere I went I saw Soldiers and Families committed and proud that they were accomplishing their missions wherever they are. It was minus 22 [degrees] in Alaska -- in Fairbanks -- no wind chills, just plain minus 22 (laughter). I got my picture taken by the bank sign at 9:30 in the morning. The street lights were still on; it was dark; it was minus 22.

We are continuing to make progress in Iraq and Afghanistan, and our guys and gals in Kuwait have led a huge logistical accomplishment getting down to 50,000 [troops] in Iraq, and now they are planning the next step. I couldn't be prouder of what our men and women are doing.

Let me just talk a little bit about where we are and where are we headed. You've listened to me drone on now for four years about getting "back in balance." I can tell you that we have made great progress towards the goals that we set for ourselves back in 2004 to get back in balance. And, with the 2011 budget, give or take some monies that we might not get because of the continuing resolution, we're in pretty good shape to reach the balance goals (that we set for ourselves in 2004) by the end of this fiscal year. So, as I go along, what I see is we're starting to breathe again. That people are getting -- instead of 12 or 13 months at home between deployments -- they're in the 18-24 month range. And that's a good thing, believe me. We needed that.

Let me just tick off a few highlights here. We have finished the [troop] growth that was directed in 2007 by President Bush. We are close to finishing the additional 22,000 growth that was authorized to us and we're right at it. We're within a couple of hundred of reaching that target right now. We're going to hold that target through the end of fiscal year 2013 so that we can rest this force a little bit before we have to start coming back down. We'll come back down to our original strength of about 547,000 at the end of 2013. That growth, plus the drawdown in Iraq, enables us to increase the BOG:Dwell ratio from what was really close to one year out - one year back, now to one year out - two years back for the Active Force, one year out - four years back for the Guard and Reserve . We expect -- by the first of October of this year (the beginning of fiscal year 2012) -- that units deploying will deploy with the expectation of BOG:Dwell at 1:2 and 1:4. Again, that is another milestone that we had to get to because we did a study in 2009 that told us what we intuitively knew - that it takes 24-36 months to recover from a one year combat deployment. It just does. When you turn faster than that, the effects build up faster. So, we needed this space not only to recover ourselves, but also to begin to prepare to do other things.

Modularity and rebalancing: the organizational transformation of the Army has been our largest organizational transformation since World War II. By the end of this fiscal year, [October], we will by and large have finished the modular conversion of all 300 plus Brigades of the Army, with less than a handful left. We will have finished rebalancing -- moving Soldiers out of Cold War skills into skills more relevant and necessary today -- to the tune of 150,000-160,000 Soldiers. Taken together, it's a fundamentally different Army than it was on September 11, 2001. We had a great Army then. We have a great combat-seasoned Army that is organized in a way that makes it much more versatile, and much more relevant today.

ARFORGEN - we've been talking about this for a while. We started talking in 2005 about Army Force Generation. ARFORGEN is a fundamentally different way of building readiness. We have been moving slowly to adapt the institutional support systems to support a fundamentally different way to build readiness. We're close to achieving that by our goal of fiscal year 2012, (October of this year), to have all of our systems tweaked so that we can efficiently and effectively generate these trained and ready forces.

We've got some work to do on the Hill, to explain this readiness model. I will tell you it's a fully integrated readiness model with the Guard and Reserve being fully integrated into that. It's interesting what Dennis [Reimer's] study pointed out to me: ARFORGEN is really more important to the Guard and Reserve -- because of the predictability that it brings -- than it is to the Active Force. So, we've achieved good progress on that.

Lastly, we're starting to bring back some strategic flexibility to have the capability to do some different things. We had our first Full Spectrum Operations rotation against a hybrid threat down at the Joint Readiness Training Center in October [2010] with the 3rd Brigade of the 82nd Airborne Division. We learned some very interesting lessons as you can imagine: we are a little rusty at Battalion and Brigade staff integration and synchronization skills and a little spoiled by having a fiber optic network - a fixed network in Iraq and Afghanistan . They did a mass tactical jump in, and they told me, "General, you don't jump fiber optics." So, it took a few days to get the network up to even just a rudimentary level, which speaks to why we're spending so much effort on the network.

There were two things that struck me the most [about the rotation]. I sat on a hill with a Company -- including the Company Commander, First Sergeant, Platoon Sergeant, and Platoon Leaders -- for an [After Action Review]. They were preparing a defense; they had been up for 36 hours; these guys are sitting there; they are working through things; they are talking about what they did right, what they did wrong. I thought to myself, "wow -- that level of intensity is something we can all be proud of." The second thing that I saw was something I expected: when these Companies and Platoons closed with the enemy, they were absolutely lethal. We know how to fight at that level. That is a huge strength. Some of you are old enough to remember the first days at the National Training Center in the early 80's where we wandered like lemmings into the kill zone and were amazed that our lights were turning on. [It was] different, very different at that level. So we'll start to get back to that, and next year, actually this year at the first of October for fiscal year 2012, we'll have as many Brigades available and not on a patch chart for Iraq and Afghanistan than we will on the patch chart. That gives us the capability now to start building up some capacity.

So, by the end of this fiscal year, we'll be in a much, much better position than we were four years ago and we're ready to step off and start doing some of the things that we have wanted to do over the past several years, but just haven't had the ability to do it.

Now we go forward from this point of "relative" balance....the staff is always calibrating me. You know the chartography in the Pentagon, where you have the chart with the scales like this' (indicating even scales) The staff keeps reminding me, "Chief they are a little wobbly." (indicating moving scales ) They are not precise. But, we're in a much better place than we were in 2007.

Now let me say a couple of words about the environment. I think this is critical. The war's not over. Just because we're going to come out of Iraq at the end of this year, this war is not over. We're involved in a long-term ideological struggle against a global extremist network that attacked us on our soil and tried to do it three times last year. These folks are not going to quit, and they are not going to give up. So we just can't say "we're done." They are coming after us, so we have to prepare ourselves for that. Given the fact that we are at war, and you've heard me talk about these trends - globalization, technology, demographics, safe havens, weapons of mass destruction - all of those things are still out there. It gives us a very complex and unpredictable future, and that's what we're designing ourselves for.

We say we want to build a versatile mix of tailorable and networked organizations that are operating on rotational cycle. Why' Because the three major things we have to do is to continue to (1) provide forces to succeed in these protracted kind of insurgency operations (Iraq and Afghanistan), and then we have (2) to build a capability to hedge if something unexpected happens - a capability that we haven't really had or haven't been able to execute on the timeline that we would want in the last 5 or 6 years. And lastly, we have to (3) do both of those things at a tempo that is predictable and sustainable for the All-Volunteer Force. Just a reminder now: this is the longest this country has been at war with an All-Volunteer Force ... we are in unchartered territory. I've talked to some of you around here and [you] know if you asked me in 2007 if we could maintain the pace and tempo that we've maintained, [and still hold volunteer force together], I would say you're "nuts." So, it is a great tribute to the men and women of the armed forces that [we've been] able to do that.

As we look out there -- at the environment -- and what we're building the Army to do, I see that our greatest challenge over the next three to five years is going to be to maintain our combat edge while we reconstitute this force and continue to build resilience for the long haul. Those are three challenges that can be competing, and I think you can see that. Let me just say a word about each of them. But the other part of that challenge is we are going to have to execute those things in an era of declining resources.

This is not new news. Some of you might have been here last year [at the AUSA ILW Breakfast] when I talked about the two Battalions coming back -- two Battalions in the same motor pool. "Do you remember that' ... We've saying this since 2008 as we looked at what was coming and we decided we needed to prepare ourselves for the budgets to start coming down. It is not rocket science. You go back and look at the defense budget since the end of World War II and the curve is almost as symmetrical as -- remember that "Band of Excellence" slide in training manual -- it's almost that symmetrical. And -- no question -- we are on the down side of a peak, and so we will continue to go down. The resources are going to come down, so we have to prepare ourselves to do that. But, the resources are coming down in a period while we're still at war, and that's why we have to be very, very careful.

Now, maintaining a combat edge: We have a combat-seasoned force, but what is going to happen now is that we have about half our available pool [of forces] going to combat and half not [going to combat]. The good news is they have time to reconstitute and prepare to do other things, and that is what they need to be doing. But, already out at Leavenworth, the Majors are figuring out and want to avoid having a "have or have not" culture - those that go and those that don't. I remember when I was a Lieutenant Colonel at the Pentagon working for [General] Carl Vuono. We were having a similar problem coming out of Desert Shield and Desert Storm, but we will work our way through that.

The other piece about maintaining our combat edge is continuous adaptation because of the uncertainty and complexity of the environment. I believe we are in a period of continuous and fundamental change, and what I tell the folks around the Army is that if you're uncomfortable with that, then you're in the wrong place. Because that is what we do, and we have to take the lessons we get out of Iraq and Afghanistan everyday and adapt them to bring them into the force -- to our organization, to our equipment, to our doctrine. But this is going to be a continuous process because nothing focuses the mind like war. We need to take advantage of that.

The other thing we have to do to maintain our combat edge is to consolidate these gains we've made with the Reserve Component. I think I've said this a couple of times [in] the last couple of years: I've never seen the relationship between [the Active and Reserve] components better than it is now. Half of our Guard and Reserves are combat veterans. That is a fundamentally different Army.

Lastly, we will get back to that full spectrum training we were talking about: having the capability to operate across the full spectrum of conflict. We adapted in 2008 to the doctrine of Full Spectrum Operations, but I will tell you we really haven't had the opportunity to look at, think about, and practice that in environments other than Iraq and Afghanistan.

The second point then, after maintaining the combat edge, is Reconstituting the Force. I see two elements to this: One is the continuous reset of forces today coming and going from Afghanistan [and Iraq]. We have over 100,000 Soldiers [there] today, and they will [need to] continue to be reset over time. Then there's the reconstitution process: the capability to build readiness in the next-to-deploy forces; to have the capability to surge forces that are not available in the pool to another contingency. We haven't had that ability in five or six years and we need to restore that capability over time. That is a function of getting some flexibility back in the personnel system, in the equipment system, and getting folks on the ground for full spectrum training.

The third part of the equation is building resilience for the long haul. We have been at war for almost a decade. The cumulative effects of [this] war are still with us -- and they are going to be with us for awhile, so we have to deal with those effects of the last decade of war. We have great programs put into place.

I mentioned the Comprehensive Soldier Fitness program last year. Last year at this time we had 100,000 Soldiers take the Global Assessment Tool [GAT] and give them a strength assessment in the five key areas. Almost a million Soldiers have taken the GAT today. Our program on Health Promotion, Risk Reduction, Suicide Prevention is getting some traction. I hate to knock on wood here, [but] as I look at the suicide rates for the end of the year, for the first time it appears we have slowed the rate of Active Duty suicides since 2004. We are certainly not out of the woods by any stretch of the imagination. But, with all the huge effort we are putting into this, we are starting to see the slowing of the rate of suicide of Soldiers on Active Duty and that is a good thing.

We are going to continue our efforts in the Army Family Covenant. One of the things I went around talking to the Families [about]: I told them we have protected family programs [from budget cuts]. They are convinced that the first things to go as the budget comes down are the family programs. I've committed to them that we are not going to do that.

We are continuing our efforts with [our] Wounded Warriors. We are working with OSD personnel and readiness folks. We've got to fix the Physical Disability Evaluation System. We have worked at and played at it at the margins, but I have come to the conclusion that we're not going to affect the output by putting more resources against it. We are throwing all kinds of resources at it, but we are not improving the time that Soldiers take to process in the system. We need fundamental changes to work that out.

Lastly, our Survivor Outreach Services Program for Families [of our] Fallen. We can never forget them. Over 20,000 Families have lost loved ones since September 11th, [2001]. It is our commitment that we will never forget them.

As we look to the next three to five years, [we will work on] maintaining our combat edge as we reconstitute the force and build resilience for the long haul. Those are the things we need to work on. That is the direction we're headed, and it's largely through the effort of the staff here that we have accomplished so much in such a difficult period of time.

When you think about the list of things I talked about -- then throw in BRAC: 380,000 Soldiers, Families and Civilians moving around the country -- it will all done here by September 15th, [2011]. No other organization in the world could have done that at the same time, especially while we're deploying 150,000 Soldiers over and back to Iraq and Afghanistan.

So, I couldn't be prouder to be a part of this great organization. I look forward to the year ahead.