Authorization and Appropriations for FY2005: Defense
Released: 2004-12-14T00:00:00

Most Recent Developments

Early in the morning on October 7, 2004, a conference agreement on the FY2005 defenseauthorization bill ( H.R. 4200 ) was announced. The House approved the conferencereport (by a vote of 359-14) on October 8, and the Senate approved it (by unanimous consent) onOctober 9. The President signed the bill into law ( P.L. 108-375 ) on October 28. On the key issues,conferees rejected a House provision to delay military base closures; authorized purchases, but notleasing, of Boeing KC-767 or other refueling aircraft; increased statutory caps on Army and MarineCorps active duty end-strength in FY2005 by 23,000; rejected a House provision that would limitpurchases of defense goods from nations that require offsets for purchases of U.S. weapons; andincreased benefits for 62-and-older survivors of military retirees. Earlier, on July 22, 2004, both theHouse (by a vote of 410-12) and the Senate (by a vote of 96-0) approved a conference agreement onthe FY2005 defense appropriations bill ( H.R. 4613 ). The President signed the bill intolaw on August 5, 2004 ( P.L. 108-287 ). The conference appropriations agreement provides $416.9billion in new budget authority, including $391.2 billion for regular Department of Defense programsand $28.2 billion in emergency funding, of which $25 billion is for operations in Iraq andAfghanistan. The $391.2 billion in regular defense appropriations is about $1.7 billion below theAdministration request. The energy and water appropriations bill, included in the consolidatedappropriations bill approved in November ( H.R. 4818 ), however, rescinded $300million of regular FY2005 defense appropriations.

Overview: What the Defense Authorization and Appropriations Bills Cover

Congress provides funding for national defense programs in several annual appropriationsmeasures, the largest of which is the defense appropriations bill. Congress also acts every year ona national defense authorization bill, which authorizes programs funded in several regularappropriations measures. The authorization bill addresses defense programs in almost precisely thesame level of detail as the defense-related appropriations, and congressional debate about majordefense policy and funding issues often occurs mainly in action on the authorization.

Because the defense authorization and appropriations bills are so closely related, thisreport tracks congressional action on both measures.

The annual defense appropriations bill provides funds for military activities of theDepartment of Defense (DOD), including pay and benefits of military personnel, operation andmaintenance of weapons and facilities, weapons procurement, and research and development, as wellas for other purposes. Most of the funding in the bill is for programs administered by theDepartment of Defense, though the bill also provides (1) relatively small, unclassified amounts forthe Central Intelligence Agency retirement fund and intelligence community management, (2)classified amounts for national foreign intelligence activities administered by the CIA and by otheragencies as well as by DOD, and (3) very small amounts for some other agencies.

Several other appropriations bills also provide funds for national defense activities of DODand other agencies -- see Table A-2 in the Appendix for a list and for budget amounts. This reportdoes not generally track congressional action on defense-related programs in these otherappropriations bills, except for a discussion of action on some Department of Energy nuclearweapons programs in the energy and water appropriations bill.

Status of Legislation

Congress began action on annual defense authorization bills the week of May 3, 2004. TheHouse Armed Services Committee began subcommittee markup of its version of the FY2005national defense authorization ( H.R. 4200 ) on May 5, completed full committee markupon May 12, and reported the bill on May 13 ( H.Rept. 108-533 ). The House began floor action onthe bill on May 19 and approved it on May 20. The Senate Armed Services Committee completedfull committee markup of its version of the bill ( S. 2400 ) on May 7 and issued a reporton May 11 ( S.Rept. 108-284 ). Floor action on S. 2400 began in the Senate on May 17, andresumed on June 2 after the Memorial Day recess. Debate continued through June 23, when the billwas passed by a vote of 97-0. The Senate debated the bill for a total of four weeks.

Action on the annual defense appropriations bills began on June 2, when the House DefenseAppropriations Subcommittee completed marking up its version of the bill. The full committeemarked up the bill on June 16 and reported H.R. 4613 on June 18 ( H.Rept. 108-553 ). The full House debated and passed the bill by a vote of 403-17 on June 22. The SenateAppropriations Committee marked up its version ( S. 2559 ) on June 22, and filed areport on the bill on June 24 ( S.Rept. 108-284 ). In floor action, the Senate took up the House-passedversion of H.R. 4613 on June 24, incorporated the reported version of S. 2559into H.R. 4613, considered amendments, and then passed H.R. 4613, asamended, by a vote of 98-0. A conference report was filed on July 20, 2004 ( H.Rept. 108-622 ) andapproved both in the House and in the Senate on July 22. The President signed the bill into law onAugust 5, 2004 ( P.L. 108-287 ).

Earlier, the Senate passed its version of the FY2005 concurrent budget resolution( S.Con.Res. 95 ) on March 12, and the House passed its version( H.Con.Res. 393 ) on March 25. A conference agreement was filed on April 10 andapproved in the House on April 11 and "deemed" to be in effect on the House side on April 19, 2004( H.Res. 649 ). The Senate has not taken up the conference agreement, but theconference agreement on the defense appropriations bill included a provision deeming amountsapproved in the budget resolution for discretionary programs to be in effect in the Senate forsubsequent action on appropriations bills.

Table 1a. Status of FY2005 Defense Appropriations, H.R.4613

Note: In floor action, the Senate substituted its version of the bill, S. 2559, into H.R. 4613.

Table 1b. Status of FY2005 Defense Authorization: H.R.4200, S. 2400

Highlights of Final Conference Agreements

Defense Authorization Conference Agreement

The conference on the defense authorization bill had to resolve differencesbetween the House and the Senate on a number of major policy issues. What followsis a brief review of the issues, followed in each case by a summary of how theconference agreement of October 7 addresses them. For more extensive backgroundon these issues, see the "Issues for Congress" section below.

Funding for operations in Iraq and Afghanistan. Theappropriations conference agreement provided $25 billion in emergency funding foroperations in Iraq and Afghanistan. The remaining issue for the authorizationconference is whether to add reporting requirements. The Senate version of theauthorization requires quite extensive additional reporting on operations in Iraq inparticular. Authorization conference outcome: Authorized $25 billion, asexpected, including $435 million for body armor, $572 million for up-armoredHumvees, and $100 million for bolt-on armor. Requires a number of reports,including quarterly accounting for operations conducted as part of the Global War onTerrorism, a report on the post-major combat operations phase of Operation IraqiFreedom, and a report on training for post-conflict operations.

Oversight of prisoner abuse in Iraq and elsewhere. TheSenate-passed bill includes an amendment proposed by Senator Patrick Leahy thatstates it is U.S. policy not to abuse prisoners in its control and that requires theAdministration to produce a number of documents related to treatment of U.S.-heldprisoners. The House has rejected a number of proposals to require production ofsimilar documents. Conference outcome: Includes a sense of the Congress sectionregarding abuse of detainees, development of a policy to prevent abuse, and reportsto Congress on the policy.

Army and Marine Corps end-strength. The Houseauthorization bill, as reported by the Armed Services Committee and passed on thefloor, increases Army end-strength by 10,000 and Marine Corps end-strength by3,000 in each of the next three years, for a total increase of 39,000. The bill alsoestablishes the new end-strength totals as statutory minimums. In floor action onJune 17, the Senate adopted an amendment by Senator Jack Reed to increase Armyend-strength by 20,000 in FY2005. The House and Senate appropriations billsprovide funds for the higher troop levels within the $25 billion provided for Iraq andAfghanistan. Conference outcome: Agreed to increase Army end-strength by20,000 and Marine end-strength by 3,000 in FY2005 and establishes the increasedtotals as minimums. Also authorizes, but does not require, additional increases of10,000 in the Army and 6,000 in the Marine Corps over the next four years, but doesnot yet establish them as minimums.

Military base closures. The House approved a measure in theauthorization bill that would delay the next round of military base closures, nowplanned for 2005, until 2007, and that would require a number of reports in theinterim. By a vote of 49-47, the Senate rejected an amendment to its version of theauthorization that would have delayed domestic base closures until 2007. This issueis likely to be a major conference item because the Administration has threatened aveto if the final bill includes a delay in base closures. (1) Conferenceoutcome: Does not agree to the House proposal to delay base closures by two years. Requires approval of 7 of 9 commissioners to add a facility to the base closure listthat the White House will propose.

Health care for reservists. In a key floor vote, the Senateapproved an amendment to the authorization bill by Senators Lindsey Graham andTom Daschle to provide health insurance through the military-run TRICAREprogram for all non-deployed reservists and their dependents, with the DefenseDepartment paying the employer share of the costs. Earlier, the Senate ArmedServices Committee had approved a more limited measure to establish a healthinsurance program for non-deployed reservists and their dependents, calledTRICARE Reserve Select. Under the program, employers could agree to pay part ofthe cost of the program, with reservists paying the remaining cost, or reservists couldsign up by paying the full cost. The House authorization includes neither provision. Instead, the House bill establishes a three-year demonstration program for providinghealth insurance through TRICARE for reservists without access toemployer-provided health insurance. The Senate bill also provides for a similartwo-year demonstration program. Conference outcome: Does not approve theSenate proposal to provide TRICARE for all non-deployed reservists. Instead, whoserve 90 consecutive days in active service or more and who agree to sign up for anadditional year or more of service in the reserves one year of access to TRICAREafter demobilization.

Military Survivor Benefit Plan. The House authorizationincludes a measure that was adopted in markup to phase in increased benefits for62-and-older surviving dependents of military retirees to 55% of retired pay (nowprovided to younger survivors) over four years through 2008. The Senate approveda floor amendment to the authorization bill that increases benefits for 62-and-oldersurvivors from the current 35% of retired pay to 45% after September 2008 and to55% after September 2014. Conference outcome: As in the House, phases in full55% benefit level by 2008.

KC-767A tanker acquisition. The House authorizationapproved a measure to require the Air Force to enter into a contract to acquire Boeing767 tanker aircraft. The Senate approved a floor amendment to the authorization billthat establishes quite strict requirements before any funds can be obligated for 767tanker acquisition. Conference outcome: Does not approve the House mandate toenter into a contract for 767s by next March. Repeals the lease-purchase programapproved last year. Instead, prohibits leasing and authorizes multi-year procurementof 100 new aerial refueling aircraft (which could be 767s or an alternative).

Renewal of authorization for public-private partnerships toprovide military family housing. After this year, a statutory cap on funding formilitary housing privatization expires, and virtually all of the congressional defensecommittees called for extending it. Repealing the cap, however, would increasemandatory spending, so advocates struggled to find an offset for the extension -- aneffort to extend the program in House action on the military constructionappropriations bill was defeated on a point of order. Conference outcome: Theauthorization conference agreement repeals the funding cap, offset by savings fromrepealing the KC-767 lease-purchase plan, which CBO had scored as mandatoryspending.

Limits on defense offset agreements and Buy Americanprovisions. The House authorization includes a measure that would prohibit theUnited States from purchasing foreign-made defense items unless the seller agreesto provide trade "offsets" equal, as a share of value, to the offsets the selling nationapplies to purchases from the United States. The provision may be waived if theSecretary of Defense certifies that a purchase is necessary to meet U.S. nationalsecurity objections. In contrast, the Senate adopted an amendment to theauthorization bill by Senator McCain ( S.Amdt. 3461 ) that would allowthe Secretary of Defense to exempt several allies from existing Buy Americanrequirements. Conference outcome: Rejects the House provision that would limitpurchases and substitutes a provision that would require the Secretary of Defense todevelop a comprehensive acquisition trade policy to ensure that U.S. firms are notdisadvantaged by foreign offsets.

Limits on arms sales and technology transfers to China. TheHouse authorization includes one provision that would tighten restrictions on transferof technology with potential military utility to China by U.S. or by foreign firms andanother to expand the number of Chinese firms defined as "military companies" towhich sales are restricted. The Senate bill includes no similar provisions. Conference outcome: As in the House bill, would expand the number of Chinesefirms defined as "military companies."

Disposition of nuclear waste at Department of Energy nuclearweapons production facilities. The Senate authorization includes a measure thatwould allow liquid waste stored at the Savannah River nuclear weapons productionplant to be redefined as low-level waste that could be stabilized and storedindefinitely on site. The Senate narrowly rejected a floor amendment to delete theprovision. The House bill does not address the issue. Conference outcome: Approves the Senate provision with some amendments, including requiring aNational Academy of Sciences study of alternatives for waste cleanup.

Development of the Robust Nuclear Earth Penetrator andother new nuclear weapons. Both the House and the Senate rejected amendments tothe defense authorization bill to eliminate funds requested for RNEP and other newnuclear weapons development. The House-passed version of the FY2005 energy andwater appropriations bill ( H.R. 4614 ), however, eliminates the $36million requested for the programs in the Department of Energy budget. Conferenceoutcome: The conference agreement on the energy and water appropriations bill,included in the consolidated appropriations bill, H.R. 4818 , eliminatesfunds for RNEP and other new nuclear weapons R&D.

Table 2. Side by Side Comparison of Key Provisions: Defense Authorization

Defense Appropriations Conference Agreement

The conference agreement on the FY2005 defense appropriations bill,approved in the House and Senate on July 22, 2004, and signed into law on August5, provides $25 billion for operations in Iraq and Afghanistan, and resolves a numberof major weapons issues.

Highlights of the defense appropriations conference agreement include

Funding for operations in Iraq and Afghanistan. Both theHouse- and Senate-passed versions of the defense appropriations bill included $25billion, as the Administration requested on May 12, to cover costs of ongoingmilitary operations in Iraq and Afghanistan through the first few months of FY2005. The main issue in Congress was how much flexibility to provide the DefenseDepartment in allocating the funds among budget accounts. The conferenceagreement provides $3.8 billion of the money in a flexible transfer account, called theIraq Freedom Fund, and the remainder in regular appropriations accounts. The levelof detail in which the funds are provided is quite narrow, as in the House-passedappropriations bill, and the Defense Department will have to seek advance approvalfrom the congressional defense committees to shift funds to other uses. (2) Of the $3.8billion in the Iraq Freedom Fund, $1.8 billion is for classified programs, so $2 billionis available for unforseen expenses.

Repeal of FY2004 rescission. The FY2004 ConsolidatedAppropriations Act ( P.L. 108-199 ), enacted last January, rescinded $1.8 billion offunds in earlier defense appropriations bills. The conference agreement repeals therescission. The Congressional Budget Office scores this as a reappropriation offunds. So the total of emergency appropriations for the Defense Department in theFY2005 defense appropriations bill is $26.8 billion, with additional amounts forother agencies.

Emergency funding for non-defense programs. The defense billincludes emergency funds for a number of other programs, including $685 millionfor State Department operations in Iraq,$95 million to respond to the humanitariancrisis in the Darfur region of Sudan and Chad, $400 million to fight wild fires in theWest, $50 million for security at the upcoming Democratic and Republican politicalconventions, and $26 million to make up a shortfall in Federal Judiciary defenderservices.

Navy DD(X) and LCS ship construction. The Administrationrequested $221 million in R&D funding for the DD(X) destroyer program to beginconstruction of the first ship of the class and $107 million, also in R&D funds, tobegin construction of the first Littoral Combat Ship (LCS). The House authorizationcut money for ship construction from both programs, though it approved continueddevelopment funding. The Senate authorizers approved the requested constructionfunds for both programs and also added $99 million in design funds for the DD(X)to accelerate production of a second ship. The House Appropriations Committeeagreed with the House authorization in cutting money for DD(X) construction andadded $125 million for advance procurement for an additional DD-51 destroyer inplace of the DD(X). The House appropriators did not, however, agree to trim fundsfor the LCS and instead added $107 million (for a total of $214 million) to fully fundconstruction of the first ship. Like the Senate authorization, the SenateAppropriations Committee approved the requested construction funds for bothprograms and added $99 million for the DD(X), though it shifted the $221 millionrequested for DD(X) construction from R&D to the procurement accounts. Theappropriations conference agreement provides $221 million for DD(X) construction,but in procurement rather than in R&D. The agreement also provides $214 millionto fully fund construction of the first LCS in the R&D accounts. So the Houseauthorization cuts did not prevail in final congressional action onappropriations.

F/A-22 fighter. The Senate Armed Services Committeetrimmed the request from 24 to 22 aircraft, saving $280 million. The Houseauthorization and the House and Senate appropriations bills, however, all supportedthe full 24 aircraft, $4.2 billion procurement request. The appropriations conferenceagreement trims $30 million from the request for assumed efficiencies, but supportsthe full 24 aircraft request.

Army Future Combat System (FCS). The House authorizationtrimmed $245 million from the FCS program and imposed a requirement that theArmy more fully justify the program. The Senate provided the full $3.2 billionrequested. The House Appropriations Committee cut $324 million and eliminatedfunds for the non-line of sight launch system (NLOS-LS), while providing fullfunding for the non-line of sight cannon (NLOS-C). The Senate appropriations billprovided the full $3.2 billion requested and the committee report specificallyapproved funding for NLOS-LS. The appropriations conference agreement trimmed$268 million from the program, but included $58.2 million forNLOS-LS.

Space programs. The House appropriators shifted $91 millionfrom the Evolved Expendable Launch Vehicle (EELV) program to the Space-BasedInfrared System-High (SBIRS-High) program, as the Air Force requested. Senateappropriators, however, cut $100 million from the EELV due to delays but did notadd anything to SBIRS-High. The appropriations conference agreement cuts $100million from the EELV and adds $91 million to SBIRS-High. The Houseappropriators cut $100 million from the $775 million requested for theTransformational Communications Satellite program, following the Houseauthorization, while the Senate appropriators cut $400 million. The appropriationsconference agreement cuts $300 million, which will require the Air Force tosubstantially restructure the program. The House appropriators essentially terminatedSpace-Based Radar development, leaving $75 million for a more basic technologydevelopment effort, while the Senate appropriators cut $100 million from the $327million requested. The appropriations conference agreement agrees with the House,effectively terminating the current Space-Based Radarprogram.

Table 3. Side by Side Comparison of Key Provisions: Defense Appropriations

Congressional Committee and Floor Action

House Defense Authorization Markup

The House marked up its version of the defense authorization bill on May 12.Some highlights of the committee-reported bill include the following.

Military Personnel End-Strength, Pay, andBenefits.

Increased statutory end-strength for the Army by 10,000 troopseach year from FY2005 through FY2007 and for the Marine Corps by 3,000 troopseach year through FY2007.

Approved the requested pay raise of 3.5% for uniformedpersonnel.

Approved a measure to increase annuities for age 62-and-oldersurvivors of military retirees from 35% of retired pay to 55% in increments throughFY2008.

Eliminated a statutory limit on funding for military housingprivatization.

Permanently increased the Family Separation Allowance from$100 to $250 per month and increased Imminent Danger Pay from $150 to $225 permonth. Also increased hardship duty pay, which may be provided to troops outsideof combat zones, from $300 to $750 per month.

Established a program to replace lost income of reservistsmobilized for extended periods up to $3000 per month.

Permanently extended to all hospitalized personnel a provisionin the FY2004 defense appropriations act ( P.L. 108-283 ) that eliminated arequirement that military personnel pay for meals while hospitalized forcombat-related injuries.

Directed the Defense Department to establish a three-yeardemonstration program that would permit non-deployed reservists not eligible foremployer-sponsored health benefits to sign up for health insurance through themilitary-run TRICARE program.

Required separate campaign medals for Operation EnduringFreedom in Afghanistan and Operation Iraqi Freedom.

Directed the Secretary of Defense to submit proposed changesin the Uniform Code of Military Justice regarding sexual assaults. Also extended theterm of a task force on sexual assaults.

Major Weapons Programs.

Provided $10.0 billion for missile defense programs, $177million below the request, cut funding for kinetic interceptor development by $200million, and added $90 million for additional Patriot PAC-3 missiles.

Required the Air Force to enter into a multi-year contract toacquire Boeing KC-767A tanker aircraft. Also required that a new contract benegotiated after June 1, 2004, and that an independent panel review the contractterms.

Approved the requested shift of funds from Comanchehelicopter development to other Army aviation and relatedprograms.

Approved $2.9 billion, as requested, for 42 F/A-18E/Faircraft.

Approved $4.6 billion, as requested, for F-35 Joint StrikeFighter development.

Added $100 million to begin development of a next-generationbomber.

Added $118 million to procure 35 UH-60 Army helicopters,rather than the 27 requested.

Added $150 million as an initial increment for construction ofa new LHD(R) amphibious ship.

Provided about the requested amounts to procure three DDG-51destroyers, one Virginia-class attack submarine, one LPD-17 amphibious ship, andtwo T-AKE auxiliary ships.

Approved funds for continued development of the DD(X)destroyer and the Littoral Combat Ship (LCS) but eliminated $221 million from theDD(X) program and $107 million from the LCS budget to begin constructing the firstof each class of ships.

Adopted an amendment in the committee markup to prohibitleasing of support ships from foreign providers for more than one year.

Other Key Actions.

Added substantial funds for force protection and relatedprograms, including $705 million for up-armored Humvees, $332 million for add-onarmor for Humvees and trucks, $421 million for body armor, and $517 million forthe Army's Rapid Fielding Initiative. Also passed a separate measure, H.R. 4323 , to provide statutory authority to the Secretary of Defense toprocure equipment needed for combatant commands rapidly by waiving normalacquisition requirements.

Approved a provision that would require the DefenseDepartment to submit several reports related to military basing requirements byMarch of 2006 and only then permit a new round of military base closures no soonerthan 2007.

Approved a measure that would require that foreign countriesreceive no more in trade offsets as a percentage of the value of a contract forpurchasing U.S. military equipment than the percentage of domestic content requiredfor U.S.-purchased military equipment.

Approved one provision to tighten restrictions on transfer oftechnology with potential military utility to China and another to expand the numberof Chinese firms defined as a "military company" to which sales arerestricted.

Approved an amendment offered in committee mark-up tostrengthen requirements that Defense Department civilian employees be allowed tocompete for operations that otherwise would be outsourced.

Provided $409 million, as requested, for the Cooperative ThreatReduction program.

Approved funding as requested for Robust Nuclear EarthPenetrator R&D and for other research on new nuclearweapons.

Included a provision requiring the Treasury Department, ratherthan the Defense Department, to make annual payments to the military retirementfund for the costs of providing TRICARE health insurance to over-65 militaryretirees beginning in FY2006. This is an effort to free up an additional $11-12 billionfor defense programs by shifting costs to the non-defense side of thebudget.

House Defense Authorization Floor Action

On Tuesday, May 18, the House Rules Committee met to consider proposedamendments to H.R. 4200 and to decide which to allow for debate onthe House floor. The committee reported a rule ( H.Res. 648 ) on May19, as debate on the bill was scheduled to begin. Several leading Democrats,including Representative Martin Frost, the ranking member of the Rules Committee,Representative Ike Skelton, the ranking member of the Armed Services Committee,and Representative John Spratt, the second ranking member of the Armed ServicesCommittee, opposed the rule because it did not make in order several proposedamendments.

Amendments Not Made in Order.

All of the senior Democrats who opposed the rule complained, in particular,that the rule did not make in order an amendment proposed by Representative Sprattto transfer $414.4 million from specified missile defense programs to providetargeted military pay raises, Marine Corp force protection measures, andimprovements to the Patriot PAC-3 missile defense system. Other amendments notmade in order by the rule included

An amendment by Representative Loretta Sanchez to makepenalties for sexual abuse crimes under the Uniform Code of Military Justiceconsistent with penalties under the U.S. Code.

An amendment by Representative Jane Harman to limit missiledefense funding to the FY2004 level, which is about $1.2 billion below the FY2005request, to require operational testing before missile defense systems are deployed,and to authorize $500 million for port security;

An amendment by Representative John Tierney to requireoperational testing before deploying missile defense systems;

An amendment by Representative Jim Cooper to authorize$67.7 billion in supplemental appropriations for military operations in Iraq andAfghanistan; and

An amendment by Representative Ed Markey to delete $29.8million requested in the Department of Energy for a new facility to produceplutonium pits for nuclear weapons.

An amendment by Representative Jim Matheson to requirecongressional authority for renewed nuclear testing.

An amendment by Representative Adam Schiff to add $200million to Department of Energy non-proliferation programs.

An amendment by Representative Norm Dicks also to requirethe Defense Department to follow a formal process in making new rules for civilianpersonnel in DOD, to consult unions about the rules, and to allow congressionalreview.

An amendment by Representatives Jay Inslee and Chris VanHollen to provide specified civil service protections for civilian defenseemployees.

An amendment by Representative Joel Hefley, to provide aright of appeal and some other protections to groups of as few as 10 federalemployees whose jobs are being studied for privatization.

An amendment by Representative Tom Lantos to requirefederal agencies to make up lost wages of employees who are military reservistsmobilized for service, and to establish a cost-sharing plan with state and localgovernments to eliminate losses for state and local governmentemployees.

An amendment by Representative Jose Serrano to providehealth screening for military personnel exposed to depleteduranium.

Amendments Agreed To.

Of the amendments made in order, selected amendments that the Houseagreed to include

An amendment by Representative Virgil Goode to allowmilitary personnel to assist in border protection (231-191);

An amendment by Representative Duncan Hunter expressingthe sense of Congress concerning the abuse of persons in custody in Iraq(416-4);

An amendment by Representative Kendrick Meek to require theSecretary of Defense to identify mission-critical information that should betransmitted immediately from the field to senior Defense Department officials andto set up mechanisms to transmit such information;

An amendment by Representative Alcee Hastings thatexpresses the sense of Congress that no funds available to any department or agencyof the United States government may be used to provide assistance for thereconstruction of Iraq unless the President certifies to Congress that the United Stateshas entered into an agreement with the Iraqi Governing Council or a transitionalgovernment in Iraq under which Iraq agrees that it will expend a significant portionof its revenues generated from oil production forreconstruction;

An amendment by Representative Curt Weldon expressing thesense of Congress that the Secretary of Defense should assist the Iraqi governmentin destroying the Abu Ghraib prison and replacing it with a modern detention facility(308-114);

An amendment by Representative Ike Skelton on behalf ofRepresentative Louise Slaughter and others, requiring the Secretary of Defense todevelop a comprehensive policy for the Department of Defense on the prevention ofand response to sexual assaults involving members of the Armed Forces andrequiring DOD to take related measures to address sexual assaults involvingmembers of the Armed Forces (410-0);

An amendment by Representative Norm Dicks requiring the AirForce to enter into a contract to acquire KC-767 tanker aircraft by March 1, 2005 (inHunter en bloc amendment);

An amendment by Representative Alcee Hastings to add $100million for Department of Energy cleanup (in Hunter en blocamendment);

An amendment by Representative Donald Manzullo to requirethe job creation in the United States be a factor in determining contract awards (inHunter en bloc amendment);

An amendment by Representative Curt Weldon to give ruralfirefighting agencies priority in acquiring excess defense property (in Hunter en blocamendment);

An amendment by Representative Henry Brown to give stateand local health agencies priority in acquiring excess defense property (in Hunter enbloc amendment);

A second amendment by Representative Henry Brown torequire the Secretary of Defense to consider establishing a joint medical care facilitywith the Veteran's Administration when requesting funds for health facilityconstruction (in Hunter en bloc amendment);

An amendment by Representative Brian Baird requiring theDefense Department to study and issue a report to Congress on mental health servicesavailable to U.S. military personal deployed to combat theaters (in Hunter en blocamendment);

An amendment by Representative Zach Wamp making changesto the Energy Employees Occupational Illness Compensation Program; and

An amendment by Representative Jim Ryun requiring theSecretary of Defense to initiate senior officer official educational programs withTaiwan (290-132).

Amendments and Motion to RecommitRejected.

Of the amendments made in order under the rule, the House rejected

An amendment by Representative Susan Davis to repeal theprohibition on servicewomen and female military dependents receiving abortions,even when paid for privately, at overseas military hospitals(202-221);

An amendment by Representative Mark Kennedy to delete theprovision in the House committee bill that would delay military base closures until2007 (162-259); and

An amendment by Representative Ellen Tauscher to reducefunds for the Robust Nuclear Earth Penetrator nuclear warhead and other new nuclearweapons R&D by $36.6 million, the total amount requested, and to transfer the fundsto intelligence programs and conventional weapons to defeat hardened and deeplyburied targets (204-214).

The House also rejected by a vote of 202-224 a motion to recommit offeredby Representative Henry Waxman. The motion instructed the Armed ServicesCommittee to report back a bill including a sense of the Congress statement that theHouse should appoint a select committee to investigate the treatment of detaineesheld in connection with Operation Iraqi Freedom, Operation Enduring Freedom, orany other operation related to the Global War on Terrorism.

Senate Defense Authorization Markup

The Senate Armed Services Committee finished marking up its version of theFY2005 defense authorization bill ( S. 4200 ) on May 6. Some highlightsof the committee-reported version of the bill include

Military Personnel End-Strength, Pay, andBenefits.

Gave the Secretary of Defense authority to increase Armyactive duty end-strength by up to 30,000 through FY2009. The committee did not,however, increase permanent statutory end-strength.

Approved the requested pay raise of 3.5% for uniformedpersonnel.

Increased the Family Separation Allowance from $100 to $250per month and increased Imminent Danger Pay from $150 to $225 per month. Thesemeasures make permanent increases that Congress approved last year in the FY2003and FY2004 Iraq supplemental appropriations bills.

Established a two-year demonstration program to allownon-deployed military reservists not eligible for employer-sponsored heath insuranceto sign up for health insurance through the military-run TRICARE program.

Also established a new health insurance program, calledTRICARE Reserve Select, under which reservists and their dependents may sign upfor health insurance through TRICARE, with employees paying 28% of the cost, asin the federal civilian health program, if employers agree to cover the remainingcost, or 100% if employers do not cover part of the cost.

Also made permanent a provision in the FY2004 Iraqsupplemental that temporarily gave reservists earlier eligibility for pre-deploymentmedical care.

Added $400 million to the request for reserve medicalcare.

Established a commission on the National Guard andReserves.

Required separate campaign medals for Operation EnduringFreedom in Afghanistan and Operation Iraqi Freedom.

Extended to all hospitalized personnel a provision in theFY2004 defense appropriations bill that eliminated a requirement that militarypersonnel pay for meals while hospitalized for combat-relatedinjuries.

Directed the Secretary of Defense to establish a uniform policyon sexual assault.

Major Weapons Programs.

Approved $10.2 billion, approximately the amount requested,for missile defense programs, though the committee trimmed funds for kineticinterceptor development and added funds for ground-based mid-course defense andfor additional Patriot PAC-3 missiles.

Added $35 million for cost overruns on the Space BasedInfrared System-High early warning satellite and $35 million for the AdvancedExtremely High Frequency communication satellite.

Approved the requested shift of funds from Comanchehelicopter development to other Army aviation and relatedprograms.

Approved the requested $905 million for Stryker mediumarmored vehicle procurement.

Approved the requested $3.2 billion for Army Future CombatSystem development.

Approved requested funds for three DDG-51 destroyers, oneVirginia-class submarine, one LPD-17 amphibious ship, and two T-AKE auxiliaryships.

Added $150 million as the first increment of funding forprocurement of the first of the new LHA(R)-class of amphibious assaultships.

Approved $1.5 billion, as requested, for DD(X) destroyerdevelopment, including $221 million in the R&D accounts for design and the startof production of the first ship of the class, and added $99.4 million to acceleratedesign of the second ship.

Approved $1.5 billion, as requested for Littoral Combat Ship(LCS) development, including $107 million for design and the start of production ofthe first ship of the class.

Authorized $2.9 billion for 42 Navy/Marine F/A-18E/F aircraft,as requested.

Approved $3.6 billion for F-35 Joint Strike fighterdevelopment, adding $15 million for the short-takeoff variant.

Approved $3.4 billion for 22 F/A-22 fighters, a reduction of$280 million and 2 aircraft from the request.

Authorized $708 million, as requested, for the Joint UnmannedCombat Air vehicles program.

Other Key Actions.

Added substantial amounts for force protection and relatedmeasures, including $925 million for up-armored Humvees and add-on armor (theAdministration requested $163 million for 818 up-armored Humvees), $603 millionfor force protection gear and combat clothing, and $107 million for the Army RapidFielding Initiative (designed to deploy high priority items rapidly to the soldiers inthe field) and for Army and Marine individual equipment.

Provided $11 billion, an increase of $445 million over therequest, for basic and applied research.

Approved $409 million, as requested, for the CooperativeThreat Reduction program that finances programs to safeguard or eliminate weaponsin the former Soviet Union. Also allowed funding for a chemical demilitarizationplant in Russia about which there has been a longstanding disagreement between theHouse and Senate.

Approved $1.3 billion, as requested, for Department of Energynon-proliferation programs.

Approved requested funding for the Robust Nuclear EarthPenetrator and for other nuclear weapons R&D.

Approved a potentially controversial legislative measureregarding handling of radioactive waste at the Savannah River nuclearplant.

Agreed to an Administration request to increase a legislativecap on U.S. military personnel in Colombia from 400 to 800 and to increase the capon contractors from 400 to 600.

Senate Defense Authorization Floor Action

The Senate began floor action on S. 2400 on May 17, when itapproved an amendment by Senator Hutchison to authorized medical and dental carefor military academy cadets and midshipmen. Through the rest of that week, theSenate disposed of only a few more amendments, in part because members of theArmed Services Committee were involved in hearings on the Iraq prison abusescandal. The Senate resumed debate on June 2. The Senate continued floor debateon the bill the weeks of June 14 and June 21, picking up its pace, adopting 36amendments and rejecting 2, with 34 amendments pending as of June 23. On June22, a cloture motion was filed with a vote expected on June 24 about whether to cutoff debate. Late on June 23, however, the Senate passed the bill by 97 to 0.

Amendments Agreed To.

The Senate cleared a number of technical amendments that were agreed to byboth sides and also agreed to an amendment by Senators John Warner and TedStevens to authorize $25 billion for military operations in Iraq and Afghanistan.Selected substantive measures agreed to included amendments

By Senator Pete Domenici, S.Amdt. 3192 , toaccelerate non-proliferation measures aimed at removing and safeguarding fissilematerials abroad (May 19, voice vote);

By Senator Robert Byrd, S.Amdt. 3212 , to increasethe authorized size of the defense acquisition work force by 15% over the next threeyears (May 19, voice vote);

By Senators Tom Daschle and Lindsey Graham, S.Amdt. 3258 , to allow all non-deployed reservists to receive healthinsurance for themselves and their dependents through the military TRICAREprogram, with the federal government paying the employer share of costs (June 2,70-25);

By Senators John Warner, Carl Levin, and Ted Stevens, S.Amdt. 3260 , to authorize $25 billion in contingent emergency fundsfor operations in Iraq and Afghanistan ( June 2, 95-0);

By Senator Ron Wyden, S.Amdt. 3305 , to requirethat federal employees, rather than contractor personnel, oversee acquisition contracts(June 14, unanimous consent);

By Senator Christopher Dodd, S.Amdt. 3312 , toprovide reimbursements for protective, safety, or health equipment purchased by oron behalf of service members deployed in connection with Operation Noble Eagle,Operation Enduring Freedom, or Operation Iraqi Freedom (June 14,91-0);

By Senators Edward Kennedy and Saxby Chambliss, S.Amdt. 3257 , to require public-private competitions and establish otherregulations governing outsourcing of Defense Department functions with more than10 civilian employees (June 14, unanimous consent);

By Senators Susan Collins and Carl Levin, S.Amdt. 3224 , to provide civilian personnel with bid protest rights inoutsourcing competitions (June 14, unanimous consent);

By Senator John Warner Amendment, S.Amdt. 3432 , to name the bill in honor of Ronald W. Reagan (June 14, unanimousconsent);

By Senator Tom Harkin S.Amdt. 3316 , expressingthe sense of the Senate that Armed Forces Radio and Television Serviceprogramming should be balanced (June 14, unanimousconsent);

By Senator Harry Reid, S.Amdt. 3307 , to requirethat any plan for compensation to individuals in military prisons in Iraq includeprovisions for compensation to former prisoners of war held by the regime ofSaddam Hussein (June 14, unanimous consent);

By Senators Gordon Smith and Edward Kennedy, S.Amdt. 3183 , to provide Federal assistance to States and localjurisdictions to prosecute hate crimes, including crimes against gays (approved June15, 65-33);

By Senator Richard Durbin, S.Amdt. 3386 , toaffirm that the United States may not engage in torture or cruel, inhuman, ordegrading treatment or punishment (approved June 16, voice vote);

By Senators Jeff Sessions and Charles Schumer, S.Amdt. 3372 , to extend military extraterritorial jurisdiction to cover notonly personnel and contractor personnel of the Department of Defense, but alsopersonnel and contractor personnel of any federal agency or provisional authoritysupporting the mission of the Department of Defense overseas (approved June 16,unanimous consent);

By Senator Patty Murray, S.Amdt. 3427 , tofacilitate the availability of child care for the children of members of the ArmedForces on active duty in connection with Operation Enduring Freedom or OperationIraqi Freedom (approved June 17, voice vote);

By Senator John Warner, a second degree amendment, S.Amdt. 3453 , to require the Secretary of Defense to prescribe and applycriteria for operationally realistic testing of fieldable prototypes developed under theballistic missile defense program -- in adopting the Warner amendment the Senaterejected an to an amendment by Senator Jack Reed, S.Amdt. 3354 , torequire the Director of Operational Test and Evaluation to prescribe and overseeoperational tests (approved, June 17, 55-44);

By Senator Jack Reed, S.Amdt. 3352 , to increaseArmy active duty end-strength for FY2005 by 20,000 to 502,400 (approved June 17,93-4);

By Senator Tom Daschle, S.Amdt. 3202 , toprovide relief for mobilized military reservists from certain federal agricultural loanobligations (approved June 17, unanimous consent);

By Senators John Ensign, Lindsey Graham, and SaxbyChambliss, S.Amdt. 3440 , to protect documents relating to the UnitedNations Oil for Food program with Iraq and to require a GAO report on the program(approved June 17, unanimous consent);

By Senators Hilary Clinton and James Talent, S.Amdt. 3163 , to improve medical tracking and pre-deployment medicaltreatment of reservists (approved June 17, unanimousconsent);

By Senator Diane Feinstein, S.Amdt. 3172 , to statethe sense of the Senate that perchlorate contamination is a health problem (approvedJune 17, unanimous consent);

By Senator Christopher Bond, S.Amdt. 3245 , torequire two reports on operation of the Federal Voting Assistance Program and themilitary postal system together with certain actions to improve the military postalsystem (approved June 17, unanimous consent);

By Senator Ben Campbell, S.Amdt. 3237 , toequalize procedures applied to Army personnel in Korea with procedures appliedelsewhere in awarding the Combat Infantryman Badge and the Combat MedicalBadge (approved June 17, unanimous consent); and

By Senator Bill Nelson, S.Amdt. 3279 , to requirea report on any relationships between terrorist organizations based in Colombia andforeign governments and organizations (approved June 17, unanimousconsent);

By Senators Durbin, Mikulski, Landrieu, Murray, Dayton, andCorzine, S.Amdt. 3196 , to ensure reservists who are federal employeeswill not lose pay if mobilized for active duty (approved June 18, unanimousconsent);

By Senator Reid, S.Amdt. 3297 as modified, toeliminate the phase-in of concurrent receipt for those veterans with a disability ratingof 100% that Congress established last year (approved June 18, unanimousconsent);

By Senator Warner, S.Amdt. 3458 as modified, toexpress sense of Congress to continue current policy that there be no media coverageof the return to the United States of remains of deceased service members (approvedJune 21, 52 to 38);

By Senator Brownback, S.Amdt. 3464 , to increasepenalties tenfold for indecent language broadcast on television or radio (approvedJune 22, 99-1); (3)

By Senator Dorgan, S.Amdt. 3235 , to repeal FCCregulations published in 2003 that generally loosened ownership restrictions fortelevision and radio media companies; amendment retains current 39% limit on thesize of the national audience that was adopted in P.L. 108-199 (FY2004 ConsolidatedAppropriations Act) (approved June 22); (4)

By Senator Reid (for Hollings), S.Amdt. 3466 , toprotect children from violent programming (approved June22);

By Senator Warner (for McCain), S.Amdt. 3461 ,to allow the Secretary of Defense to exempt from Buy American restrictions sevencountries who have "declaration of principles" agreements with the United Statesregarding reciprocal procurement of defense items (approved June 22,54-46);

By Senator Levin (for Boxer), S.Amdt. 3367 , toexempt abortions of pregnancies due to rape or incest from the prohibition againstusing DOD funds (part of en bloc amendments approved on June22);

By Senator Warner (for McCain), S.Amdt. 3319 ,to repeal several reporting requirements on identifying and assessing essential itemsin the defense industrial base that were adopted in last year's defense authorizationact (part of en bloc amendments approved on June 22);

By Senator Warner (for McCain), S.Amdt. 3441 ,to prohibit acquisition of Air Force tanker refueling aircraft until 60 days aftercurrently required studies are completed and to require the Secretary of Defense tocertify that acquisition complies with all applicable laws, Office of Managementcirculars, and regulations (part of en bloc amendments approved on June22);

By Senator James Inhofe, S.Amdt. 3198 , toincrease from $150 million to $250 million the amount of assistance the UnitedStates may provide to Iraqi and Afghan military and security forces (part of en blocamendments approved on June 22);

By Senators Clinton, Leahy, and Kennedy, S.Amdt. 3204 , to require a Comptroller General report on closure ofDepartment of Defense dependent elementary and secondary schools and commissarystores. (part of en bloc amendments approved on June 22);

By Senator Bond, S.Amdt. 3384 , as modified, toinclude certain former nuclear weapons workers in a group receiving benefits underthe Energy Employees Occupational Illness Compensation Program and to providefor disposal of excess stocks (agreed to on June 23);

By Senator Warner (for McConnell), S.Amdt. 3472 , to require a report on the stabilization of Iraq , including efforts to enlist thesupport of other nations (approved by a vote of 71 to 27 on June23);

By Senators Landrieu and Snowe, S.Amdt. 3315 as modified, to phase in increases in survivor benefits over 3Â½ years (agreed to onJune 23);

By Senator Bingaman, S.Amdt. 3459 as modified,to require reports on detainment of foreign nationals held by DOD for more than 45(agreed to on June 23);

By Senator Daschle, S.Amdt. 3468 to S.Amdt. 3409 , to assure funding increases for veterans health caresufficient to cover increases in population and inflation (agreed to on June 23 aftera motion to waive a point of order against S.Amdt. 3409 was rejected bya vote of 49-49); and

By Senator Reid (for Leahy), S.Amdt. 3387 ,stating that it is U.S. policy that foreign prisoners be treated according to standardsthe United States would regard as legal if applied by an enemy against Americanprisoners, that U.S. officials are bound by laws against torture and abuse, and thatcases against prisoners at Guantanamo be pursued expeditiously and requiring thatthe Administration provide various information to Congress, including a schedule formilitary commissions at Guantanamo, all International Red Cross reports regardingtreatment of prisoners in current operations, and a report setting forth all approvedinterrogation techniques (motion to table failed June 23, 45-50, and amendment wassubsequently agreed to).

Amendments Rejected.

The most high-profile debate in the Senate's first week of action on theauthorization was about an amendment by Senators Trent Lott, Byron Dorgan, andothers to delay domestic military base closures by two years that the Senate narrowlyrejected. Another major debate concerned a provision in the bill to allow nuclearwaste at the Savannah River nuclear plant in South Carolina to be redefined aslow-level waste that could be stored indefinitely on site, but the Senate rejected anamendment by Senator Maria Cantwell to delete provisions backed by theDepartment of Energy from the bill. A key debate the week of June 14 was over aproposal by Senators Edward Kennedy and Diane Feinstein to eliminate funds for theRobust Nuclear Earth Penetrator nuclear warhead and other new nuclear weapons,which the Senate also rejected.

Amendments rejected include

An amendment by Senators Trent Lott, Byron Dorgan, OlympiaSnowe, Diane Feinstein, Thad Cochran, and Tom Daschle, S.Amdt. 3158 , to delay by at least two years the next round of domestic military base closures,to permit only bases abroad to be closed in 2005, and to provide that Congress mustrenew authority for base closures to occur in 2007 by approving a joint resolution tobe considered under expedited procedures (rejected May 18,47-49).

An amendment by Senator Frank Lautenberg and others, S.Amdt. 3151 , to strengthen measures designed to prevent U.S.-basedcompanies from engaging in business with nations found to sponsor internationalterrorism (rejected May 19, 49-50);

An amendment by Senators John Kyl and John Coryn, S.Amdt. 3191 , to raise funds for defense programs by imposing anexcise tax on lawyers fees exceeding $20,000 per hour in tobacco cases (rejectedMay 19, 39-62);

An amendment by Senator Maria Cantwell, S.Amdt 3261 , to eliminate a provision in the committee version of thebill that would allow the Department of Energy to reclassify certain waste at theSavannah River, South Carolina, nuclear weapons production plant as low-levelwaste that can be stored indefinitely on-site (not agreed to June 3, 48-48);

An amendment by Senators Edward Kennedy and DianeFeinstein, S.Amdt. 3263 , to prohibit the use of funds for new nuclearweapons development under the Stockpile Services Advanced Concepts Initiative orfor the Robust Nuclear Earth Penetrator (RNEP) (rejected June 15,42-55);

By Senator Christopher Dodd, S.Amdt. 3313 , toprohibit the use of contractors to seek intelligence from military detainees and toestablish limitations on the transfer of custody of prisoners of the Department ofDefense (tabled June 16, 54-43);

By Senator Patrick Leahy, S.Amdt. 3292 , to stiffenpenalties against profiteering and fraud in contracts for military operations support,post-war relief, or reconstruction (rejected June 16, 46-52);

By Senator Barbara Boxer, S.Amdt. 3368 , to allowdeployment of the ground-based midcourse defense element of the national ballisticmissile defense system only after the mission-related capabilities of the system havebeen confirmed by operationally realistic testing (rejected June 17,42-57);

By Senator Jack Reed, S.Amdt. 3354 , to requirethe Director of Operational Test and Evaluation to prescribe and oversee operationaltests of ballistic missile defense systems (rejected when the Senate agreed to theWarner 2nd degree substitute, June 17, 55-44); and

By Senator Joseph Biden, S.Amdt. 3379 , toprovide funds for the security and stabilization of Iraq by suspending a portion of thereduction in the highest income tax rate for individual taxpayers (rejected June 17,44-53).

By Senator Lautenberg. S.Amdt. 3291 , to requirethat the Secretary of the Defense develop a protocol to permit media coverage of thereturn of remains of service members who die overseas (rejected June 21, 39 to54);

By Senator Levin, S.Amdt. 3338 , re-allocate fundsfrom Ground-based Midcourse interceptors in the missile defense program to nuclearnonproliferation activities in the Department of Energy's Global Threat ReductionInitiative program, and to anti-terrorism/force protection programs (rejected June 22,44 to 56);

By Senator Dayton, S.Amdt. 3197 , to restorecurrent Buy American restrictions by deleting Sections 842 and 843 in the reportedversion of the bill that had allowed the Secretary of Defense to exempt some 21countries who had memorandums of understanding with the United States aboutdefense trade (rendered moot June 22 by passage of the Warner (McCain) S.Amdt. 3461 );

By Senator Levin (for Kennedy), S.Amdt. 3377 ,to require reports on the efforts of the President to stabilize Iraq and relieve theburden on members of the Armed Forces of the United States deployed in Iraq andthe Persian Gulf region (rejected June 23, 48-50);

By Senator Reed, S.Amdt. 3353 , to limit theobligation and expenditure of funds for the Ground-Based Midcourse Defenseprogram pending the submission of a report on operational test and evaluation(rejected June 23, 45-53);

By Senator Levin (for Byrd), S.Amdt. 3423 , toreduce authority provided in the committee bill for U.S. military personnel inColombia from 800 to 500 and for contractor personnel from 600 to 500 (rejectedJune 23, 40-58);

By Senators Leahy and Corzine, S.Amdt. 3485 (to S.Amdt. 3387 ), to direct the Attorney General to submit to theCommittee on the Judiciary of the Senate all documents in the possession of theDepartment of Justice relating to the treatment and interrogation of individuals heldin the custody of the United States (rejected June 23, 46-50);

By Senator Levin (for Corzine), S.Amdt. 3303 , toreduce the age for receipt of military retired pay for nonregular service from 60 to 55(rejected when a motion to waive a point of order that the measure violatedprovisions of the Budget Act by increasing mandatory spending was not upheld June23, 49-49); and

By Senator Reid (for Daschle), S.Amdt. 3409 , toassure that funding is provided for veterans health care each fiscal year to coverincreases in population and inflation (rejected when a motion to waive a point oforder that the measure violated provisions of the Budget Act by increasing mandatoryspending was not upheld June 23, 49-48).

House Defense Appropriations Markup

The House Appropriations Committee marked up its version of the FY2005defense authorization bill on June 16 and reported H.R. 4613 on June18, 2004 ( H.Rept. 108-553 ). Some highlights of the committee-reported version ofthe bill include the following.

Iraq and Afghanistan Costs.

The committee provided $25 billion to cover part of the costsof operations and Afghanistan -- the committee would make the money available onenactment of the bill, so some of the funds could be used to cover costs in FY2004as well as FY2005. The committee did not agree to the Administration request toprovide all of the funds in a flexible account that would allow the Secretary ofDefense to transfer money to activities without prior congressional approval. Thecommittee also required quarterly reports on the use of thefunds.

Military Personnel End-Strength, Pay, andBenefits.

Provided funding for a military pay raise of 3.5% and forhousing allowances and other benefits as approved in the Houseauthorization.

Within the $25 billion for Iraq and Afghanistan, included fundsfor Army and Marine Corps end-strength increases as approved in the Houseauthorization.

Cut $499.7 million from military personnel accounts to reflectperennial underexecution of military personnel programs in prior years, as reportedby the General Accounting Office.

Major Weapons Programs.

Added $2.2 billion for what the committee describes as aninitiative to "recapitalize" Army and Marine Corps ground forces. The increasesincluded $950 million, doubling the amount requested, to procure Stryker armoredpersonnel carriers and associated equipment sufficient to stand-up an additionalStryker brigade, $350 million for other armored combat vehicles, $503 million forhelicopters, $390 million for trucks and other support vehicles, and $52 million forthe ammunition production base.

Provided $9.7 billion for missile defense, $458 million belowthe request. The committee indicated overall support for the program, but said thatthe remaining funds provide a sufficient increase over last year's program. Thecommittee also rescinded $31.5 million due to termination of a joint satellite programwith Russia (called RAMOS) and $74.7 million due to restructuring of the AirborneLaser program.

Cut the Army's request for $3.2 billion for Future CombatSystem development by $324 million, $79 million more than the Houseauthorization. Most of the reduction was in what the committee described asmanagement overhead, but the committee also cut $76 million from the non-line ofsight launch system (NLOS-LS), terminating the project. The committee continuedfull funding for the non-line of sight cannon (NLOS-C) program,however.

Provided $165 million, $76 million more than requested, tofully fund construction of a Theater Support Vessel in Army R&Daccounts.

Agreed with the House authorization in trimming $248 millionfrom the DD(X) R&D program, including funds to begin constructing the firstship.

In place of DD(X) construction, the committee added $125million in advance procurement for one additional DDG-51 destroyer to be fullyfunded in the FY2006 or FY2007 budgets.

Did not agree with the House authorization cut of $107 millionfor construction of the first Littoral Combat Ship. Instead, the committee added $107million to the program to fully fund the cost of building the first ship, though it cut$50 million for design of the second ship of the class, saying it wasredundant.

Eliminated $44 million requested for R&D on the LHA(R)amphibious ship program and provided no funds for procurement, rejecting theaddition of $150 million for LHA(R) advance procurement recommended in theHouse and Senate authorization bills.

Supported procurement of 24 F/A-22 fighters, asrequested.

Provided $4.4 billion for F-35 Joint Strike Fighter R&Dfunding, a reduction of $240 million to reflect delays that are anticipated in view ofproblems in controlling aircraft weight. Also prohibited obligation of $1.4 billion ofthe funds until DOD reports to Congress on plans to adjust the program following anindependent review.

Objected strongly to provisions in multi-year procurementcontracts the Air Force negotiated to purchase C-17 and C-130 aircraft, saying thatthey violate rules requiring full funding of the total cost of useable end-items ofequipment. (5) The committee revised requirements in the annualappropriations bill governing multi-year procurement and shifted $159 million fromC-17 upgrades to fully fund 15 aircraft, one more thanrequested.

Provided $100 million in a "Tanker Replacement TransferFund" available to acquire KC-767 tanker aircraft whenever the status of the programwarrants acquisition.

Added $91 million for the Space Based Infrared System-High(SBIRS-High) program, more than the $35 million the House and Senate authorizersadded. Agreed, with minor variations, to cuts the authorizers made in theTransformational Communications Satellite and the Evolved Expendable LaunchVehicle (EELV). In report language, the committee said that two contractors for theEELV may not be justified.

Provided $75 million for the Space Based Radar program, $253million below the request, effectively terminating the program, with the remainingfunds to be used for alternative technologies and concepts.

Added $50 million for new bomber development, half what theHouse authorization added.

Other Key Actions.

Added $900 million, close to amounts approved in prior years,for unrequested, earmarked medical R&D projects, including breast cancer andprostate cancer research.

Added $500 million in operation and maintenance accounts toredress shortfalls identified by the military services in short-term, readiness-relatedareas.

Cut operation and maintenance accounts by $415 million toreflect under-obligation of O&M funds in prior years, by $335 million for assumedefficiencies in administrative and related activities; by $86 million to eliminategrowth above inflation in requested funds for base operations support, by $92 millionfor overstated civilian pay requirements, by $177 million to reflect a slower rate thanestimated in converting jobs from uniformed positions to civilian ones, by $316million in working capital funds to reflect cash balances and purchases that will notbe necessary, by $967 million of excess cash balances in the transportation workingcapital fund, by $300 million for overstated requirements for outside contracts, by$100 million for unnecessary payments to contractors for taxes, and by $55 millionfor overestimated civilian separation incentives.

Added $25 billion for operations in Iraq and Afghanistan. Thecommittee provided almost all of the funds in regular appropriations accounts exceptfor $2.978 billion in the Iraq Freedom Fund, a flexible transfer account. Of the$2.978 billion, however, $1.978 is available only for classified programs describedin an annex to the report, so only $1 billion is available as flexiblefunding.

In a manager's amendment during the full committee markup,the committee added $685 million to the emergency funding for Iraq for StateDepartment operations and also added $95 million in emergency funds for faminerelief and refugee assistance in Sudan and Chad.

House Defense Appropriations Floor Action

On June 22, the House voted to pass H.R. 4613 , the FY2005DOD Appropriations Act by 403 to 17. Before the bill was passed, however,controversy erupted over H.Res. 683 , the rule to consider H.R. 4613 , which, as proposed by the Rules Committee, includedplaceholder language that would allow the conferees to raise the ceiling on thenational debt as part of the bill rather than requiring a separate vote ( H.Rept.108-559 ). The vote on the rule, H.Res. 683, was 220 to 196. (6)

The House then adopted the Lewis en bloc amendment requiring severalreports from DOD, including one on reducing the dud rate of cluster munitions,another on contracts for security, translation, and interrogation services in Iraq,Afghanistan, or Guantanamo Bay, as well as requiring notification to theInternational Relations, Foreign Relations, and the defense committees beforeproviding assistance to Iraqi and Afghan military and security forces. The Houserejected an amendment by Congressman Inslee that would have prohibited the useof funds for implementing reforms of DOD's civilian personnel system. (7) Fiveamendments were withdrawn.

Senate Defense Appropriations Markup

Military Personnel End-Strength, Pay, andBenefits.

Provided funding for a military pay raise of 3.5% and forhousing allowances and other benefits as approved in the Senateauthorization.

Within the $25 billion for Iraq and Afghanistan, included fundsfor an increase in Army end-strength of 20,000 as approved in the Senateauthorization.

Cut $375 million from military personnel accounts to reflectperennial underexecution of military personnel programs in prior years, as reportedby the General Accounting Office.

Cut $93.8 million from military personnel accounts to reflectthe planned end of U.S. operations in Bosnia in December2004.

Major Weapons Programs.

Provided $865 million, out of the $25 billion in emergencyfunding added for Iraq and Afghanistan, for an Army "Rapid Response ForceProtection Initiative." The funds may be used for up-armored Humvees, bolt onarmor kits, armored cabs, or other related purposes. Also provided $240 million forMarine Corps vehicle hardening.

Provided $10.2 billion, about the amount requested, for missiledefense programs. Added $80 million for the Israeli Arrow program. Agreed toterminate the U.S.-Russian RAMOS program, but allocated $5 million for afollow-on program. Added $163.5 million for Ground-Based Midcourse Defense. Cut $252 million, about half the amount requested, from the Ballistic MissileDefense System Interceptor program, a program to develop a very high acceleration,mobile booster and warhead for land- and sea-basing and to explore space-basedinterceptors.

Provided the full $3.2 billion requested for Army FutureCombat System development. The committee specifically approved continuedfunding for the non-line of sight launch system (NLOS-LS), which the Housecommittee wants to terminate.

Provided $905 million, as requested, for Stryker armoredvehicle procurement -- the House bill added $950 million.

Approved $221 million for construction of the first DD(X)destroyer, but moved the money from R&D to procurement. The House committeeeliminated the funds. Also added $99 million for design of the second ship of theclass, following the Senate authorization.

Provided $107 million in R&D, as requested, for constructionof the first prototype Littoral Combat Ship -- the House committee provided anadditional $107 million to fully fund construction.

Added $175 million for LHD(R) advance procurement -- theHouse committee provided no funds, while both authorization bills approved $150million.

Supported procurement of 24 F/A-22 fighters, asrequested.

Provided full funding, as requested, for Navy and Air Forcedevelopment of the F-35 Joint Strike Fighter -- did not concur with House cuts dueto delays.

Provided $110 million for tanker aircraft replacement, but didnot specify whether the funds were for KC-767s, in effect leaving the issue forauthorizers to decide.

Provided $508 million for development of the Space-BasedInfrared System-High (SBIRS-High), but did not add $91 million, as the Air Forcehad requested and the House agreed.

Provided $228 million for the Space-Based Radar program,$100 million below the request. The committee did not agree with House cuts thatwould effectively terminate the program.

Provided $375 million for the Transformation CommunicationsSatellite, $400 million below the request. The House cut $100million.

Provided $511 million for the Evolved Expendable LaunchVehicle, $100 million below the request due to launch delays. The House cut $91million.

Provided $557 million for development of a replacementMarine One helicopter, $220 million below the request, as in theHouse.

Other Key Actions.

Added about $650 million for earmarked medical R&Dprograms, about half the amount in the House bill. Of this amount $200 million forcancer research, including peer-reviewed breast cancer, prostate cancer, and othercancer research, was provided in a single block, and the committee directed theDefense Department to allocate the funds. In the past, most such funds have beenearmarked for specific diseases. Also provided $50 million in a similar block forother peer-reviewed medical R&D programs.

Cut $478.2 million from operation and maintenance accountsto reflect the planned end of U.S. operations in Bosnia in December2004.

Provided $25 billion for operations in Iraq and Afghanistan. The committee provided most of the funds in regular appropriations accounts, subjectto normal procedures requiring congressional approval of transfers above certainthresholds. Provided $2.5 billion in the flexible Iraq FreedomFund.

Senate Defense Appropriations Floor Action

On June 24, the Senate took up the House-passed version of the FY2005defense appropriations bill ( H.R. 4613 ), substituted the terms of itscommittee-reported version of the bill ( S. 2559 ), acted on a number ofamendments, and then passed the amended version of H.R. 4613 by a voteof 98-0.

Amendments Adopted. TheSenate adopted a number of amendments to add relatively small amounts for anumber of specific projects. In addition, the Senate approved amendments

By Senator Mike DeWine ( S.Amdt. 3493 ) toprovide $95 million -- as was provided in the House-passed bill -- for humanitarianrelief activities in Sudan and Chad (the Senate did not, however, add $685 million,as the House did, for State Department operations in Iraq); and

By Senator Robert Byrd ( S.Amdt. 3502 ),expressing the sense of the Senate that the Administration should request funds forongoing military operations, including operations in Iraq and Afghanistan, as part ofthe regular annual defense budget request rather than as supplemental appropriations(approved 89-9).

Amendment Rejected. The Senatealso rejected one amendment

By Senator Biden ( S.Amdt. 3520 ) to increase theamount provided for humanitarian relief in Sudan and Chad to $188 million (tabled,53-42).

Issues for Congress

One issue was paramount in congressional debate about the FY2005 defensebudget -- whether Congress should provide funding for operations in Iraq andAfghanistan before early 2005, when the Bush Administration initially said it plannedto request supplemental appropriations. In May, the Administration requested anadditional $25 billion for Iraq and Afghanistan, which Congress subsequentlyapproved in all versions of the annual defense authorization and appropriations bills. Congress did not, however, agreed to provide the Administration with the extensiveflexibility it wanted to allocate the money among accounts.

A number of other issues were also on the agenda, including some that werepolitically contentious this year and some with significant long-term defense policyimplications. Among the key issues for Congress were

To what extent budget deficits over the next few years mightconstrain defense spending;

Whether Congress should require a substantial, temporaryincrease in active duty end-strength, particularly in the Army, to ease pressures on theforce caused by operations in Iraq and Afghanistan;

Whether the planned deployment of a missile defense test bedwith a limited operational capability in September or October was scheduledprimarily for political rather than for sound technical reasons;

To what extent major weapons programs in all of the servicesmay need to be reined in, both because of limits on overall defense spending andbecause of rapid cost growth in several big projects;

How the Defense Department's change in longstandingregulations governing weapons acquisition procedures to permit what DOD calls"evolutionary acquisition" is affecting managerial controls and congressionaloversight over major weapons programs;

Whether Congress should provide additional military personnelbenefits, including (1) access to DOD-provided health insurance for non-deployedmilitary reservists and their dependents and (2) increased military retiree survivorbenefits;

Whether Congress should delay or restrict a new round of baseclosures planned in calendar year 2005;

The status of Pentagon plans to redeploy U.S. military forcesstationed abroad and the implications for congressional oversight and defensebudgets;

How the Army plans to manage and to finance a far-reachingreorganization of its combat forces to increase the number of deployable combatbrigades and to turn brigades, rather than divisions, into the major unit of action infuture operations;

How the Defense Department is restructuring its civilianpersonnel system following Congress's approval last year of the Pentagon's requestfor broad authority to reform civil service pay and performancerules;

Whether Congress should approve the Defense Department'srequest for changes in environmental laws and regulations governing military trainingin addition to changes Congress approved last year;

Whether Department of Energy plans to investigate new nuclearweapons -- including low and variable yield weapons and earth penetration weapons-- are strategically sound and in line with authority Congress provided last year;

Whether Congress should require the Defense Department tobegin acquiring Boeing KC-767 tanker aircraft; and

Whether Congress should take steps to limit foreign militarysales offsets or to strengthen "Buy American" requirements.

The following discussion provides brief background information on each of theseissues and discusses congressional action to date.

Funding for Iraq and Afghanistan

The Administration did not initially request funding for ongoing operationsin Iraq and Afghanistan in the regular FY2005 defense bills. Instead, officials saidthat they expected to request supplemental appropriations for overseas operationssome time early in calendar year 2005, possibly when the FY2006 budget request issubmitted at the beginning of February. After considerable debate in Congress,however, on May 12, 2004, the White House submitted an amendment to its FY2005request in which it asked for $25 billion to be appropriated into a reserve fund foroperations in Iraq and Afghanistan in early FY2005. (8)

Two issues remained for Congress, however. One was whether Congressshould appropriate more than $25 billion, since costs in FY2005 are expected to totalat least twice as much. (9) Although there was considerable discussion aboutthe issue, and several amendments were proposed to add money, the House- andSenate-passed versions of the authorization and appropriations bills all provided $25billion.

A second issue -- and, in the end, the key one -- was how much flexibilityCongress would agree to provide the Administration in allocating additional funds. The Administration's May 12 request would permit the Secretary of Defense, inconsultation with the Office of Management and Budget, to allocate the funds to anybudget account, requiring only that the Secretary notify Congress five days beforetransferring the funds. Many Members of Congress, including the leaders of theappropriations committees, said that they were not willing to provide so muchflexibility and intended to ensure that funds are available only for specified activities(for a full discussion, see CRS Report RL32422 , The Administration's FY2005Request for $25 Billion for Operations in Iraq and Afghanistan: Precedents andOptions for Congress , by [author name scrubbed] and [author name scrubbed]).

The debate over funding for Iraq and Afghanistan began as soon as theAdministration presented its budget request, when some legislators complained thatthe Administration's failure to request money was intended to avoid a congressionaldebate about Iraq policy during the presidential election campaign, to obscure thewar's long-term costs, and to understate the size of projected federal budget deficits. The issue became particularly acute days later when Army Chief of Staff GeneralPeter Schoomaker was asked about it in a Senate Armed Services Committee hearingon February 10. Schoomaker said he was "concerned ... on how we bridge betweenthe end of this fiscal year and whenever we could get a supplemental in the next year.And I do not have an answer for exactly how we could do that." General MichaelHagee, the Commandant of the Marine Corps, echoed Schoomaker's concern.

In response, the next day, February 11, DOD Comptroller Dov Zakheim helda press briefing to explain that Pentagon leaders were sure they could meet Army andMarine Corps requirements into next Spring by "cash flowing" regular FY2005appropriations. (10) In FY2003, Zakheim said, the DefenseDepartment was able to provide $26 billion for Iraq war costs before Congress couldapprove supplemental appropriations; the money, he said, was mainly operation andmaintenance funds that would otherwise not have been spent until the fourth quarterof the fiscal year. DOD and also the Office of Management and Budget (OMB), hesaid, were certain that they could manage FY2005 funding in a similar way. Zakheim also argued that it was appropriate to delay requesting funds for Iraqbecause of great uncertainty about costs, particularly following the planned transferof sovereignty to an interim Iraqi government on June 30.

Subsequently, a number of related issues emerged.

One issue is what precedents earlier wars provide. Last year,a CRS memo reported that the initial funding for most conflicts -- from World WarII, to Korea, to Vietnam, to the 1991 Persian Gulf War -- was generally providedthrough supplemental appropriations. (11) That memo did not, however, address fundingfor wars after the initial phases. On that question, the precedents are mixed. Whilethe Korean conflict was financed mainly with supplementals, World War II andVietnam were funded both with supplementals and with regular appropriations. (Fora review of methods used to fund operations since 1991, see CRS Report RL32141 , Funding for Military and Peacekeeping Operations: Recent History and Precedents ,by Jeff Chamberlin.) Vietnam therefore, is the most recent truly comparableexample. In that case, the Administration first asked for a $700 millionsupplemental for FY1965 in May of 1965; then for a $1.7 billion addition to theregular FY1966 defense appropriations bill, which was requested as a budgetamendment in the summer of 1965; and then, in January of 1966, as troop levels inSoutheast Asia were climbing, a supplemental of $12.3 billion for FY1966 andregular appropriations of $10.3 billion for FY1967, both requested when the FY1967budget was submitted. So, in the case of Vietnam, the Johnson Administration askedfor emergency supplementals when necessary, but also requested funds in regularappropriations bills as soon as those bills were on the congressional agenda, eventhough troop levels were in flux and the duration of the conflict could not beforeseen.

As the defense bills were being marked up, there was also somediscussion in Congress about the adequacy of FY2004 funding for Iraq. In testimonybefore the House Armed Services Committee on April 21, 2004, General RichardMyers, the Chairman of the Joint Chiefs of Staff, said that the military services hadidentified a preliminary shortfall of about $4 billion through the end of the fiscalyear. He also said that the Defense Department was in the midst of a budget reviewwhich the service chiefs thought would be able to find enough money in, forexample, underexecuting acquisition programs, to cover the shortfall. General Myersreiterated that assessment in testimony before the Senate Defense AppropriationsSubcommittee on May 12, 2004. In its review of the issue, CRS found that FY2004shortfalls could be substantial but that funds to cover costs are also available, so thatthe Defense Department may, indeed, be able to get through FY2004 (see CRS Report RL32381(pdf) , Adequacy of the Army's FY2004 Funding for Operations in Iraq ,by [author name scrubbed]). More recently, the Government Accountability Office calculatedthat the Defense Department was as much as $12 billion short and would have to haltplanned training and make other substantial changes in plans to pay the bills(Government Accountability Office, Military Operations: Fiscal Year 2004 Costsfor the Global War on Terrorism Will Exceed Supplemental, Requiring DOD to ShiftFunds from Other Uses, GAO-04-915, July 21, 2004). In the end, Congress madethe $25 billion it provided in emergency funds available immediately on enactmentof the legislation, so funds were available in August, and the Administration tappedabout $2 billion for immediate costs.

A final related issue is whether the Defense Department hasrequested enough money for everyday equipment for troops in Iraq and Afghanistan,including equipment for force protection -- that is, for items such as up-armoredHumvees, body armor, robots and other devices for coping with improvisedexplosive devices (IEDs), night vision goggles, and other equipment of immediatevalue to troops on the ground. Senator Jack Reed pointed to a Defense Departmentreprogramming request that would allocate $619 million for urgent Iraq needs. (12) And in theApril 21 House Armed Services Committee hearing with General Myers,Representative Curt Weldon cited a number of shortfalls in such equipment that theArmy identified in its annual unfunded priorities list.

Congressional Action. In all fourversions of the annual defense bills, Congress agreed to provide $25 billion as aninitial down payment for costs of operations in Iraq and Afghanistan in FY2005. TheHouse, Senate, and conference versions of the defense appropriations make themoney available as soon as the bill is signed into law, which means that the moneycould be used not only for initial costs in FY2005, but also to cover any shortfalls inthe remainder of FY2004.

The key issues to be resolved in the appropriations conference were how todivide up the money among Department of Defense appropriations accounts, howmuch to provide in a flexible transfer account that can be used to meet unanticipatedexpenses, how much "general transfer authority" to provide the Defense Departmentto move money between appropriations accounts (with advance congressionalapproval), and what reporting requirements to establish.

The House version of the appropriations bills provided somewhat more detailthan the Senate bill in allocating the money among regular appropriations accountsand in specifying what weapons programs it approved, though the differences wererelatively minor. The House bill provided $2.978 billion in a flexible transferaccount, called the Iraq Freedom Fund. Of the $2.978 billion, however, $1.978billion was for classified programs described in an annex to the report, so only $1billion was available as flexible funding. The Senate bill technically provided all ofthe $25 billion in the Iraq Freedom Fund, but it also set detailed floors and/or ceilingson amounts that could be transferred from the fund into regular appropriationsaccounts, leaving $2.5 billion as flexible funding. The House bill also provided $3billion of general transfer authority for the entire FY2005 defense appropriations bill,including the $25 billion in emergency funds. The Senate bill provided $4 billion. Transfers of funds using general transfer authority are subject to detailedrequirements governing the reprogramming of funds and require advance approvalof the congressional defense committees.

The House appropriations bill required a number of reports on operations inIraq and Afghanistan, including semiannual reports on the amounts spent by month,an assessment of progress, an assessment of the effects of operations on personnelrecruitment and retention, monthly costs of equipment repair, the amounts and typesof foreign support, and details of reserve mobilizations; a report by October 1, 2004,on projected costs from FY2006 through FY2011 or a certified statement by thePresident that a realistic projection of costs is not possible; quarterly reports onamounts used to provide transportation and other logistical support to allied nationsproviding forces in Iraq; and a list of all contracts for support of operations in Iraq,Afghanistan, and Guantanamo Bay.

The Senate appropriations bill required five-day advance notification toCongress of any transfer of funds into regular appropriations accounts under theterms of the bill; quarterly reports on cumulative transfers; quarterly reports onlogistical and other support to allied nations; 15-day advance notification of supportfor the New Iraqi Army and the Afghan National Army; and quarterly reports on theuse of funds for the Commander's Emergency Response Program.

The appropriations conference agreement provides most of the $25 billion inregular appropriations accounts, with report language further directing the allocationof procurement and some operating funds in some detail. This is closer to the Housethan to the Senate approach. The agreement also provides $3.8 billion in the flexibleIraq Freedom Fund, but $1.8 billion of that is for specific classified programs,leaving $2 billion in flexible funding. The conference bill also provides that $1.5billion of the $25 billion for Iraq and Afghanistan may be transferred among accountsprovided only that Congress is promptly notified of the transfer. TheIraq/Afghanistan title of the bill also increases FY2004 general transfer authority by$700 million, from $2.1 to $2.8 billion. And the overall bill provides $3.5 billion ofgeneral transfer authority -- a substantial increase from amounts provided in recentyears.

The conference agreement requires a number of reports on operations in Iraqand Afghanistan, including semi-annual reports, due on April 30 and October 31 ofeach year, on amounts expended for military operations and reconstruction in Iraqand Afghanistan in the previous six months, progress in preventing attacks on U.S.personnel, effects of operations on military readiness, effects on personnelrecruitment and retention, costs for repair or equipment, types and extent of foreignsupport, and reserve mobilizations.

Deficits and the Defense Budget

Congressional debate about the FY2005 budget seems to mark a turning pointof sorts. After several years in which mounting budget deficits were apparently ofless interest in Congress than tax cuts, Medicare prescription drug coverage, andincreased benefits for military retirees, old-time deficit cutting religion appeared toundergo a bit of a revival. The Administration proposed a budget plan which it saidwill cut the federal budget in half by FY2009, though there is considerable debateabout whether it would actually accomplish that. In their versions of the FY2005budget resolution, both the House and the Senate imposed somewhat tighterrestrictions on total discretionary spending than the Administration, and the Senatevoted to reimpose procedural restrictions, known as "PAYGO" rules, both onincreases in mandatory programs and on reductions in revenues. Statutory PAYGOrules were first established by the Budget Enforcement Act of 1990, but expired afterFY2002.

Battles over how to control federal deficits were fixtures of congressionalbudget debates from the time Congress approved the first Gramm-Rudman-Hollingsdeficit control act in November 1985 into the late 1990s. Congress passed revisedmeasures to limit deficits in 1987, 1990, 1993, and 1997. It was only after 1998 thatan economic boom, together with several rounds of tax increases and measures tolimit spending, led, though only temporarily, to budget surpluses. The deficit battles,as well as the end of the Cold War, were a major factor affecting defense spending. Adjusted for inflation, the defense budget declined in real terms for 14 straight years,from FY1986 through FY1999, and began to turn up again only in FY2000 as deficitpressures eased.

The re-emergence of the deficit as an issue, therefore raises an obviousquestion: to what extent might ongoing efforts to control budget deficits eventuallylimit the amounts available for defense? This year, there was a serious debate inCongress about the total amount for defense for the first time in several years. In theSenate, Budget Committee Chairman Don Nickles proposed, and the full committeereported, a budget resolution that reduced the recommended total for national defenseby $6.9 billion below the Administration request. In the House, Budget CommitteeChairman Jim Nussle initially proposed a $2 billion cut in defense in an attempt tomake the point that everything -- even defense -- needed to be on the table to controllong-term spending. While Congress did not, in the end, support cuts in defense, thelong-term budget situation may raise the issue again in the future.

Congressional Action. In theSenate, the Budget Committee reported version of the annual budget resolution( S.Con.Res. 95 ) recommended $415.2 billion for the national defensebudget function (function 050), $6.9 billion below the CBO reestimate of theAdministration request (see Table 4 ). In a floor vote on March 10, however, theSenate approved an amendment by Senator John Warner to restore the funds. In theHouse, Budget Committee Chairman Jim Nussle dropped his proposal to recommend$2 billion less for defense than the Administration requested. The House resolution( H.Con.Res. 393 ), as reported by the Budget Committee and as passedby the full House, recommended the requested level of funding for national defense,though $2.6 billion of the request was shown in a new budget function for HomelandSecurity.

The conference agreement on the budget resolution provides $472.2 billionfor national defense in FY2005, including $50 billion for overseas contingencyoperations. The House approved the budget resolution on May 20, and also approveda measure "deeming" the totals in the budget resolution to have been agreed to forpurposes of subsequent House action on appropriations bills and other legislation. The Senate, however, never took up the budget resolution. This compelled theSenate to begin acting on FY2005 appropriations bills with the level of funding fortotal discretionary programs set at the level projected in the FY2004 budgetresolution, which was $814 billion in new budget authority. This was about $8billion below the level requested by the Administration and $7 billion below the levelapproved in the "deeming" resolution in the House.

This caused some problems in the Senate, which came to a head in action onthe defense appropriations bill. As a way of coping with the $7 billion gap with theHouse, the Senate Appropriations Committee designated $7 billion in the regularFY2005 defense appropriations bill as "emergency" funds. The effect was to allowallocations of funds to other, non-defense appropriations bills to equal the total in theHouse. If House conferees had accepted this approach, it would have freed up $7billion for additional funding for non-defense bills within the $821 billion cap ondiscretionary funding. The House leadership objected. The solution was to includein the FY2005 defense appropriations bill a measure "deeming" a total of $821billion in discretionary budget authority to apply in the Senate as in the House. WithSenate passage of the defense appropriations conference report, that level is now ineffect. Ultimately, the defense appropriations conference agreement provided $391.2billion for regular Department of Defense programs, about $1.7 billion below theAdministration request.

Table 4. Congressional Budget Resolution Targetfor the National Defense Budget Function (050)

(millions of dollars)

Sources: Congressional Budget Office; Senate Budget Committee, March 5, 2004; S.Con.Res. 95 as passed by the Senate; House Budget Committee reporton the FY2005 budget resolution, H.Rept. 108-441 ; Congressional Record , March25, 2004; H.Rept. 108-498 .

Notes

a. The CBO reestimate, the Blue Dog Coalition plan, and the Democratic Substituteall make projections through FY2014 -- figures beyond FY2009 are notshown here.

b. The House-passed budget resolution excludes $2.6 billion of homelandsecurity-related funding from the national defense budget function (function050) in FY2005and instead provides it in a new "homeland security" budgetfunction (function 100). If the defense-related homeland security funds areadded to the National Defense Budget Function, the totals equal the CBOreestimate of the Administration request.

In an attempt to ease constraints on defense spending, the House ArmedServices Committee included in its version of the defense authorization bill aprocedural measure to shift costs of future health insurance benefits for militarypersonnel when they retire from the Defense Department to the general Treasury andfrom discretionary funds subject to budgetary caps to the mandatory side of theledger. Under current law, the Defense Department is required to make annualcontributions to the military retirement fund sufficient to cover cost in the future ofproviding guaranteed medical care to 65-and-over military retirees (this is known asTRICARE for Life, and was established in the FY2001 national defenseauthorization act, P.L. 106-398 ). These contributions are considered part of the costof military personnel and are scored as discretionary funds requiring annualappropriations.

The measure (Section 1541 of the House bill), which was approved withamendments in the conference agreement (Section 725 of the conference bill),requires the Treasury to make the contributions to the retirement trust fund insteadof the Defense Department beginning in the FY2006 budget. The effect would be toreduce DOD personnel costs by an average of about $12 billion a year over the nextfive years. A sense of Congress provision added in the conference agreement urgesthat this shift should not reduce the total discretionary funding requested for theDefense Department -- in effect, increasing defense spending by $12 billion a year.

So far, the Office of Management and Budget has not agreed. In a December9, 2004 letter to the Chairmen of the House and Senate Budget Committees, OMBurged that the FY2006 budget resolution score the health insurance contributions tothe military retirement fund according to earlier precedents. Traditionally, OMB hassupported the principle, known as "accrual accounting," which holds that theactuarily determined costs of future benefits for current personnel should be includedin annual budgets of federal agencies in order to allocate the actual, full costs ofpersonnel to current programs.

Active Duty End-Strength

Even before the current conflict in Iraq began, there was some support inCongress for increasing the size of the active duty force, particularly in the Army, asa means of reducing strains on military personnel that some argued were aggravatedby frequent military operations abroad, such as peacekeeping operations in Bosniaand Kosovo. (13) In the House, Representative Ike Skelton, theranking Democrat on the House Armed Services Committee, argued for some yearsthat the Army needed about 40,000 more troops. (14)

Now, the need to keep a substantial number of troops in Iraq for an as yetindeterminate period has made end-strength a critical issue. Currently, the DefenseDepartment has waived statutory caps on end-strength, and it is keeping about 30,000more personnel in the active duty force than before the war in Iraq. Costs of payingthese additional troops -- as well as temporarily mobilized reserve troops -- has beencovered with FY2003 and FY2004 supplemental appropriations. Army leaders havesaid that they want to keep as many as 30,000 additional troops in the service for thenext couple of years, not only to ease strains of overseas deployments, but also toallow some flexibility as the Army reorganizes its combat units (see below). So itappears likely that the Administration will want to keep some additional end-strengthfor some time, still paid for with supplemental appropriations -- Army officials saythe increases will be needed the end of FY2006.

The Defense Department, however, has opposed congressional measures toincrease statutory end-strength and to establish end-strength minimums. It appearsthat the Defense Department wants flexibility to increase or reduce troop levelswithout a congressional mandate. But neither critics nor proponents of an increasein statutory end-strength have addressed why it would be better or worse than thepresent situation, in which DOD is keeping added end-strength by waiving thecurrent statutory caps.

In response to past, pre-Iraq proposals to increase end-strength, SecretaryRumsfeld has argued that the services can increase the number of deployable troopswithout adding to overall end-strength by more efficiently managing the forces thatare available. One key efficiency measure is a plan to transfer as many as 10,000jobs now performed by uniformed personnel to civilians in FY2004 and another10,000 in FY2005. Reportedly, some Pentagon studies have found that as many as320,000 military jobs could be performed by civilians. (15)

These prospects have not persuaded advocates in Congress that potentialproblems caused by the burden of rotating forces into Iraq are being adequatelyaddressed. Some Members of Congress have proposed increasing the Army'sstatutory end-strength by as many as 40,000 troops. And some have proposed, aswell, that some of the additional troops should be assigned to units speciallyorganized and trained for stability operations overseas.

A part of the discussion of end-strength is the cost. The CongressionalBudget Office estimated that in 2002 the average active duty service-memberreceived a compensation package, including pay and non-cash benefits, of about$99,000 per year. (16) So, without including training and otheroperating costs of additional forces, a rough starting point for analysis is that eachadditional 10,000 active duty troops will add about $1 billion to the defense budget. These estimates are in line with Army projections, which are that it would cost $3.6billion a year to add 30,000 troops to the force. Presumably, these troops would beused to fill out existing units, not to add new ones, which would cost additionalmoney.

Congressional Action. At the endof April, House Armed Services Committee Chairman Duncan Hunter announcedthat he would propose an increase in statutory end-strength for the Army and theMarine Corps in the committee markup of the FY2005 defense authorizationbill. (17) The bill as reported by the committee and passed by the House includes his proposalto increase statutory end-strength in the Army by 10,000 and in the Marine Corps by3,000 in each of the next three years, for a total increase of 39,000 troops. Thecommittee assumed that the costs of the increase in FY2005 will be paid for not outof regular funds but out of additional funding for Iraq -- in the $25 billioncontingency fund for the first part of the fiscal year and/or in later supplementalappropriations.

In the Senate, Senators Reed, Akaka, Clinton, Nelson (FL), Hagel, McCain,Schumer, Landrieu, and Boxer, sponsored a bill, S. 2165 , to increaseArmy end-strength by 30,000. The Senate Armed Services Committee included ameasure in its version of the FY2005 authorization that would permit, but notrequire, the Secretary of Defense to increase total active duty end-strength by up to30,000 through FY2009. Finally, on June 17, by a vote of 93-4, the Senate adoptedan amendment by Senator Reed to increase FY2005 Army active duty end-strengthby 20,000.

The end-strength issue was not resolved in the FY2005 defenseappropriations conference report. The bill provides funds for added end-strengthwithin the $25 billion provided for Iraq and Afghanistan, but it does not prejudgewhether an increase in the statutory end-strength will be agreed to in theauthorization conference. The defense authorization conference agreement increasesArmy end-strength by 20,000 and Marine end-strength by 3,000 in FY2005 andestablishes the increased totals as minimums. The conference bill also authorizesadditional increases of 10,000 in the Army and 6,000 in the Marine Corps over thenext four years, but it does not establish them as minimums.

Missile Defense

In December 2002, the White House announced a plan to deploy a what itreferred to as a "test bed" of ground-based missile defense interceptors -- 10 to bedeployed in Alaska and 10 in California -- intended to have a limited operationalcapability against long-range missile attacks against the United States beginning bythe end of September 2004. That deployment plan has been delayed by at least acouple of months and there have been some changes in the proposed program in theinterim. The main change is that only one type of missile booster will initially beavailable because a fire in a production plant delayed production of a second rocketengine. The Missile Defense Agency has been working on construction of missilesilos and support facilities and began placing interceptors in silos in Alaska in July,2004. An operational capability by was expected to be declared in early October, butit is now unclear when it will be announced. (18)

The system that is being deployed will not be a full up operational missiledefense. It will rely on a ground-based missile tracking radar, called "Cobra Dane," that was built to monitor Soviet missile tests and that can track warheads launchedKorea or elsewhere in Asia. Cobra Dane does not look over the poles for warheadslaunched from the Middle East, however, nor can it be aimed to follow missiles orinterceptors in the U.S. Pacific Test Range far to the south. The radar also does nothave the degree of precision that is planned for the future. A more capableship-borne radar is still being developed. The interceptor warheads are also stillbeing tested against various kinds of increasingly complex targets, and the system hasnot demonstrated that it is a reliable operational weapon. The avowed primarypurpose of the test bed is to be just that -- a system to allow progressively moredemanding tests against progressively more realistic targets under progressively morerealistic operating conditions. Test intercepts cannot, however, be carried out fromthe 10 interceptor missiles being deployed at Fort Greeley, Alaska, however, becauseof range safety issues. The Pentagon's Director of Operational Testing, Tom Christie,has told Congress that he has advocated the deployment of some kind of test bedprecisely as a means of strengthening the rigor of the development process. (19)

Although there has been little criticism of the decision to develop a missiledefense test bed, per se , the White House decision to declare a system operational inthe midst of a presidential election campaign was a matter of occasionally testydebate in Congress. (20) Some other issues have also emerged. A bigissue is cost -- one key question is whether the big increase in missile defensefunding over the past few years is justified or whether funds should be shifted toother priorities. A perennial issue has been whether the Missile Defense Agencyshould spend less on development of space-based systems that may betechnologically risky or more on Patriot missile batteries and other systems that maybe of more immediate value to troops in the field.

Another set of issues has to do with management of the program. There havebeen repeated delays and substantial cost increases in the missile defense programitself and, particularly, in some related programs, including the Space-Based InfraredSystem (SBIRS)-High, run by the Air Force, the Space Surveillance and TrackingSystem (SSTS, formerly SBIRS-Low), run by the Missile Defense Agency, and theAirborne Laser (ABL) an Air Force-run, Missile Defense Agency-funded program. Missile defense programs may be a test of whether the Pentagon's "spiraldevelopment" acquisition strategy (see below), which is designed to accelerate thedevelopment process, may not also weaken managerial and cost controls.

Congressional Action. Both theHouse and the Senate Armed Services Committees generally supported theAdministration request, though they made some small changes (see Table A-2 ,below, for details). The House committee reduced funds for Advanced Concepts by$50 million, for system core technologies by $30 million, for the ForwardDeployable Radar (to be deployed with the THAAD system) by $56 million, and forinterceptors, particularly for sea-based systems, by $75 million. The committeeadded $47 million for the Theater High Altitude Area Defense (THAAD) program,$30 million for mid-course defense, and $30 million for advanced technologies forTHAAD and the PAC-3. The committee also required a report on the status of theAirborne Laser, though it indicated overall support for the program.

The Senate committee added $40 million to the ground-based mid-coursedefense program to reduce development risk and $90 million for 36 additional PAC-3missiles. For details of House and Senate committee action, see Table A-2 inAppendix A.

Missile defense funding was not an issue on the House floor, however,because the Rules Committee refused to permit any missile defense-relatedamendments. Senior Democrats complained in particular that the Rules Committeedid not make in order an amendment by Representative John Spratt, the secondranking Democrat on the Armed Services Committee, to shift $414 million fromspecified missile defense programs to military pay and benefits and to forceprotection programs.

The key issue in debate on the Senate floor was whether to require morestringent operational testing of missile defense systems. On June 17, the Senateadopted an amendment by Senator John Warner to require the Secretary of Defenseto prescribe and apply criteria for operationally realistic testing of fieldableprototypes developed under the ballistic missile defense program. By adopting theWarner amendment, the Senate rejected an amendment by Senator Jack Reed torequire the Director of Operational Test and Evaluation to prescribe and overseeoperational tests. Later, on June 22, by a vote of 44-56 the Senate rejected anamendment by Senator Carl Levin to reduce funds for missile defense by $515million and reallocate the money to Department of Energy counter-proliferation, toNORAD cruise missile detection programs, and to various Department of Defensehomeland defense programs.

The House Appropriations Committee made somewhat deeper cuts in therequest for missile defense programs than either authorizing committee -- in all, thecommittee cut $457.9 million from the request, though the committee report notedthat the remaining total is $632.4 million above FY2004 funding. The committeemade cuts of $205 million in program elements containing funds for programs beingcoordinated by a "Ballistic Missile Defense National Team" of government,contractor, and federal research center personnel. The goal of the national teameffort is to integrate various elements of the overall missile defense program,including terminal defense and midcourse defense, into a single system. Thecommittee said that the Missile Defense Agency's budget justification material didnot provide a sufficient rationale for the amounts requested. In addition, thecommittee cut $25 million from advanced concepts developments, saying that currentsystems needed more testing, and $61.5 million from terminal defense programs,citing growth in management costs and delays in rocket motor production. Inaddition, the committee recommended rescinding $74 million of previouslyappropriated funds because of delays in the Airborne Laser program.

In contrast, the Senate Appropriations Committee approved the full $10.2billion requested -- it actually increased the total by about $16 million -- though it didshift some funds among missile defense programs. The committee added $80 millionfor the Israeli Arrow program, added $163.5 million for Ground-Based MidcourseDefense, and cut $252 million, about half the amount requested, from the BallisticMissile Defense System Interceptor program, a program to develop a very highacceleration, mobile booster and warhead for land- and sea-basing and to explorespace-based interceptors.

The appropriations conference report provides $10.0 billion for missiledefense, $176 million below the request, but $280 million above the House level. The agreement increased funds for ground-based missile defense and reduced fundsfor interceptor R&D. The agreement also made an unallocated, across-the-board cutof $180 million, allowing DOD to decide how to allocate the reduction.

"Bow Waves" and "Train Wrecks": Cost Growth and Affordability of Major Weapons Programs

A perennial issue in defense policy is whether future defense budgets will belarge enough to finance all of the weapon acquisition programs that are in thepipeline. There are a couple of variations on the theme.

One issue is whether a "bow wave" of acquisition costs will growunsustainable at some point in the future. The term "bow wave" technically refersto the normal funding profile of a major program: funding is small in the early stagesof development, climbs during engineering development, peaks during full rateprocurement, and then declines again as production winds down. When severalweapons programs appear likely to grow in concert, then a large collective "bowwave" may appear to be looming in the future.

A second issue is whether projected weapons procurement budgets are largeenough to replace aging weapons as they reach the ends of their nominal servicelives. A 1999 report by the Center for Strategic and International Studies (CSIS),entitled The Coming Defense Train Wreck , argued that projected procurementbudgets would fall as much as 50% a year short of the amount needed to maintain amodernized force. (21) That study evoked considerable controversy. Very large variations in projected total costs could arise from minor changes inassumed rates of cost growth from one generation of weapons to the next, inassumptions about possible extensions of nominal service lives with upgrades, andin assumptions about whether some elements of the force (such as strategic nuclearweapons) need to be updated at all. (22)

Since 1999, the Congressional Budget Office has done a series of studies ofwhat it calls a "steady state" procurement rate (i.e., the rate at which weapons wouldhave to be replaced to maintain a modernized force of a given size) and also of thecumulative cost of the Pentagon's actual weapons plans. (23) CBO'sinitial "steady state" studies found a shortfall, but not of the magnitude CSISprojected. CBO's more recent studies of the affordability of the Administration planfind a potentially substantial "cost risk" if program costs grow above what theservices are now projecting.

Cost growth in major weapons programs is nothing new; it has plaguedplanners at least since the early days of modern systems analysis studies of defensepolicy in the 1960s. (24) Despite efforts to fix it, however, the problemnow appears to be recurring among most of the Defense Department's current, mosthigh-profile weapons programs, including

Air Force F/A-22 fighter: As a recent GAO report pointsout, (25) the development cost has grown from a 1986 Air Force estimate of $12.6 billion toa current estimate of $28.7 billion, the average unit procurement cost (not includingR&D) has grown from an estimated $69 million per aircraft to $153 million, andplanned procurement has declined from an initial goal of 750 aircraft to a current AirForce estimate of 276 to fit within a procurement cost cap (which GAO estimateswill permit only 218 aircraft at the most recent unit costestimates).

Air Force/Navy F-35 Joint Strike Fighter: Between September30, 2003 and December 31, 2003, official DOD estimates of JSF costs, provided toCongress in quarterly Selected Acquisition Reports, grew by $45 billion, from$199.7 billion to $244.8 billion, a 23% increase.

Space launch systems: Over the same period projected AirForce Evolved Expendable Launch Vehicle (EELV) program costs grew by $11.6billion, from $20.8 billion to $32.3 billion, a 56% increase.

Missile defense: Over the same period, estimated costs of theoverall missile defense R&D program grew by $3.2 billion, from $62.9 billion to$66.1 billion, a 5% increase.

Marine Corps V-22 tilt rotor aircraft: The total acquisition cost(R&D plus procurement) has grown from an estimated $32.4 million per aircraft in1986 to $104.9 million per aircraft currently, while the planned total procurement hasdeclined from 913 to 458 aircraft. (26)

Prior year Navy shipbuilding: Congress appropriated $1.3billion for cost growth in Navy ships that are now under construction in FY2003 andanother $636 million in FY2004, and the Administration is requesting $484 millionfor shipbuilding cost growth in FY2005.

Navy DD(X) destroyer and Littoral Combat Ship (LCS)acquisition: The Navy estimates that it will cost about $39 billion to acquire 24DD(X) destroyers and $14 billion to acquire about 56 LCS. Based on historicaltrends, however, CBO estimates a cost of about $53 billion for the DD(X)destroyers, (27) while the LCS design remains too uncertain foralternative cost estimates.

Space-Based Infrared System-High (SBIRS-High),Spaced-Based Infrared System-Low (SBIRS-Low), and Airborne Laser (ABL)programs: The SBIRS-High, an Air Force-run program to develop a new missilelaunch detection and tracking satellite that would be tied into a national missiledefense, has more than doubled in cost since 1995 to over $8 billion, including a $2billion estimate increase in 2001, and it still appears to be experiencing delays andcost growth. Recently the Air Force confirmed reports that the cost will grow byanother $1 billion and that satellite launches will be delayed another two years. There have been similar, though less severe delays and cost growth in the MissileDefense Agency-run SBIRS-Low program to develop a low-earth-orbit missiletracking satellite. And the Air Force-run, Missile Defense Agency-funded AirborneLaser program has been delayed and has suffered enough cost growth that the AirForce has decided to use available R&D funds for one rather than twoaircraft.

The Army Future Combat System (FCS): The FCS programremains at a very early stage of development, with several differing designalternatives still under consideration. Until recently, production was planned to beginin 2008 with an initial operational capability in 2010. In an April 2004 report,however, GAO found that 3/4 of the necessary technologies for the system wereimmature when the program started and that prototypes would not be available fortesting until shortly before production planned. (28) Mostrecently, the Army announced a major restructuring of the program which will delaymajor components for at least two years and increase total program costs by $25 to$30 billion. (29)

Taken together, all of this suggests that the "cost risk" CBO has warned aboutis an imminent prospect, and that the affordability of current weapons modernizationplans is in some doubt. The issue for Congress, this year and perhaps more and morepressingly in the future, is what to do about it. One possibility is to increase defensespending, though budget deficits may make that problematic. Another is to terminateother programs in addition to the Comanche and, earlier, the Crusader -- SenatorJohn McCain recently mentioned the F-22. (30) A third isto restructure priorities within the defense budget to find more money for weapons,though demands to increase end-strength appear at odds with such a prospect.

Congressional Action. Thecongressional defense committees made a number of changes in major weaponsprograms. Among the changes, a few stand out. The Senate Armed ServicesCommittee trimmed F/A-22 procurement from 24 to 22 aircraft saving $280 million. The rationale was that the program had been delayed in any case, so production willbe slower than the Air Force had planned. Critics of the decision argued thatproduction capabilities will ramp back up by 2007, when the money provided in theFY2005 budget would actually be spent. Neither appropriations committeesupported a cut, making the issue moot: the appropriations conference agreementprovides funds for 24 aircraft.

The House Armed Services Committee trimmed funds for two high-profileNavy programs on the grounds that production is beginning faster than the maturityof planned technology and the stability of system design warrants. These programsare the Navy DD(X) destroyer and the Navy Littoral Combat Ship (LCS). TheFY2005 request includes funds in the R&D accounts to begin construction of the firstof each of the DD(X) and LCS ships. The committee said that production is not yetjustified, so it trimmed $221 million from the DD(X) and $107 million from theLCS. Opponents of the cuts have argued that reductions will delay ship construction,and that old ways of developing ships led to obsolete technology being deployed. The Senate Armed Services Committee provided requested funding for both DD(X)and LCS construction, and added $99 million for the DD(X) to accelerate design ofa second ship.

The House Appropriations Committee followed the House authorizers on theDD(X), cutting $221 million, but it added $125 million in its place to begin buildingan additional DG-51 destroyer. The House appropriators did not agree to cut LCSconstruction, however, and instead added $107 million to fully fund the cost ofconstructing the first ship.

The Senate Appropriations Committee provided the $221 million requestedfor DD(X) construction, but in Navy procurement funds rather than in R&D, andadded $99 million for second ship design, following the Senate authorization. TheSenate appropriators also provided requested funding for LCS construction. So thekey differences were between the appropriators. The House wanted to delay DD(X)production and instead build an additional DG-51, while the Senate supported theDD(X) and wanted to add $99 million. Both the House and the Senateappropriations supported LCS construction, and the House wanted to add $107million.

The appropriations conference agreement ultimately did not support the cutsin either program that the House Armed Services Committee had imposed at thebeginning of the congressional process. The appropriations conference agreementprovides $221 million for DD(X) construction, but in procurement rather than inR&D, as the Senate proposed. The agreement also provides $214 million to fullyfund construction of the first LCS in the R&D accounts, as the House wanted.

The House Armed Services Committee also trimmed $245 million from theArmy's Future Combat System development request, saying that the money was"excess to requirements." The committee included a provision, Section 211,requiring extensive reports on the status of the program and mandating that specificcriteria be met before proceeding with various stages of the development process. The House Appropriations Committee went further -- it cut $324 million andeliminated funds for non-line of sight launch system (NLOS-LS) development. Neither Senate committee reduced funds for FCS, so this became a major issue inconference. As the appropriations conference was concluding, there were reports,since officially confirmed by the Army, that the Army is proposing a two-year delayin the program. (31)

The appropriations conference agreement trimmed $268 million from theprogram but included $58.2 million for NLOS-LS. The agreement also includes astatutory provision requiring the Army to field a version of the non-line-of-sightcannon by 2010, even if other elements of the FCS program are not deployed by then.

Other major weapons issues in the appropriations conference negotiationsconcerned space systems. The House appropriators shifted $91 million from theEvolved Expendable Launch Vehicle (EELV) program to the Space-Based InfraredSystem-High (SBIRS-High) program, as the Air Force requested. Senateappropriators, however, cut $100 million from the EELV due to delays, but did notadd anything to SBIRS-High. The appropriations conference agreement cuts $100million from the EELV and adds $91 million to SBIRS-High.

The House appropriators cut $100 million from the $775 million requestedfor the Transformational Communications Satellite program, following the Houseauthorization, while the Senate appropriators cut $400 million. The appropriationsconference report cut $300 million.

And the House appropriators essentially terminated Space-Based Radardevelopment, leaving $75 million for research into alternatives. The Senateappropriators cut $100 million from the $327 million requested. The appropriationsconference report follows the House, essentially terminating the program.

Evolutionary Acquisition and Spiral Development

The Defense Department has formally adopted a new process for acquiringweapons, which it calls evolutionary acquisition with spiral development. The goalof the process is to accelerate the deployment of new technology to troops in the fieldby deploying what is technologically ready and then progressively improving it asnew technology matures.

These goals appear to have pretty widespread support in Congress. Moreover, the new acquisition policies, which the Clinton Administration had alsobeen considering, appear in many ways closer to commercial practices that have oftenbeen successful. (32) But there has also been some concern that thenew procedures may weaken managerial controls and congressional oversight. (33) Someprograms, like the Littoral Combat Ship, have been started without the kind ofsystematic, formal analysis of alternatives that earlier regulations required. In othercases, GAO and others have warned that large investments are being made inprograms that still appear technologically immature, with potentially high risk ofdelays and cost growth and with a prospect that systems will not fully meetoperational requirements. (34)

Military Personnel Benefits

In recent years, Congress has repeatedly enhanced personnel benefits foruniformed personnel. Benefit increases have included "TRICARE for Life," whichguarantees full medical coverage to Medicare-eligible military retirees, repeal of a1986 law that reduced retirement benefits for new military enlistees, a phased in planto fully offset off-base housing costs, increased imminent danger pay and familyseparation allowances, and a one-year trial program to provide health insurance tonon-activated reservists not eligible for employer-provided insurance.

A particularly big issue in the last couple of years has been whether to permitconcurrent receipt of military retired pay and veterans disability payments. In theFY2003 defense authorization, Congress approved a limited plan to permit retireeswith disabilities directly related to combat to receive both retired pay and disabilitybenefits without an offset. In the FY2004 defense authorization, Congresssupplemented that measure with a plan to phase in concurrent receipt for all retireeswith a service-connected disability of 50% or greater.

Although veterans organizations still would like full concurrent receipt for allretirees with any degree of disability, that issue has not been a matter of much debatethis year. But two other personnel benefit issues were on the agenda this year.

One issue was whether to provide medical insurance to non-deployedreservists. Congress had to decide whether to extend a provision in the FY2004 Iraqsupplemental appropriations bill ( P.L. 108-106 ) that permits reservists withoutemployer-provided health insurance to sign up for the DOD TRICARE program thatprovides health care to a military dependents, provided the reservists pay a share ofthe cost equivalent to what civilian federal employees pay for their health plan. Beyond that, Senators Daschle and Graham of South Carolina proposed a bill topermit all reservists, whether eligible for employer-provided health insurance or not,to sign up for TRICARE.

A second issue was whether to increase benefits provided under the militarySurvivor Benefit Plan (SBP). Several Members of Congress have proposed measuresto revise longstanding rules that reduce benefits for surviving dependents of militaryretirees once the survivors reach age 62. The reduction was originally enacted to takeaccount of survivors becoming eligible for social security benefits. Veterans groupshave long argued that the reduction is out of date, unclear to participants, and unfairto survivors. (For a full discussion, see CRS Report RL31664 , The Military SurvivorBenefit Plan: A Description of Its Provisions , by David Burrelli; and CRS Report RL31663(pdf) , Military Benefits for Former Spouses: Legislation and Policy Issues , by David Burrelli.)

Congressional Action. In thecommittee-reported and House-passed version of the FY2005 defense authorization,the House included a provision that would increase Survivor Benefit Plan (SBP)payments to over-62 dependents of deceased military retirees from 35% of retired payto 55% in increments by March 2008. On June 23, the Senate adopted anamendment to the authorization by Senators Mary Landrieu and Olympia Snowe, tophase in increased benefits over 10 years through 2014 -- the amendment wouldprovide 45% of retired pay after September 2008, and 55% after September 2014.

A key issue in congressional action on the Survivor Benefit Plan -- and whichshaped the terms of the amendment the Senate adopted -- was how to pay for it. TheHouse version of the budget resolution included a provision, Section 303, thatestablished a "deficit-neutral" reserve fund for a measure that would increase SBPpayments. The measure provided that the chairman of the Budget Committee mayadjust totals in the budget resolution to accommodate an SBP increase if the ArmedServices Committee reports a bill that provides an increase offset by cuts in othermandatory programs.

This was potentially a show-stopper. Because the Armed ServicesCommittees have jurisdiction only over a limited number of mandatory programs,mainly military retiree pay and benefits, it normally would be difficult for thecommittees to come up with offsets, though it may have been possible to offer a flooramendment that would tap other mandatory programs or increase revenues. TheDemocratic alternative budget, offered by Representative John Spratt, included aprovision that would have required the Armed Services Committee to report ameasure providing increased survivor benefits as part of a larger reconciliation billmaking other changes in mandatory programs and revenues, but the House rejectedthe Spratt alternative.

On March 11, the Senate adopted a floor amendment to its version the budgetresolution by Senator Mary Landrieu to establish a reserve fund that would raiseaggregates in the budget resolution by $2.757 billion from FY2005-FY2009 to allowfor a measure, reported either by the Armed Services Committee or by theAppropriations Committee, that would eliminate the SBP over-62 Social Securityreduction. Senator Landrieu's amendment proposed offsetting the costs byeliminating tax benefits to individuals and corporations that avoid United Statestaxation by establishing a foreign domicile and by closing other tax loopholes and taxshelters.

The conference agreement on the budget resolution includes the Houseprovision -- i.e., it would permit an increase in SBP payments only if offset by othercuts in mandatory spending. As it turns out, however, the House Armed ServicesCommittee (acting before the conference agreement on the budget resolution wascompleted) was able to fund a way around the potential impasse.

The solution was a by-product of committee action on Boeing KC-767 tankeraircraft acquisition. Last year, the conference agreement on the FY2004 defenseauthorization ( P.L. 108-136 ) included a provision that authorized the Air Force toproceed with a program to lease 20 and then buy 80 aircraft. Because of the way theprovision was worded, the Congressional Budget Office (CBO) scored the measureas a mandatory program. In its version of the FY2005 authorization, the Housecommittee revised the KC-767 acquisition plan. It approved a multi-yearprocurement contract for the 80 aircraft to be procured, and it authorized money inAir Force RDT&E to develop needed aircraft modifications. CBO scores thisapproach for procuring 80 aircraft as a discretionary program, so it credited theArmed Services Committee with $14.3 billion in savings in mandatory programsfrom FY2006-FY2012. (35) These amounts were then available to offset theSBP increases (and, also, to offset an increase in mandatory spending due to thecommittee's extension of the military family housing privatization initiative).

The Senate, however, did not have any such windfall of mandatory offsets inhand when it acted on survivor benefits. As a result, the Senate limited the cost ofthe program by providing the full 55% of retired pay only after the end of FY2014,since mandatory spending increases over a 10-year period, but not beyond that, aresubject to a point of order. The Senate also eliminated a provision in the originalLandrieu proposal that limited premium increases for retirees who sign up forsurvivor benefits, so the cost of the 45% increase that is phased in by 2008 may bepaid for by the beneficiaries. The issue for authorization conferees is whether toadopt the more limited benefits provided in the Senate proposal or figure out how tooffset costs of the House proposal if, as appears quite possible, there is no agreementto alter that KC- 767 acquisition plan as the House has proposed.

In action on TRICARE for reservists, the House and Senate approved severalmeasures.

Both the House and the Senate Armed Services Committeesapproved measures to establish demonstration projects that would allownon-deployed reservists and their dependents to sign up for health insurance throughthe TRICARE program.

The Senate Armed Services Committee-reported version of thedefense authorization included a measure, called "TRICARE Reserve Select," toallow non-deployed reservists access to health insurance for them and theirdependents through the military-run TRICARE program, provided that the full costsare paid either through employer-employee cost sharing or if reservists cover the fullcost.

On June 2, the Senate approved a floor amendment to theauthorization bill by Senators Tom Daschle and Lindsey Graham to allow allnon-deployed reservists to receive health insurance for themselves and theirdependents through the military TRICARE program, with the federal governmentpaying the employer share of costs.

The issue for the authorization conference was whether to approve only somekind of demonstration program for providing health insurance for reservists, orwhether, instead, to adopt one of the Senate approaches -- either TRICARE ReserveSelect, which offers TRICARE if employers share costs or if reservists pay the fullcost, or the Daschle-Graham proposal for the federal government to pay the employershare.

The appropriations conference report did not resolve any of these, or other,personnel benefits issues. The part of the bill providing $25 billion for Iraq andAfghanistan includes funds in the Defense Health Program to finance increases inTRICARE for reservists, including TRICARE for non-deployed reservists withoutaccess to employer-sponsored health insurance, for the next four months. But theappropriations conference did not address other benefits increases.

The authorization conference agreement resolved both issues. The agreementincorporates the House measure on the Survivor Benefits Plan -- i.e., it phases in thefull 55% benefit by FY2008. The costs were offset by savings in mandatory budgetaccounts from changes in the KC-767 acquisition plan.

On the issue of TRICARE for reservists, the authorization conferenceagreement is a compromise between the House and the Senate. The agreementprovides that reservists who are activated for duty and who subsequently reenlist areeligible for TRICARE benefits for one year for each 90 days of active duty service,provided they pay 28% of the cost of the benefit. The conference agreement did notestablish a demonstration program for a broader program, but instructed GAO tostudy DOD's preparations for carrying out a demonstration.

Base Closures

In the FY2003 defense authorization bill, Congress approved a new round ofmilitary base closures to be carried out in calendar year 2005. In February 2004, theDefense Department met one requirement of the law by issuing a statement of criteriato be used in deciding which bases to close. In addition, DOD has issued guidanceto the military services on how the process of identifying bases to recommend forclosure will be organized. Senior Pentagon officials have said that size of the basingstructure remains as much as 25% larger than is needed, implying that the 2005 baseclosure round could be quite large.

In Congress, the 2005 base closure round has been a matter of extensivedebate. Last year, the House Armed Services Committee-reported version of theFY2004 defense authorization bill included a provision that would have restricted theextent of future base closures by requiring the Defense Department to maintain a basestructure large enough to absorb an increase in the size of the force plusredeployment of forces deployed abroad to the United States. Under a veto threatfrom the White House, that provision was removed from the bill in conference.

This year, the issue was again on the agenda. Several Members of Congresscriticized the Defense Department's base closure criteria, mainly for not including thecumulative economic effect of prior base closures as a factor in deciding on newclosures. In the presidential campaign, Senator John Kerry said he would prefer todelay a new base closure round pending decisions on the size of the force and onoverseas deployments. (36)

Congressional Action. TheHouse-passed version of the defense authorization bill included provisions thatwould delay the next scheduled round of military base closures from 2005 to 2007. The measure required a series of reports, due between January 1, 2006, and March15, 2006, before a new round may begin. The reports included studies on how thePentagon's Global Posture Review of overseas deployments may affect domesticbasing requirements (see below); how force transformation will affect basingrequirements; how changes in the reserve forces will affect basing requirements; andhow surge requirements will affect basing requirements. Although the committeeagreed to delay base closures, it rejected an amendment in the markup byRepresentative Gene Taylor to eliminate the next round entirely.

In floor action, the full House rejected an amendment by Representative MarkKennedy to remove the base closure delay from the bill. The Senate, however,rejected an amendment by Senators Trent Lott, Byron Dorgan, and others, to delayadditional domestic base closures until 2007. So base closures were a major issuein House-Senate authorization conference negotiations. The Administrationthreatened to veto the authorization bill if it includes a measure delaying baseclosures, as in the House-passed bill. The authorization conference agreement doesnot agree to the House-passed delay.

Overseas Troop Deployments

After the Cold War ended, the United States reduced the number of troopsdeployed overseas, especially in Europe, but it did not relocate remaining troopsaway from old Cold War forward bases. In November 2003, the BushAdministration has announced that it was undertaking a Global Posture Review toreconsider where and how U.S. troops are deployed overseas. (37) Officialssubsequently undertook extensive discussions with allies, in Europe and elsewhere,about changes in the location of U.S. troops. On August 16, 2004, the Presidentannounced that 60,000-70,000 U.S. troops would be withdrawn from locationsoverseas to the United States. (38) U.S. forces in Germany will be reduced the most;a naval command now in England will be relocated to Italy; and the United Stateswill build a number of bare bones facilities in several countries that can be used asneeded to support troop deployments to different parts of the world.

To date, the main interest in the issue in Congress has been fromsubcommittees overseeing military construction. A potential large-scaleredeployment of U.S. troops, however, also has profound implications for the overallglobal capabilities of U.S. forces, for regional alliances, and for foreign policy ingeneral.

Army Transformation

Early in the year, the new Chief of Staff of the Army, General PeterSchoomaker, announced some very far-reaching changes in the organization of theArmy and in Army personnel policies. These measures are designed to make theArmy more flexible to respond to small as well as large operational requirements,and to create a force that is easier to deploy rapidly abroad.

One change is to increase the number of deployable combat brigades in theactive duty force from 33 to 43 by 2006 and perhaps to 48 after that. A relatedchange is to turn brigades rather than divisions into the basic, deployable "unit ofaction" in the Army. This means giving brigades the communications, commandstructures, transportation and engineering support elements, and other associatedunits to allow them to operate independently of divisions and, above the divisionlevel, corps. A third change is to revise the personnel system so that entire units arekept together for training and deployment; this is known as unit manning, and it isto replace the Army's longstanding individual replacement system.

The Army's reorganization plan raises a number of issues for Congress. Oneis how much it will cost and how the Army will finance the reorganization. Thebiggest costs may be in equipping brigades to operate independently. Reportedly, theArmy has estimated that the plan could cost $20 billion through FY2011. (39) Anotherissue is how the plan will affect Army end-strength requirements. Army officialswant to add to the number of combat units within current end-strength. But this willrequire reassigning personnel from non-combat positions to the new brigades, andofficials have not said how many positions will be affected. (40) A thirdissue is how the plan will affect the relationship between active duty and reservecomponents. Currently, reserves are mobilized to fill out deploying active duty units. The effort to make active duty units more rapidly deployable, therefore, hasimportant implications for the role and structure of reserves. And, finally, the Armyhas failed in past efforts to use unit manning, in part because it affects howindividuals meet rotational requirements for promotion. Congress may be concernedabout how unit manning will affect the overall Army personnel system.

DOD's Civilian and Uniformed Personnel Systems

Last year, Congress agreed to an Administration request to give the Secretaryof Defense very broad authority to reorganize DOD's civilian personnel system. DOD is now beginning to implement changes. Some of the steps the department hastaken to date have led to disagreements with some employees and some unions -- particularly a measure that would move authority to bargain locally over certain workrules to the national level. So Congress was, in effect, tasked to exercise someoversight over how the new system is being implemented. In addition, last year,Congress considered, but ultimately did not act on amendments to the personnelproposals to ensure certain traditional civil service procedures. Similar measureswere proposed this year.

Last year, the Defense Department also requested changes in several lawsgoverning assignment of senior officers, but Congress did not act on the request. This year, the Pentagon has again submitted legislative proposals giving the Secretaryof Defense more authority over senior officers. The proposals include allowing theSecretary to reassign three- and four-star generals and admirals to new positionswithin the same grade without Senate confirmation, allowing senior officers to serveup to age 72, allowing the Secretary greater flexibility to reassign officers betweenthe ranks one- to four-star generals and admirals, and a measure to eliminaterestrictions on the length of service of military service chiefs and of the chairman andvice chairman of the Joint Chiefs of Staff.

Congressional Action. The Houseversion of the authorization bill included a measure allowing the President to extendthe terms of military service chiefs by up to two years in normal circumstances or byan additional period if the total term is not over eight years in time or war or nationalemergency. The House version also included measures to allow an increase in themilitary's mandatory retirement age for up to 10 senior officers and a measurerepealing a requirement that no more than 50% of flag officers may be above theone-star level. None of these provision were included in the Senate bill, and nonewere adopted in the conference agreement.

Several civilian personnel management issues were debated in floor actionon the bills. On June 22, by a vote of 202-218, the House rejected an amendment tothe defense appropriations bill to prohibit the use of funds in the bill to implementchanges in civilian personnel management practices that Congress approved last year. The House approved a measure, however, setting conditions on the conversion ofwork to private contractors, including a requirement that, for an conversion involving10 or more employees, the conversion involves a full competition, savings exceed thelesser of 10% or $10 million, and that the contractor not receive an advantage due to health insurance costs. The appropriations conference accepted the House measure.

On the authorization bill, the House approved a similar measure limitingoutsourcing, and also approved a measure permitting civilian employees to protestprivatization decisions. The Senate approved also approved a somewhat differentmeasure allowing employee protests. The authorization conference agreementincludes limits on privatization similar to those in the appropriations bill -- theagreement does not directly address health insurance costs, but requires a study of theimpact of health and other benefits in privatization competitions. The authorizationconference agreement also includes a provision allowing employee protests ofprivatization decisions under certain conditions.

Easing Environmental Provisions Affecting Military Training

For the past three years, the Defense Department has proposed a number oflegislative measures, under the rubric of the Readiness and Range PreservationInitiative, to ease the application of several environmental statutes to militarytraining. In the FY2003 defense authorization, Congress agreed to amend theMigratory Bird Treaty Act as it applies to accidental injuries to birds caused bymilitary aircraft. In the FY2004 defense authorization, Congress agreed to changesin the Marine Mammal Protection Act and in the Endangered Species Act.

This year, the Administration proposed somewhat revised versions ofproposals it made in prior years to amend the Clean Air Act, the ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA) and theResource Conservation and Recovery Act (RCRA). As DOD explains theseprovisions, (41) they would

Extend the allowable time to incorporate new military readinessactivities into a Clean Air Act State Implementation Plan when new units are movedto an installation; and

Clarify regulation of munitions under ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA) and ResourceConservation and Recovery Act (RCRA) if and only if munitions are used on anoperational range and those munitions and their associated constituents remain there.

Administration officials said that changes were made in these proposals toreflect particularly concerns expressed by state environmental enforcement agencies. But in response to the revised proposals, 39 states' attorneys general signed a jointletter criticizing the new measures. (42) Representative John Dingell, the RankingDemocrat on the House Energy and Commerce Committee, issued a press release andtwo fact sheets criticizing the Administration proposals. (43)

Congressional Action. Congressdid not consider the Administration's environment proposals this year. Neither theHouse nor the Senate Armed Services Committees considered the proposals in actionon their versions of the defense authorization. In the House, ReadinessSubcommittee Chairman Joel Hefley said he had no plans to move a package, andHouse Energy and Commerce Committee Chairman Joe Barton said he did not intendto address the issues in time for House action on the defense authorization if atall. (44)

Development of New Nuclear Weapons

Last year, after extensive debate both in the House and in the Senate,Congress approved a measure in the FY2004 defense authorization bill that repealeda FY1994 provision that had limited research on and development of new, low-yieldnuclear weapons. In its place, Congress added a provision to prohibit engineeringdevelopment of new low-yield weapons without specific authorization by Congress( P.L. 108-136 , Section 3116). The FY2004 authorization also approved requestedfunding for R&D on new weapons, but the final appropriations bill imposed somelimitations. In the FY2004 energy and water development appropriations bill( H.R. 2754 , P.L. 108-137 ), Congress provided $6 million, as requested,for the Department of Energy's Advanced Concepts Initiative (ACI) to study newweapons, but it prohibited obligation of $4 million of that amount until DOE submitsa report on its plans. The bill also trimmed funding to study a Robust Nuclear EarthPenetrator (RNEP) warhead from the $15 million requested to $7.5 million.

New nuclear weapons R&D was an issue in Congress again this year. Controversy developed, in particular, over proposed funding for the RNEP. TheAdministration requested FY2005 funding for the RNEP of $27.6 million, and itprojected total funding of $484.7 million over the five years from FY2005-FY2009. These amounts go far beyond the total of about $45 million that the Department ofEnergy said last year would be needed between FY2003 and FY2005 for feasibilitystudies. (For full discussions of these issues, see CRS Report RL32130 , NuclearWeapons Initiatives: Low-Yield R&D, Advanced Concepts, Earth Penetrators, TestReadiness , by Jonathan Medalia; CRS Report RL32347 , Robust Nuclear EarthPenetrator Budget Request and Plan, FY2005-FY2009 , by Jonathan Medalia; and CRS Report RL32347 , Robust Nuclear Earth Penetrator Budget Request and Plan,FY2005-FY2009 , by Jonathan Medalia.) The Administration also requested $9million for the ACI.

Congressional Action. On April28, Senator Dianne Feinstein made a major speech on the Senate floor criticizingAdministration plans for development of new nuclear weapons, including the robustnuclear earth penetrator. (45) She said that she intended to propose anamendment to the defense authorization bill to apply the same restrictions todevelopment of the RNEP as to advanced systems -- i.e., she would require specificcongressional authorization for RNEP engineering and development.

In House action on the defense authorization bill, the House rejected anamendment by Representative Ellen Tauscher to eliminate the $36.6 millionrequested for RNEP development and for the Advanced Concepts Initiative (ACI)and to transfer the funds to non-nuclear programs to defeat deeply buried andhardened targets. On June 15, the Senate rejected an amendment by SenatorFeinstein and Senator Ted Kennedy to eliminate funds for RNEP and the ACI. Theauthorization conference agreement does not limit RNEP or ACI funding.

Notwithstanding the House and Senate votes on the defense authorization bill,however, the committee-reported and House-passed version of the Energy and WaterAppropriations bill ( H.R. 4614 ) eliminated funds both for the RNEP andfor the ACI. Moreover, in report language, the committee was very critical of theAdministration's plans for developing new nuclear weapons (see H.Rept. 108-554 ,pp. 114-115). The Senate never acted on its version of the energy and water bill. A conference agreement on the energy and water bill was included in theconsolidated appropriations bill ( H.R. 4818 ) that Congress approved inNovember. The agreement followed the House and eliminates funds for the RobustNuclear Earth Penetrator and the Advanced Concepts Initiative.

Boeing KC-767 Tanker Aircraft Acquisition

Last year, in the FY2004 defense authorization ( P.L. 108-136 ), Congressrejected an Air Force proposal to lease 100 Boeing 767 aircraft modified as refuelingtankers and instead approved a plan to lease 20 aircraft and purchase 80 more. Earlyin 2004, however, a report by the Defense Department's Inspector General and a laterstudy by the Defense Science Board both raised questions about the status of theprogram. The Defense Department then put a decision on whether to proceed withthe program on hold, pending the results of a formal Air Force Analysis ofAlternatives (AOA), which is not expected until the end of this year. Subsequently,the program was mired in scandal when a former senior Air Force acquisition officialoverseeing tanker negotiations pleaded guilty to illegally seeking employment withBoeing.

Congress also investigated the proposal and Senator John McCain put a holdon approval of some Pentagon nominations because DOD has not provided somerequested documents. (46) Air Force Secretary Douglas Roche later warnedthat reopening the proposals might require reviewing proposals by other suppliers,including the European Aeronautic Defence and Space (EADS) company.

Congressional Action. The HouseArmed Services Committee-reported version of the FY2005 defense authorizationincluded a provision that authorizes the Air Force to proceed with multi-yearprocurement of 80 KC-767 aircraft and another provision that required the Air Forceto enter into a contract with Boeing to acquire the aircraft. The multi-yearauthorization provision replaced (and repealed) an earlier authorization for multi-yearprocurement in the FY2004 defense authorization, but did not repeal an authorizationin that bill for the Air Force to lease 20 aircraft, which therefore would remain ineffect. The committee provision also required that a new contract for KC-767acquisition be signed after June 1, 2004, and be reviewed by an independent panelestablished to assess the terms of the contract and determine whether the Air Forcereceived full and fair value. On the floor, the House approved an amendment byRepresentative Norman Dicks (passed as part of a Hunter en bloc amendment) torequire that the contract be completed no later than March 1, 2005.

Senator McCain, among others, continued to oppose the KC-767 acquisitionplan, at least until the mandated studies were completed. Last year, the SenateArmed Services Committee, on which Senator McCain serves, was the only one ofthe four congressional defense committees to turn down a Defense Departmentreprogramming request that would have allowed the Air Force to go ahead with itsinitial proposal to lease 100 aircraft. Instead, the committee proposed the modifiedlease 20-buy 80 plan that the House then agreed to in conference negotiations on theFY2004 authorization. On the Senate floor, Senator McCain proposed a number of767-related amendment to the defense authorization bill, all of which would setconditions before funds may be obligated for the program. On June 22, the Senateadopted a McCain amendment to prohibit acquisition of Air Force aerial refuelingaircraft until 60 days after currently required studies are completed and requiring theSecretary of Defense to certify that acquisition complies with all applicable laws,Office of Management circulars, and regulations.

For their part, the appropriators left resolution of the KC-767 issue up to theauthorizers, though both the House and the Senate Appropriations Committeessupported the program in the past. The House Appropriations Committee provided$100 million for KC-767 acquisition in a transfer fund that could be used forprocurement, R&D, or leasing of the aircraft. The Senate Appropriations Committeeprovided $110 million in a fund available for tanker aircraft replacement, which,presumably, could be used for KC-767s or for some other program. Theappropriations conference report includes $100 million for a tanker replacementprogram.

The authorization conference agreement repeals the lease provision in theFY2004 bill and approves multiyear procurement of a tanker replacement. So the AirForce may still decide to acquire KC-767 refueling aircraft at some time in the nextfew months, or it may decide to acquire some other system.

Buy American Act, Trade Offsets, and Related Issues

Last year, the House-passed authorization bill included provisions tostrengthen requirements that the Defense Department buy defense equipment andparts from American companies. The Senate opposed these measures, and the issueheld up final approval of the defense authorization bill for some time. Advocates ofmore stringent buy American provisions were not fully satisfied with the outcome,so the issue was expected to come up in some form again this year. A related issueis whether the Navy should be permitted to continue leasing some support ships fromforeign firms, or should, instead, be required to buy new ships from Americanshipyards. See above for discussions of congressional action on the issue.

Congressional Action. The HouseArmed Services Committee did not directly seek to strengthen "Buy American"provisions it its version of the FY2005 defense authorization, but it addressed theissue indirectly in a provision regarding offsets for foreign military sales. U.S. salesof military equipment to foreign countries often include agreements to offset part orall of the value of the sale. Offsets may include allowing foreign suppliers to provideparts for the system, allowing foreign companies to perform assembly operations orother parts of production, or requiring U.S. purchases of equipment from foreignproviders. The House version of the authorization bill includes a measure that wouldprohibit the United States from purchasing foreign-made defense items unless theseller agrees to provide trade "offsets" equal, as a share of value, to the offsets theselling nation applies to purchases from the United States. The provision may bewaived if the Secretary of Defense certifies that a purchase is necessary to meet U.S.national security objections.

In the Senate, the authorization bill, as reported by the Armed ServicesCommittee, included provisions allowing the Defense Department to waive domesticcontent requirements for purchases from foreign countries that have a reciprocal tradeagreement with the United States. On June 22, the Senate considered an amendmentby Senators Mark Dayton and Russ Feingold to eliminate those provisions. TheSenate rejected that proposal, however, when it adopted, by a vote of 54-46, asubstitute amendment proposed by Senator McCain to revise the language of theoriginal provision. The McCain amendment, included in the Senate-passed versionof the bill, allows the Defense Department to waive domestic content requirements for trade with any nation that has signed a "Declaration of Principles" agreement withthe United States regarding reciprocity in defense trade. On June 23, the Senate alsoagreed to an amendment by Senator Christopher Dodd to penalize contractors thatagree to offsets of more than 100% of the value of a contract for sales of defensegoods to foreign nations.

The authorization conference agreement requires the Secretary of Defense todevelop a defense acquisition trade policy designed to eliminate any adverse impactof offset agreements in defense trade. Conferees dropped the Senate provisionallowing waivers of buy American laws.

Legislation

Concurrent Budget Resolution

S.Con.Res. 95 (Nickles). An original concurrent resolutionsetting forth the congressional budget for the United States government for FY2005and including the appropriate budgetary levels for fiscal years 2006 through 2009. Reported by the Senate Budget Committee without written report, March 5, 2004. Measure laid before the Senate, March 8, 2004. Considered by the Senate, March10-12, 2004. Agreed to in the Senate with amendments (51-45), March 12, 2004. House struck all after the enacting clause and inserted the provisions of H.Con.Res. 393 , March 29, 2004. House requested a conference andappointed conferees, March 30, 2004. Senate disagreed to House amendment andappointed conferees, March 31, 2004. Conference report filed ( H.Rept. 108-498 ),May 19, 2004. House approved conference report (216-213), May 19, 2004.

H.Con.Res. 393 (Nussle). A concurrent resolution establishingthe congressional budget for the United States government for FY2005 and settingforth appropriate budgetary levels for fiscal years 2004 and 2006 through 2009. Reported by the House Budget Committee ( H.Rept. 108-441 ), March 19, 2004. Considered by the House, March 24-25, 2004. Agreed to in the House (215-212),March 25, 2004. House inserted the provisions of H.Con.Res. 393 into S.Con.Res. 95 and agreed to S.Con.Res. 95, March 29, 2004. House requested a conference, March 30, 2004.

Defense Authorization

H.R. 4200 (Hunter). To authorize appropriations for FY2005for military activities of the Department of Defense, to prescribe military personnelstrengths for FY2005, and for other purposes. Marked up by the House ArmedServices Committee, May 12, 2004. Ordered to be reported by the House ArmedServices Committee ( H.Rept. 108-491 ), May 13, 2004. Considered by the House,May 19-20, 2004. Motion to recommit failed with instructions (202-224), May 20,2004. Agreed to by the House (391-34), May 20, 2004. Senate took up H.R.4200, struck all after the enacting clause and inserted the provisions of S. 2400 , and approved H.R. 4200, as amended, by unanimousconsent, June 23, 2004. Senate insisted on its amendments, requested a conference,and appointed conferees, June 24, 2004. Conference report filed ( H.Rept. 108-767 ),October 8, 2004. Conference report agreed to in the House (359-14) and in theSenate (unanimous consent), October 9, 2004. Signed into law by the President ( P.L.108-375 ), October 28, 2004.

S. 2400 (Warner). An original bill to authorize appropriationsfor FY2005 for military activities of the Department of Defense, for militaryconstruction, and for defense activities of the Department of Energy, to prescribepersonnel strengths for such fiscal year for the Armed Services, and for otherpurposes. Marked up by the Senate Armed Services Committee, May 6-7, 2004. Reported by the Senate Armed Services Committee ( S.Rept. 108-260 ), May 11,2004. Considered in the Senate, May 17-21, June 2-4, 7, and 14-18, 21-23, 2004. Agreed to in the Senate, with amendments (97-0), June 23, 2004. Senateincorporated S. 2400 into H.R. 4200 and Senate adopted H.R.4200 as amendment by unanimous consent, June 23, 2004.

Defense Appropriations

H.R. 4613 (Lewis). Making appropriations for the Departmentof Defense for the fiscal year ending September 30, 2005, and for other purposes. Reported by the House Appropriations Committee, June 18, 2004 ( H.Rept. 108-553 ). Reported by the Rules Committee with amendment, H.Res. 683 on June21, 2004. Considered in the House, June 22, and passed by a vote of 403 to 17 onJune 22, 2004. Taken up and considered by the Senate; Senate struck all after theenacting clause and inserted the provisions of S. 2559 , as reported bythe Armed Services Committee; Senate considered amendments and adopted H.R.4613, as amended (98-0), June 24, 2004. Senate insisted on itsamendments, requested a conference, and appointed conferees, June 24, 2004. Housedisagreed to the Senate amendments, agreed to a conference, agreed to instructconferees by a voice vote, and appointed conferees, July 13, 2004. Conference reportfiled ( H.Rept. 108-622 ), July 20, 2004. Conference report agreed to in the Senate(96-0) and in the House (410-12), July 22, 2004. Signed into law by the President( P.L. 108-287 ), August 5, 2004.

S. 2559 (Stevens). An original bill making appropriations forthe Department of Defense for the fiscal year ending September 30, 2005, and forother purposes. Ordered to be reported by the Senate Appropriations Committee,without written report, June 22, 2004. Senate incorporated S. 2559 into H.R. 4613 as an amendment and took up H.R. 4613, asamended, June 24, 2004. Report filed by the Senate Appropriations Committee( S.Rept. 108-284 ), June 24, 2004.

For Additional Reading

CRS Reports

CRS Report RL32381(pdf) . Adequacy of the Army's FY2004 Funding for Operations inIraq .

CRS Report RL32056 . The Air Force KC-767 Tanker Lease Proposal: Key IssuesFor Congress .

CRS Report RS20859 . Air Force Transformation.

CRS Report RS20787 . Army Transformation and Modernization: Overview andIssues for Congress.

CRS Report RL31954 . Civil Service Reform: Analysis of the National DefenseAuthorization Act for FY2004.

CRS Report RL31924 . Civil Service Reform: H.R. 1836, HomelandSecurity Act, and Current Law.

CRS Report RL31187(pdf) . Combating Terrorism: 2001 Congressional Debate onEmergency Supplemental Allocations.

CRS Report RS21327. Concurrent Receipt of Military Retirement and VA DisabilityBenefits: Budgetary Issues.

CRS Report RS21644. Defense Funding by Mission For Iraq, Afghanistan, andHomeland Security: Issues and Implications.

CRS Report RL30392. Defense Outsourcing: The OMB Circular A-76 Policy.

CRS Issue Brief IB10062. Defense Research: DOD's Research, Development, Testand Evaluation Program.

CRS Report RL32238 . Defense Transformation: Background and Oversight Issuesfor Congress.

CRS Report RS21195 . Evolutionary Acquisition and Spiral Development in DODPrograms: Policy Issues for Congress.

CRS Report RL32141 . Funding for Military and Peacekeeping Operations: RecentHistory and Precedents.

CRS Report RL32090 . FY2004 Supplemental Appropriations for Iraq, Afghanistan,and the Global War on Terrorism: Military Operations & ReconstructionAssistance.

CRS Report RL31946 . Iraq War: Defense Program Implications for Congress.

CRS Report RL32216 . Military Base Closures: Implementing the 2005 Round.

CRS Report RS21822 . Military Base Closures: DOD's 2005 Internal SelectionProcess.

CRS Report RL30051 . Military Base Closures: Agreement on a 2005 Round.

CRS Report RL31663(pdf) . Military Benefits for Former Spouses: Legislation andPolicy Issues.

CRS Report RS21754 . Military Forces: What is the Appropriate Size for the UnitedStates?

CRS Issue Brief IB85159. Military Retirement: Major Legislative Issues.

CRS Report RS21148 . Military Space Programs: Issues Concerning DOD's SBIRSand STSS Programs.

CRS Report RL31664 . The Military Survivor Benefit Plan: A Description of ItsProvisions.

CRS Report RL31111 . Missile Defense: The Current Debate.

CRS Report RS20851 . Naval Transformation: Background and Issues for Congress.

CRS Report RL32130 . Nuclear Weapon Initiatives: Low-Yield R&D, AdvancedConcepts, Earth Penetrators, Test Readiness.

CRS Report RL32347 . Robust Nuclear Earth Penetrator Budget Request and Plan,FY2005-FY2009.

CRS Report RL31406 . Supplemental Appropriations for FY2002: CombatingTerrorism and Other Issues.

CRS Report RL31829 . Supplemental Appropriations FY2003: Iraq Conflict,Afghanistan, Global War on Terrorism, and Homeland Security.

CRS Issue Brief IB92115. Tactical Aircraft Modernization: Issues for Congress.

Appendix A. Funding Tables

Table A-1. Congressional Action on FY2005 DefenseAppropriations Bill by Title

(budget authority in millions of dollars)

Sources: H.Rept. 108-553 ; S.Rept. 108-284 , H.Rept. 108-622 , H.Rept. 108-792 .

Table A-2. National Defense Budget FunctionRequest by Appropriations Bill, FY2002-FY2005

(current year dollars in millions)

Source: Department of Defense, National Defense Budget Estimates for FY2005 ,March 2004.

Table A-3. Congressional Action on Missile Defense Programs

(amounts in millions ofdollars)

Sources: Department of Defense, Procurement Programs (P-1), Fiscal Year 2005 , February 2004; Department of Defense, RDT&E Programs (R-1),Fiscal Year 2005 , February 2004; H.Rept. 108-491 ; S.Rept. 108-260 ; H.Rept. 108-553 ; S.Rept. 108-284 ; H.Rept. 108-767 .

Note: Excludes $22.3 million requested for military construction.

Table A-4. House and Senate Action on Major Weapons Acquisition Programs: Authorization

(amounts in millions of dollars)

Sources: H.Rept. 108-491 ; S.Rept. 108-260 .

Table A-5. House and Senate Action on Major Weapons Acquisition Programs: Appropriations

(amounts in millions of dollars)

Source: H.Rept. 108-553 , S.Rept. 108-284 , H.Rept. 108-622 .

Appendix B. Overview of the Administration Request

On February 2, 2004, the Administration released its FY2005 federal budgetrequest. The request includes $423.1 billion in new budget authority for nationaldefense, of which $402.6 billion is for military activities of the Department ofDefense, $17.2 billion for atomic energy defense activities of the Department ofEnergy, and $3.2 billion for defense-related activities of other agencies. The requestdoes not include funding for ongoing military operations in Iraq, Afghanistan, andelsewhere, for which Administration officials have said they expect to submit asupplemental appropriations request early in calendar year 2005.

Table B-1 shows the Administration projection of funding for the nationaldefense budget function from FY2005 through FY2009, including requested fundingfor Department of Defense military activities and for defense-related activities of theDepartment of Energy and other agencies. It also shows the Administration'sestimate of FY2004 funding.

The FY2004 amounts are not directly comparable to figures for later years,because they include supplemental appropriations for operations in Iraq, Afghanistan,and elsewhere, while the Administration projections for FY2005 and beyond do not. Table B-2 shows Department of Defense funding for FY2004 with and withoutsupplemental appropriations compared to the FY2005 request.

With one exception, the Administration's FY2005 defense request does notmark a dramatic departure from plans officials have presented to Congress over thepast couple of years.

The exception is the Army's decision to terminate the Comanche helicopterprogram. Otherwise, the Administration's request mainly reflects ongoing trends inthe defense budget, including

continued growth in operation and maintenance and in militarypersonnel costs; and

continued growth in a few very large weapons programs,including the Air Force F-22 fighter, the multi-service F-35 Joint Strike Fighter(JSF), the Navy's DD(X) destroyer and Littoral Combat Ship (LCS) programs, theArmy's Future Combat System, and, largest of all, missiledefense.

Table B-1. National Defense Budget Function,FY2004-FY2009, Administration Projection

(budget authority in billions of dollars)

Source: Office of Management and Budget, Historical Tables: Budget of the UnitedStates Government for FY2005 , Feb. 2004; Department of Defense, NationalDefense Budget Estimates for FY2005 , Mar. 2004.

Table B-2. Department of Defense Budget,FY2004-FY2005, With and Without FY2004 SupplementalFunding

(budget authority in billions of dollars)

Sources: Department of Defense, Financial Summary Tables, FY2005 Budget ,February 2004.

*Note: The FY2004 total shown for Operation and Maintenance (O&M) includes anoffsetting rescission of $3.5 billion. Without the rescission, the total for O&M, notincluding supplemental funding, is $131.7 billion, which is the total of programmaticfunding available to DOD, and which is most comparable to the $141.2 billionrequested for O&M in FY2005. The FY2004 figures shown include total offsettingrescissions of $6.1 billion.

Comanche Termination

On February 23, two weeks after the budget was released, the Armyannounced a decision to terminate development of the Comanche helicopter and toshift budget savings into other Army aviation programs. In all, the Army spent about$8 billion on the Comanche prior to FY2005 and estimated that its plan to acquire650 aircraft through FY2014 would cost an additional $29 billion. Halting theprogram will save about $1.2 billion in FY2005, $8.9 billion from FY2005-FY2009,and, according to Army officials, $14.6 billion from FY2005-FY2011, minustermination costs estimated at $450-$680 million. Army officials said they wouldreallocate all of these funds to other Army helicopter, missile, and unmanned aerialvehicle (UAV) programs. On March 3, 2004, the White House submitted a budgetamendment that shifts FY2005 Comanche funds to other Army programs.

Continued Growth in Operation and Maintenance and in Military Personnel Costs

As Table B-2 , above, shows, the Defense Department's FY2005 budget isabout $26 billion higher than the baseline FY2004 budget (i.e., excluding FY2004supplemental funding). Of that increase, $6.4 billion is for military personnel and$13.0 billion for operation and maintenance (O&M). The O&M increase is a bitoverstated because the FY2004 base reflects a $3.5 billion rescission in FY2003emergency supplemental funds. But even after adjusting for the FY2004 rescission,over 70% of the requested DOD increase between FY2004 and FY2005 is forpersonnel and O&M.

Operation and Maintenance CostsTrends. For O&M, this is not a new story. As Figure B-1 shows,after adjusting for inflation and for changes in the size of the force, total operationand maintenance funding has grown at a very steady rate of just over 2.5% per yearabove inflation ever since the end of the Korean War. Many things explain the trend: (1) the steadily growing cost of operating and maintaining new generations of morecapable and sophisticated weapons; (2) efforts to improve the extent and quality ofmilitary training; (3) efforts to ensure that the quality of life in the military keeps upwith the quality of life in the civilian sector as the military has shifted to an allvolunteer, older, more commonly married, and more skilled force (this is reflected,among other things in growing health care costs and in expenditures to operatefacilities); and (4) modest but steady real growth in the compensation of DODcivilian personnel, most of whom are paid with O&M funds. The cost of maintainingaging equipment in recent years does not appear to be major factor. (47)

Over the years, the Defense Department has perennially tried to slow thegrowth of O&M costs. Efficiency measures -- including base closures, outsourcing,business process reforms, and attempts in the acquisition process to improveweapons reliability -- may have had some effect, but not enough to slow thelong-term trend perceptibly. Experience during the Clinton Administration may bean object lesson. Pentagon officials often projected that O&M costs would level off. When they did not, more money had to be found to make up O&M shortfalls,sometimes at the expense of procurement accounts and at other times from increasesin the defense total. For its part, the Bush Administration has built into its budgetsan expectation that O&M costs will continue to rise.

Figure B-1. Operation and Maintenance Budget Authority Per Active Duty Troop, FY1955-FY2009

Recent Rapid Growth in Military PersonnelCosts. Military personnel costs have also grown over time,particularly since the inception of the all volunteer force in 1973. Until FY2000, therate of growth was relatively modest. Beginning with the FY2000 defense bills,however, Congress, sometimes at the Pentagon's request and sometimes not, hasapproved a series of increases in military pay and benefits that have driven uppersonnel costs dramatically. These increases include

Annual military pay raises pegged at 0.5% above the"employment cost index," a measure of pay rates in the civiliansector;

"Pay table reform" which gave larger, often substantial, payraises to targeted mid-level personnel in an effort to ensure retention of skilledpeople;

Repeal of a 1986 measure, known as "REDUX," that hadreduced retirement benefits for personnel entering the force after that time;

A plan to reduce out-of-pocket housing costs for personnelliving off base by increasing housing allowances enough to eliminate differenceswith on-base housing; and

Most expensive of all, in the FY2001 defense authorization, ameasure known as "TRICARE for Life" to provide full health care benefits toover-65 military retirees.

Figure B-2 shows the trend in total military personnel funding, adjusting forinflation and for changes in the size of the force, indexed to 1973, the first year of theall-volunteer force. (48) By this measure, uniformed military personnelare 30% more expensive in FY2005 than in FY1999. While the rate of growth maylevel off over the next few years, annual pay raises and other changes in benefits startfrom a much higher base than just a few years ago, and very high personnel costs area fact of life in long-term military budget planning.

Figure B-2. Military Personnel Budget Authority Per Active Duty Troop, FY1973-FY2009

Growth of Large Acquisition Programs

Compared to the FY2000 defense budget -- the last full budget approvedwithout subsequent supplemental funding during the Clinton Administration -- theBush Administration's FY2005 request reflects a substantial increase in funding formajor weapons acquisition programs. Over the five year period, without adjustingfor inflation, weapons procurement is about 36% higher, and, strikingly, research,development, test, and evaluation (RDT&E) is 78% higher (see Table B-3 ).

Although these increases are going to finance acquisition of a broad range ofweapons programs, a very large part of the growth is for just a few programs, manystill in the R&D stage. Table B-3 shows trends in funding for seven selected majorweapons acquisition programs from FY2000 through FY2005 (note that figures inthis table are not adjusted for inflation). These seven programs alone account for34% of the increase in the RDT&E title between FY2000 and FY2005 and 35% ofthe increase in weapons procurement. These and a few other large programs willcontinue to dominate the acquisition part of the defense budget for the next severalyears.

Table B-3. Increases in Funding for SelectedAcquisition Programs, FY2000-FY2005

(budget authority in millions of current yeardollars)

Sources: Department of Defense, Program Acquisition Costs by Major WeaponSystem , annual editions for FY2002-FY2005; Department of Defense, RDT&EProgram Descriptive Summaries , various years and service volumes; Department ofDefense, Procurement Programs (P-1) , various years.

From a budgeting perspective, this is also nothing new. The growing cost ofmajor weapons programs also drove budgets higher in the past. Much of theincreased spending during the defense buildup of the first four years of the ReaganAdministration went to pay for procurement of weapons that began development inthe early 1970s as the war in Vietnam was winding down. Similarly, much of theincrease in the early years of the George W. Bush Administration is going to carryon weapons programs which were started some years ago. Almost all of theseprograms have experienced significant cost growth and schedule delays, which raisessome questions about the long-term affordability of current weapons plans (see belowfor a more extensive discussion).

Appendix C: Defense Budget Trends

Even without supplemental funding for Iraq and Afghanistan, the FY2005Bush Administration defense request represents a substantial increase from theamounts provided in the final years of the Clinton Administration. Table C-1 compares the FY2000 defense plan, which was the last full budget year of theprevious Administration with the FY2005 request. Adjusted for inflation, theoverall FY2005 request is about 23% higher, with the largest increases inprocurement, +28%, and, most strikingly, in R&D, +66%. This represents anaverage annual growth rate of 3.7% above inflation over the five-year period.

Table C-1. Change in National Defense BudgetFunction by Appropriations Title, FY2000-FY2005

(budget authority in billions of constant FY2005dollars)

Sources: CRS calculations based on amounts from the Office of Management andBudget and FY2005 base year deflators from the Department of Defense.

Notes

a. FY2005 amounts do not include anticipated supplemental appropriations for Iraqand Afghanistan.

b. The FY2000 Military Personnel total is inflated to FY2005 prices usingDepartment of Defense "deflators," which count military pay raises asinflation. A calculation using different deflators, such as the Consumer PriceIndex, would show a different amount: see Figure 2 above.

Though substantial, these increases are not as large those in the first five yearsof the Reagan Administration. Between FY1980 and FY1985, the defense budgetgrew by 48%, an average annual increase of 8.1%. Moreover, even when funding foroperations in Iraq and Afghanistan is included, military spending remains relativelylow as a percentage of GDP. The FY2004 budget, including costs of Iraq andAfghanistan is about 4% of GDP, substantially higher than in FY2000, but wellbelow what it was in the mid-1980s, when the Cold War was still going on (see Figure C-1).

Figure C-1. National Defense Outlays % of GDP, FY1947-FY2009

Advocates of higher military spending sometimes point to the long-termdecline in defense as a share of the economy to argue that the nation can easily affordmore. One counter-argument, or at least part of a counter-argument, is that the trendin defense spending is part of a broader long-term trend in the federal budget, inwhich both defense and non-defense discretionary spending have declined whilemandatory programs have grown. As Figure C-2 shows, total federal spending hasbeen remarkably stable at about 20% of GDP over the past 40 years. So to increasedefense substantially as a share of the economy would require either an increase intotal federal spending as a share of GDP or offsetting reductions elsewhere.

Figure C-2. Federal Outlays % of GDP, FY1962-FY2009

After FY2005, the Administration defense plan, again not includingwar-related supplementals, calls for fairly modest increases in the defense budgetaveraging a bit over 2% per year above inflation. Table C-2 shows the trend.

Table C-2. Administration Projections for theNational Defense Budget Function, FY2005-FY2009

(budget authority in billions of current and constantFY2005 dollars)

Source: CRS calculations using deflators from Department of Defense Comptroller.