DEPARTMENT OF DEFENSE APPROPRIATIONS FOR 1967 MONDAY, MARCH 7, 1966. OPERATION AND MAINTENANCE Mr. MAHON. This morning the committee meets to begin consideration of the fiscal year 1967 estimates for title II of the Defense appropriation bill entitled "Operation and maintenance." The total requested for fiscal 1967 is $15.7 billion, an overall total increase of $701.1 million over funds proposed to be available for fiscal year 1966. STATEMENT OF THE COMPTROLLER, OSD As we have done in previous years, we shall insert in the record at this point the statement of the Assistant Secretary for Defense (Comptroller), Mr. Anthony, which gives a rather complete breakdown of the various budgetary items for which operation and maintenance funds are required. The statement also provides statistical data supporting the budget request. (The statement follows:) Mr. Chairman and members of the committee: This opportunity to present an I overall statement and supporting data describing the operation and maintenance appropriation requests for 1967 is indeed welcome. This statement is intended as a preface to the detailed statements and presentations that will be given ! subsequently by each of the Service and Defense agency spokesmen and, therefore, will be concerned only with major Defense-wide matters. APPROPRIATION COVERAGE Title II is composed of 11 appropriations which provide for the operating costs of the Department of Defense other than those financed by the military personnel appropriations. Upon the adequacy of these funds depend the ability of our forces to react quickly, deploy effectively, and to maintain their overall state of readiness. In addition to financing the operation of force units, whether in training, in combat, or otherwise supporting the Nation's military posture, these appropriations provide for the individual training of military personnel in basic military training, and in specialties from aircraft pilot to cook; for their medical care, troop housing and other personnel support; for the operation of the logistic support system for supply, transportation, and materiel maintenance; for the complex of command control, administration, and related communications; and for the operation of a base establishment in support of those functions. (1) Table 1 shows the personnel strengths, force levels, facilities, and activity rates which are the fundamental determinants of operation and maintenance requirements. The increased magnitude of the forces and operations to be supported in fiscal years 1966 and 1967 is indicated by the following comparison of these data with the estimates which were presented one year ago in connection with the fiscal year 1966 President's budget: The distribution of operation and maintenance funds among the principal pro grams of the Department of Defense is shown in table 2, and summarized below The impact of southeast Asia operations is indicated by the fact that about £ percent of the $3.1 billion increase in operation and maintenance costs betwee 1965 and 1967 is for General Purpose Forces and the related General Suppo programs such as training, medical, transportation, and other logistic suppor COMPARISON OF FUNDS The fiscal year 1967 request for new obligational authority under title II tota $15.7 billion. Attached hereto are financial summaries which: 1. Compare the fiscal year 1967 request with prior years, including the nece sary detail of financing adjustments (table 3-A). 2. Compare the estimates of expenditures on the same basis as the comparis of new obligational authority (table 3-B). The current fiscal year 1966 requirement of $14.9 billion is $2.4 billion high than the $12.5 billion initially appropriated. This increase consists of the $2 billion in the supplemental for southeast Asia operations, and $0.1 billion for t civilian pay raises provided by the Federal Employees Salary Act of 1965. The operation and maintenance appropriations increase by another $0.8 billion in fiscal year 1967 to a total of $15.7 billion. Again, increased costs for southeast Asia support are the most significant factor. Since during fiscal year 1966 we are budgeting for an increase in our southeast Asia deployments and our total military strength, the operation and maintenance appropriation increases directly reflect the tempo of the operating forces and the personnel support workload. For instance, direct support of Army and Marine Corps operating forces accounts for $248 million of the $789 million increase in fiscal year 1967. Navy, Marine Corps, and Air Force aircraft fuel costs are estimated to be up about $15 million. Ship operating supplies increase by about $12 million. Significant increases for depot-level maintenance include $84 million for ship overhauls and alterations, and $22 million for Air Force aircraft and missiles. Estimates for personnel-oriented programs such as training, education and medical support are up substantially in fiscal year 1967 both to provide for activities in Vietnam and for the much larger number of military personnel and dependents overall. Obligations for medical care are estimated to be about $89 ! million higher in fiscal year 1967 than in fiscal year 1966. Individual training and education program increases of the Services total more than $67 million. The fiscal year 1967 increases in logistic support programs appear relatively small in the operation and maintenance appropriations; this is because so many one-time costs are being incurred in fiscal year 1966 to ready and ship equipment and supplies for the initial buildup in southeast Asia. Secretary McNamara, in his statement on the fiscal year 1966 supplemental for southeast Asia, stated that "*** the maintenance of separate financial and logistic systems for U.S. and military assistance forces is proving to be entirely too cumbersome, time-consuming, and inefficient." In order to minimize this difficulty, it is proposed that "*** funds required for the support of the forces of South Vietnam and other free world military assistance forces in that country would be authorized for and appropriated to the accounts of the military departments. The remainder of the military assistance program would be legislated separately." This change in military assistance support accounts for $192 million of the fiscal year 1967 increase in the operation and maintenance appropriations; that is, these funds, which would have been in the military assistance program, have been budgeted under the operation and maintenance appropriations of the services. 1 In addition to the costs I have mentioned incident to support of southeast Asia operations, there are also increases in the costs of operating the worldwide base complex on which forces are housed and trained. There has been no letup in our effort to eliminate unnecessary costs in these operations. In December, the Secretary announced additional base reduction actions as part of that effort. Anticipated savings from these and other economies have been taken into account in arriving at the budget estimates. One major action recently implemented in the program to increase efficiency results in an increase in the operation and maintenance appropriations, although Do increase in the total operating costs of the Defense Department in fiscal year 1967. This is the program to replace some 74,000 military personnel with 58,000 civilians where advantageous from the viewpoint of effective use of military skills. Most of the civilians added under this program will be paid from the II operation and maintenance funds. The net fiscal year 1967 cost in operation and maintenance appropriations as a result of this program is estimated to be $230 million. Another $18 million will be paid from other appropriations. These costs are offset by savings of $248 million in the military personnel appropriations. In fiscal year 1966 $27 million are programed in operation and maintenance funds, and $3 million in other appropriations, offset by savings of $41 million in military personnel costs. Another cause of increased O. & M. costs is the civilian pay raise which became effective in October of 1965. The full-year cost of the pay raise in fiscal year 1967 will require $46.6 million more than in fiscal year 1966. AREAS OF SPECAL INTEREST I shall next discuss briefly certain major aspects of the operations and maintenance areas in which the committee has expressed particular interest in the past. Civilian personnel The recent downward trend in the number of direct-hire Federal civilian personnel employed by the Department of Defense has been reversed because of the requirement for personnel to support the increased forces and tempo of operations in 1966 and 1967. In addition, the military-to-civilian conversion, which I have already mentioned, and the replacement of contractor technical services personnel with direct-hire civilians are other actions which, although they increase the numbers of civilian employees, will produce lower overall cost. The patern of direct-hire civilian employment for the last several years and the differences between the current program and last year's budget are as follows: The following table adjusts the 1966 and 1967 figures so that they are com parable with those of 1965: The table shows that the downward trend of employment maintained since fisca year 1962 is continuing except for the unusual demands of the southeast Asi situation and programs for replacing military and certain contract personnel b civilian Government employees. That downward trend is in large part due to pas and planned base reductions and consolidations and to the regular review of pr gram requirements. In addition to eliminating functions and programs whic do not contribute significantly to our defense efforts, the Secretary of Defense has for several years established goals for increased productivity of the civilians employed by the Department of Defense and has directed corresponding reductions in employment. Due to the early retirements in calendar year 1965 resulting from recent legislation, the Department of Defense is anticipating a reduction in employment through elimination of the higher than usual number of vacancies which need not be filled. The combination of these factors is expected to reduce by 1% percent, without any effect on programs, the employment which would otherwise have been required. More detailed personnel data are shown in table 4-A, which summarizes the total direct-hire civilian personnel by service, and table 4-B which indicates direct-hire civilian personnel paid from operation and maintenance appropriations. TRAVEL COSTS In view of the committee's interest in travel costs, we have again included a summary of the amounts in operation and maintenance appropriations for object class 21, "Travel and transportation of persons." The total amount decreases by $8.5 million between fiscal years 1966 and 1967. This is the net effect of slight increases in Army related to support of deployed forces for the full year, which are more than offset by a decrease in Air Force resulting from a reduction in unit rotations and exercises. Departmental administration Table 6 is a summary of the military and civilian personnel and costs which are identified with the centralized direction and administration of servicewide or Defense-wide activities and programs. The total cost of departmental administration is estimated to increase by about $10 million between 1966 and 1967, of which $8.6 million is for the pay of military and civilian personnel. Most of this increased cost is due to the change in average salaries caused by such factors as normal in grade advancement and the fullyear effect in 1967 of the recent military and civilian pay raises. The centralization of functions in the Defense agencies, the full-year costs of southeast Asiarelated employment, and new management improvement programs make up the rest of the increase. Aircraft and flying hours Operation of aircraft is another major program in which the committee has expressed continued interest. Table 7 ("Active Aircraft Inventory") and table 8 ("Flying Hours Supported From Operation and Maintenance Funds") show the significant data in this area. Of particular interest are the rapid buildup in the Regular Army inventory and the considerable increases in the flying hour programs for the active forces of each of the services. The planned fiscal years 1966 and 1967 flying hours exceed the fiscal year 1965 actual by 12 and 21 percent, respectively. Aircraft overhaul Tables 9 and 10 summarize the distribution between Government and contract facilities of depot-level maintenance and modernization performed on aircraft, their engines, and accessories. Table 9, which covers just the operation and maintenance appropriations, indicates that the SEA-related workload in fiscal year 1966 was placed primarily at Government facilities to respond to a rapidly increasing requirement, much of which must be met by overtime. These Government depots are maintenance oriented, with approximately 99 percent of their work funded from operation and maintenance appropriations. As the workload levels off in fiscal year 1967, the in-house/contract proportions return to the fiscal year 1965 percentage distri bution. |