mr. mark peterson u.s. special operations command chief financial officer/comptroller

UNCLASSIFIEDUNCLASSIFIED


The “New” Fiscal Environment

(The anticipated fiscal environment)

ASMC Luncheon September 2009

Mr. Mark Peterson

U.S. Special Operations Command

Chief Financial Officer/Comptroller

The overall classification of this briefing is:

Unclassified

US Special Operations CommandUS Special Operations Command

Ver 4c



The Economy is a National Security Issue 2

The Future has arrived (Sooner than expected !)

David WalkerGAO Comptroller General

Nov 98 – Mar 08

"I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility.”

CBS 60 Minutes, March 2007

“The fiscal wake-up tour”



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The Fiscal Environment

Federal

Department of Defense

The New Administration



THE FEDERAL VIEWTHE FEDERAL VIEW

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The United States Constitution entrusts the `power of the purse' to the Legislative Branch of the United States.

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• Article I, section 8: Congress is empowered “[t]o lay and collect Taxes, Duties, Imports, and Excises to pay the Debts and provide for the common Defense and General Welfare of the United States.”

• Article I, Section 9: “[n]o money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”



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2009 Federal BudgetDiscretionary vs. Entitlement

Sixty-two percent of the Federal Budget is mandatory spending (including interest)

DOD Budget is more than 56% of all Federal discretionary spending----------------------------

Some parts of DoD “Discretionary” spending acts like an “entitlement” (e.g., Military Health Care and Retirement)

Source: FY 2009 Budget of the United States Government

Approximately $3 Trillion Dollars



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The Fiscal Environment(Historical View compared to GDP)

4% GDP $568B

Do

wn

ward

Pres

sure



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Key Players in the Federal Discussion

“Peter has been one of our nation’s leading voices on budgetary issues…he doesn’t need a map to tell him where the bodies are buried in the federal budget. He knows what works, and what doesn’t.” President Obama commenting on Mr. Orszag as the new Director of OMB, November 25, 2008

Director of OMB Peter Orszag President Obama



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Project for National Security Reform (PNSR)

The Project for National Security Reform recently published its report highlighting the need for a “whole-of-government strategic planning document that outlines national objectives, priorities, and specific actions for improving interagency coordination and operational planning.

- Resource implications: Shift of DoD $$ to other Agencies

National Security Advisor James Jones

Dennis Blair & James Locher III

Key participants of the PNSR effort included retired Admiral Dennis Blair, Director of National Intelligence and retired General Jim Jones, National Security Advisor

“Our country is wearing concrete shoes in a security environment that demands speed and agility. The need for fundamental reform is urgent and the consequences of inaction are dire.” James Locher III, PNSR Executive Director



Fiscally speaking: we are in “uncharted” waters as a nation 9

Federal Summary

The National Economy is a National Security Issue

Wake-up call came early: Recession and failure of the mortgage and banking industry. Unemployment will continue to rise.

Short Term: The domestic economy will take priority over all other funding issues in the Federal Government. All Budget decisions will be heavily influenced by the Recession Next major issue will be the FY 2011 President’s Budget (How much can

we afford for Defense - -and what kind of Defense?) Anticipate a historic Budget fight for PB-2011 as Agencies wrestle over

scarce dollars

Long Term: Entitlement spending must be addressed. Health care reform will be initial focus with tax increases and “means testing” an inevitable part of the equation (personal opinion).

Funding the “full instruments of national power” for security issues will be a theme in the FY 2011 President’s Budget



THE DEPT OF DEFENSE VIEWTHE DEPT OF DEFENSE VIEW

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President Obama meets with the Chairman of the Joint Chiefs of Staff and the Service Chiefs on January 28, 2009.

“It’s bad….but not nearly as bad as the economy”

- Informal remarks by President Obama after receiving briefs on the current situation in Iraq and Afghanistan with the Joint Chiefs of Staff. ‘Meet the Press’ 2/2/09

President meets with Senior military leaders



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FY 2010 DoD Budget(Current dollars in Billions)

Source: DRDW Warehouse Database FY 2001 – FY 2011, Government Accounting Office FY 2001- 2009 GWOT

GWOT Request Information Database (GRID), FY11 Request in PresBud “The New Era” Feb 2009

Numbers may not add due to rounding

DoD Base Budget & Non-GWOT Supps.

GWOT FundingPBR 11 Position

Totals

Base FY 2001 – FY 2009 3,639

GWOT FY 2001 – FY 2009 884

Enacted Total 4,519

FY 10 / 11 OCO Request



04/21/23 06:54 AMDRAFT PRE-DECISIONAL13

DoD Top-Line BudgetDoD Top-Line Budget1948 – 20101948 – 2010

250

500

750

1948 1958 1968 1978 1988 1998 2008

(FY 2009 $ in Billions)

(FY 2009 Constant Dollars in Billions)

Notes: FY 1949 – 2010 data includes supplementals, as applicableSource: Department of Defense National Defense Budget Estimates for FY 2008, Budget Authority in 2009 Constant Dollars

0

Korea

Vietnam

Reagan Build-Up

9-11, Afghanistan,

Iraq

Cold War Ends



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200

300

400

500

600

700

800

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Co

ns

tan

t F

Y 0

8 $

(B

illio

ns

)

Actual

President’s DoD Budget Submit with FYDP Projections

Supplemental/GWOT

Carter Reagan I Reagan II G. Bush Clinton I Clinton II G.W. Bush I G.W. Bush II

Fiscal Year President submitting budget

Obama

High Point

OverseasContingencyOperations



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Key DoD Leader perspectives

“We must have the courage to make hard choices. Any necessary changes should avoid across-the-board adjustments, which inefficiently extend all programs.” Secretary Gates testifying before the SASC on Jan 29, 2009. {Referring to FY-10 budget discussions and noting procurement and acquisition reform as one of the biggest challenges facing the pentagon}

Admiral Mullen, Chairman of Joint Chiefs of Staff

Robert Gates, Secretary of Defense

‘The global financial crisis is threatening U.S. security options abroad. The financial meltdown will force a delicate balance between national security and federal budgets.’ Paraphrased by USA Today, Feb 3, 2009

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“We’ve got to fund the wars we are in. The most expensive part of our budget is our people, and there isn’t a lot of flexibility with respect to people unless you start reducing forces.”Adm Mullen indicating that the procurement budget will likely be the bill-payer as the Department puts its PB-10 budget together.



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ASD SO/LIC&ICMichael Vickers

“Rebalancing the overall Defense portfolio to ensure that the joint force is as effective in irregular warfare as it is in traditional warfare requires focused efforts in three key areas:

(1) Growing SOF capacity while maintaining quality standards

(2) Reorienting general purpose force (GPF) capabilities toward irregular warfare while maintaining the capability of GPF

(3) Promoting increased integration between SOF and GPF”

Mr. Vickers congressional testimony before the HASC subcommittee on terrorism and unconventional threats and capabilities, February 2008

“The defining principle of the Pentagon’s new National Defense Strategy is balance. The U.S. cannot expect to eliminate national security risks through higher defense budgets…The military and civilian elements of the U.S. national security apparatus have responded unevenly and have grown increasingly out of balance.” - SECDEF SECDEF Gates from, “A Balanced Strategy: Reprogramming the Pentagon for a New Age” Foreign Affairs, Jan/Feb 2009

Key OSD Leader perspectives

SECDEF Gates andPrior SECSTATE Rice



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New Administration Transition Brief(Five primary cost drivers requiring attention)

Manpower & Entitlements Fully loaded personnel costs account for 50% of the DoD baseline

budget. Healthcare costs (for active duty and retirees) noted as rising at an unsustainable rate.

O&M costs continue to increase Improve supply chain and energy consumption

Excessive Overhead (tooth-to-tail ratio) – 42% rate Includes management functions, personnel support, central training –

considered to be “taxing combat capability.”

Force Structure/End-Strength Adjust force for new “strategic intent” Primary QDR issue – Ms. Flournoy Influence

RDT&E and Procurement Acquisition Reform (again) “Cannot reset force, modernize, and transform all portfolios” – tough

choices required

USD Policy Michelle Flournoy



The economy and will drive a smaller DoD Budget 18

DOD Summary

Serious divestment discussion required (process used?) Greater accountability of resources (prior, current, future funds) Acquisition Reform will be highlighted (again)

Reduction in major procurement accounts “Hollow Force” versus “Smaller Force” ?

Preparation for a different kind of war (6 points) Influence the force structure through the next QDR What does “Rebalance” really mean? Affordability will be a major factor Interagency role will be revisited Role of Guard and Reserve forces Joint focus with serious look at “roles and missions”

– Interdependent to provide true joint capabilities



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Questions ?

BGEN Charles G. Dawes, General Purchasing Agent for the Army Expeditionary Force, testifying before Congress, 1921

“Sure we paid…we would have paid horse prices for sheep if sheep could have pulled artillery…It’s all right now to say we bought too much vinegar or too many cold chisels, but we saved the civilization of the world…Hell and Maria, we weren’t trying to keep a set of books. We were trying to win a war!”

You will always be asked to give an account of how you spent your funds

mr. mark peterson u.s. special operations command chief financial officer/comptroller

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