Department of Defense Priorities and Challenges

John P. RothDeputy Comptroller (Program/Budget)

7 March 2005

2

DoD Priorities and Challenges

Fiscal pressures and challenges

DoD Program/Budget process

USD (Comptroller) responsibilities and initiatives

3

Fiscal Pressures and Federal Spending

Federal budget deficit and escalating mandatory spending is putting heavy pressure on discretionary spending

Projected outlays for FY 2006-10

National Defense discretionary: +$38 billion

Non-defense discretionary: +$3 billion

Mandatory spending: +$406 billion

Net interest: +$136 billion

(Projections do not include costs for global war on terror)

4

On-Budget Surplus/Deficit(FY 2006 Budget projections, excluding Social Security)

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

600

FY90 FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 FY10

Fiscal Years

$ Billions

Actual

Billions of dollars

Projected

5

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

3000

79 90 00 05 10

Trends in Federal Spending(Outlays in billions of dollars)

Nondefense

Defense

Mandatory

Discretionary

Total Federal Outlays

Net Interest

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Department of Defense Topline(Discretionary budget authority $ in billions)

*FY 05 FY 06 FY 07 FY 08 FY 09 FY10FY11

DoD (051) 400.1 419.3 443.1 462.4 482.0 492.1502.3

FY 2006 DoD budget:

Increase over FY 2005: 4.8 percent

Increase over FY 2001: 41.4 percent

*Excludes supplemental appropriations

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DoD Topline Chronology (Discretionary budget authority $ in billions)

FY01 FY02 FY03 FY04 FY05 FY06

Baseline 296.5 327.5 375.2 377.1 400.1 419.3

Enacted Supplementals: 19.2 17.5 62.3 90.1 76.0

Program 5.5

GWOT 4.3 3.5 62.3 65.1 74.9

GWOT 9.4 14.0

GWOT (Title IX) 25.0

Hurricane 1.1

Total Enacted w/ Supps 315.7 345.0 437.5 467.2 476.1 419.3

Total GWOT $ Enacted FY 2001-2005 = $258.5 Billion

8

0

2

4

6

8

10

60 70 80 90 00 06

DoD Outlays as Percent of GDP

Fiscal Years

8.98.2

4.6

FY 06 = 3.3%

6.76.0

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DoD Outlays as Percent of Federal Budget

0

15

30

45

60 70 80 90 00Fiscal Years

43.4

22.5FY 06 = 16.5%

27.3

20.7

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DoD Budget Reflects Fiscal Realities

President’s FY 06-11 DoD topline $25B lower than previously

Programs curtailed to keep within topline

Rigorous agenda planned for 2005 Quadrennial Defense Review

Action continuing to get greater security from each budget dollar:

New generation of weapons with greater capabilities, less manpower

Changing how DoD does business across all functions: acquisition, human resources, infrastructure, financial management, and more.

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Action on Budget-Related Challenges

Military Personnel and health care costs: Working with Congress and internally to moderate growth

Defense requirements: Continuing rigorous assessment based on capabilities needed, looking forward – not clinging to the past

Delivery of support services: Continuing to streamline and integrate

Infrastructure: Advancing the restructuring of overseas basing and realigning of US bases through 2005 BRAC process

Personnel: Moving military out of non-military billets, overhauling management of civilians with National Security Personnel System, and innovating on compensation, recruiting, and retention

(These are challenges cited by Government Accountability Office in two March 2005 reports on high risk fiscal challenges.)

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DoD Program/Budget Process

Goals Focus on capabilities – not prejudge how best to achieve them Balance near-term readiness and long-term modernization Emphasize joint requirements and joint operations Support the President’s and Secretary’s priorities Ensure that planning guidance is followed Assess program performance and effectiveness Use program assessment to inform budget decisions and improve

program performance

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DoD Program/Budget Process – 1st Year

BudgetExecution

DevelopNational Security

PlansServicesDevelop

ProgramsBudgets

OSD/OMB ProgramBudget Review

CongressionalReview

SubmitBudget

to Congress

Winter-Spring

Spring-Summer

Summer-Fall

Winter

Spring-Summer

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DoD Program/Budget Process – 2nd Year

BudgetExecution

Off-Year Defense

Planning Guidance, as

necessary

ServicesPrepare Program Change Proposals/

Budget Change Proposals

OSD/OMB Program/Budget

ExecutionReview

CongressionalReview

SubmitBudget

to Congress

Winter-Spring

Summer

Fall-Winter

Winter

Spring-Summer

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Supporting SecDef Priorities in FY 06 Request

Successfully pursue the Global War on Terror FY 06 budget request complements FY 05 supplemental

Added funding for Army restructuring, chem-bio defenses, language skills

Strengthen joint warfighting capabilities Make hard choices to fund most pressing priorities

Accelerate to new generation of systems

Transform the joint force Restructure Army & Marines to gain more units, more deployable

Restructure US global posture and basing

Improve manning/take care of our forces Improve pay, allowances, health care, housing, and facilities

Mil-to-Civ conversions and rebalancing to increase high demand skills

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USD (Comptroller) Responsibilities

Ensure DoD follows Secretary of Defense policies

Serve as the DoD Chief Financial Officer

Prepare annual DoD budget and financial statements

Present/defend budget to Congress

Implement/enforce congressional direction

Formulate and enforce financial management policies

Improve DoD business/financial management

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Transforming DoD Business Management

Business Management Modernization Program (BMMP)- Overhaul DoD management processes- Consolidate and integrate information systems- Facilitate auditable financial statements

Budget execution- Achieve greater ability to shift funding to address new requirements- O&M funds available for 2 years

Defense Business Board Metrics: to measure and improve program performance Management Initiative Decisions (MIDs)

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FY 2005 Supplemental Request

To be included in request, funding had to be:

Vital, urgent, and temporary in nature

Incremental costs related to Global War on Terror

For funding executable in FY 05

Issues on inclusion in supplemental appropriations

Army/USMC restructuring

Army end strength above baseline (both FY 05 and FY 06)

Military construction -- urgent and/or temporary?

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Department of DefenseWithin the Executive Branch

PRESIDENT

Office of Manageme

nt& Budget

Secretary of Defense NationalSecurityCouncil

Office of the Secretary of

Defense• Policy• Acquisition• Intelligence• Comptroller• Personnel & Readiness• Legal• Public Affairs• Congressional Affairs

Combatant Commanders

Europe Special Operations Joint ForceSpacePacific TransportationSouthern StrategicCentral Northern

MilitaryDepartme

ntsArmyNavyMarine CorpsAir Force

Chairman,Joint Chiefs

of Staff--------

Joint Staff

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Office of the Secretary of Defense

Secretary of Defense/Deputy Secretary of Defense

Secretary of Defense/Deputy Secretary of Defense

Under Secretaryof Defense

Policy

Under Secretaryof Defense

Policy

Deputy ChiefFinancial Officer

Deputy ChiefFinancial Officer

Deputy Comptroller(Program Budget)

Deputy Comptroller(Program Budget)

DirectorProgram, Analysis &

Evaluation

DirectorProgram, Analysis &

Evaluation

Under Secretary of Defense

Acquisition,Technology & Logistics

Under Secretary of Defense

Acquisition,Technology & Logistics

Under Secretary of Defense

Personnel & Readiness

Under Secretary of Defense

Personnel & Readiness

Under Secretary of DefenseComptroller/Chief Financial

Officer

Under Secretary of DefenseComptroller/Chief Financial

Officer

Under Secretary of DefenseIntelligence

Under Secretary of DefenseIntelligence

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Secretary of Defense President Congress OSD CJCS Staff Party Leadership

Army Navy USAF OMB Authorization

Combatant Cdrs Appropriations

External Influences

Defense Budget Influences

global events economy & fiscal conditions public attitudes

media industry interest groups constituencies