On January 10, 2002, the President signed P.L. 107-117 , the FY2002 DOD Appropriations Act( H.R. 3338 ). On December 20, 2001, the House and the Senate passed H.R. 3338 by 408 to 6 and 94 to 2, respectively. In addition to providing the fundingrequested by the Administration for DOD, the act allocates $20 billion in Emergency TerrorismResponse supplemental ( P.L. 107-38 ) funding among all federal agencies to combat terrorism andprovide aid and recovery to the victims of the attacks. The debate on the FY2002 DOD appropriations act centered on the allocation of the $20 billion in funding to combat terrorism. The conferees resolved the significant differences betweenthe House and Senate versions by shifting $4.3 billion in funding requested by the Administrationfor DOD to non-defense agencies to combat terrorism and provide aid to New York city. Efforts inboth houses to increase funding for antiterrorism beyond the $20 billion already enacted in theemergency supplemental failed after President Bush threatened to veto any bill that exceeded thatamount. The final version of the bill provides $317.2 billion to the Department of Defense in regularappropriations. The DOD Authorization Act ( S. 1438 ) was passed on December 13 and also provided the amount requested by the Administration. The authorizers resolved the chief item ofcontention - base closures - by delaying the date to 2005. There was little controversy about the total amount of regular appropriations for DOD. Along with funds for military construction and other defense-related programs, the $317.2 billion for DODin the final version of H.R. 3338 provides $343.3 billion, about the same amount intotal as requested by the Administration. Because of the recession that began last spring, along withaccommodating the full defense request, emergency spending to combat terrorism, and lower taxrevenues because of the tax act, funding government expenditures in FY2002 will require not onlyusing all of the social security surplus but also returning to deficit spending. 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 all of the 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 usually occurs mainly in action on the authorization. Because thedefense authorization and appropriations bills are so closely related, this report trackscongressional action on both measures. The annual defense appropriations bill provides funds for military activities of the Department of Defense (DOD), including pay and benefits of military personnel, operation and maintenance ofweapons and facilities, weapons procurement, and research and development, as well as for otherpurposes. Most of the funding in the bill is for programs administered by the Department of Defense, though the bill also provides (1) relatively small, unclassified amounts for the Central IntelligenceAgency retirement fund and intelligence community management, (2) classified amounts for nationalforeign intelligence activities administered by the CIA and by other agencies as well as by DOD, and(3) very small amounts for some other agencies. Five other appropriations bills also provide fundsfor national defense activities of DOD and other agencies including: the military construction appropriations bill, which finances constructionof military facilities and construction and operation of military family housing, all administered byDOD; and the energy and water development appropriations bill, which funds atomicenergy defense activities administered by the Department of Energy. the VA-HUD-independent agencies appropriations bill, which finances civildefense activities administered by the Federal Emergency Management Agency, activities of theSelective Service System, and DOD support for National Science Foundation Antarctic research; the Commerce-Justice-State appropriations bill, which funds nationalsecurity-related activities of the FBI, the Department of Justice, and some other agencies; and the transportation appropriations bill, which funds some defense-relatedactivities of the Coast Guard. On January 10, 2002, the President signed P.L. 107-117 ( H.R. 3338 ), the FY2002DOD Appropriations Act, including both the regular funding for defense and the allocation of $20billion among all government agencies that was provided in the Emergency Terrorism Responsesupplemental to combat terrorism (see H.Rept. 107-350 and Table 1a ). On December 20, 2001,the House and the Senate passed H.R. 3338 / P.L. 107-117 , the conference version of theFY2002 Department of Defense (DOD) appropriations bill. Although Congress provided $343.3billion for National Defense, close to the total requested by the Administration, Congressre-allocated the funding - providing $1.7 billion less than requested for the Department of Defense,and $500 million more for military construction, and $750 million more for the Department ofEnergy's defense programs. (2) Of the $20 billion inemergency supplemental funding that wasallocated in H.R. 3338 , DOD received $3.5 billion. Although P.L. 107-117 ( H.R. 3338 ) makes various changes to the Administration's FY2002 request for regular DOD appropriations, the Administration's basic priorities are preserved,including a substantial increase in overall resources for defense, a large increase in military pay andfull funding of defense health benefits, and a major jump in spending for missile defense. Congressdoes, however, reduce spending on operations and maintenance on the basis of various pricingadjustments and efficiency measures in order to accommodate increases to the procurement andRDT&E accounts (see below for a fuller discussion). A week earlier, on December 13, 2001, both houses passed S. 1438 , the conference version of the FY2002 DOD authorization bill (see S.Rept. 107-333 and Table 1b ). The confereesresolved the chief issue in contention - authorizing another round of base closures as requested bythe Administration - by delaying the date to 2005. In addition, the authorizers set upward limits onthe amounts that could be provided in the emergency supplemental to combat terrorism. Table 1a. Status of FY2002 Defense Appropriations Table 1b. Status of FY2002 DefenseAuthorization During floor consideration of the bill in both houses, the debate centered on the adequacy and allocation of the $20 billion in emergency supplemental funding to combatterrorism. In response to concerns raised by members that more funding was needed for therecovery of New York and homeland defense, the conferees shifted $4.3 billion from fundingrequested by the Administration for DOD to those purposes. Several members suggested thatthe Administration could request additional funding for defense in a FY2002 supplemental.Earlier attempts to provide funding above the $20 billion already appropriated were stymiedby the threat of a presidential veto. Of the total $40 billion provided by the emergency supplemental, DOD received $17.5 billion, including $14 billion that was allocated at the discretion of the President and $3.5billion that was allocated in the FY2002 DOD appropriations act (see below). (3) Non-defenseagencies received a total of $22.5 billion, including $16.5 billion that was allocated in theFY2002 DOD bill. Within that $16.5 billion for non-defense agencies, the majorprogrammatic emphasis is for: recovery for New York and other affected areas ($5.0 billion); bioterrorism $2.8 billion); and investigatory activities ($2.3 billion). (See discussion below and CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by [author name scrubbed] and [author name scrubbed]). Total funding appropriated for the national defense function in FY2002, including the $3.5 billion of funding from the Emergency Terrorism Response supplemental that wasallocated in the DOD bill, is $346.8 billion (see Table 2 ). DOD also received $14.0 billionin funding from the Emergency Terrorism Response supplemental that was distributed by thePresident (see below). (4) Those funds are includedin DOD's FY2001 appropriations.Including those funds along with $5.8 billion provided last summer in a non-emergencysupplemental, funding for national defense in FY2001 totaled $330.5 billion, or $16.3 billionbelow the total for FY2002. Since the advent of the new Administration, resources available to DOD have increased by a total of $56 billion, including: $5.8 billion appropriated in the non-emergency supplemental in late June 2001; $32.6 billion increase for FY2002 provided by Congress in the regulardefense appropriations as requested by the Administration; and $17.5 billion in emergency supplemental funding to combatterrorism. President Bush's increase in resources for defense of $56 billion or 18% in real growth for defense within a year is comparable to the $61.6 billion, or 19% real growth in defenseresources, added by President Reagan between 1981 and 1982 in his first year in office (allfigures in FY2002 dollars). (5) In comparison to growthin defense spending between 1965 and1966, the beginning of the buildup for the Vietnam war, the additions by President Bush aresomewhat larger - $56 billion compared to $53.5 billion (in 2002 $) for Vietnam. (6) Combined with the emergency funding allocated to non-defense agencies and the impact of the recession that began in the spring of 2001, this additional funding for Defense requiredthat Congress set aside earlier budgetary guidelines designed to protect the surplus generatedby the Social Security and Medicare trust funds and return to deficit spending (see below). Table 2. National Defense Function by Appropriations Bill, FY2001 to FY2002 Enacted (in millions of dollars a ) Notes: a. Includes discretionary and mandatory funding. b. P.L. 107-20 , Supplemental appropriations for FY2001. c. P.L. 107-38 , the Emergency Terrorism Response supplemental, appropriated $40 billionin emergency supplemental funding to respond to the terrorist attacks of September 11,2001. Of that total, $20 billion was available to be distributed by the President withoutfurther congressional action; for that reason, the Congressional Budget Office scoredor considered those funds as FY2001 appropriations. Because the second $20 billion became available only when included in a later appropriation act, those funds areFY2002 appropriations. Sources: House Appropriations Committee, appropriations tables for FY2002, Conference report on H.R. 3338 , FY2002 DOD Appropriations, H.Rept. 107-350 , Conference reporton S. 1438 , FY2002 DOD Authorization, CBO cost estimates for S. 1438 , Pay-as-you-Go, DOD (Comptroller), National Defense estimates forFY2002, OMB, Budget of the United States (April 2001), and Mid-Session Update, August2001, and CRS calculations. In the enacted version of H.R. 3338 , P.L. 107-117 , the FY2002 DOD appropriations bill, Congress endorses most of the Administration request. Despite someconcerns raised by members, Congress funds most of the substantial increase in fundingrequested for the Ballistic Missile Defense program. P.L. 107-117 also provides the fullincreases in pay and benefits requested by the Administration, and in all but a couple ofcases, the funding requested for major weapons systems (e.g. JSF, F-22 Captor, Comanche,Crusader, DDG-51 cruiser). Those major programs in which Congress reduces funding - the V-22 tilt rotor aircraft and the Navy's new surface combatant - are troubled programsthat the Department of Defense is in the process of designing (for more detailed discussion,see below). The overall RDT&E funding level is higher than requested (see Table 3 and Summary Tables A2 and A3 ). The greatest divergence in funding priorities is for Operation and Maintenance, (O&M) where Congress reduces the Administration's request for O&M at funding by $3.1 billionin FY2002 to reflect anticipated savings from a variety of management reforms, as well ascuts in administrative areas (like headquarters) and various pricing adjustments (e.g. fuel andforeign currency). O&M funds not only training that ensures readiness but also support ofthe military infrastructure (see below). Congress also all but eliminates the Overseas Contingency Operations Transfer Fund, a revolving and management account that funds ongoing continency operations (like Bosnia),as well as unanticipated operations. Congress transfers the funds designated for Bosnia tothe services and cuts $650 million from the request, suggesting that the accounting of fundsneeded to be improved. (7) This issue is likely toresurface in the FY2003 budget request. Foradditional information on congressional changes, see individual sections on "Major Issues"and "Other Important Issues" below. Table 3. Department of Defense Appropriations Bill byTitle, FY2002 to FY2002 Enacted (in millions of dollars) Notes: a Reflects FY2001 enacted level prior to non-emergency and emergency supplementals, P.L.107-20 and P. L. 107-38. b Reflects effect of rescissions include in the FY2002 DOD appropriations bill. Sources : OMB, CBO, House Appropriations Committee, and conference reports on H.R. 3338 ( H.Rept. 107-350 ), and CRS calculations. Action on the defense appropriations bill was delayed by the debate about the amount and the distribution of the emergency supplemental funds. On December 7, 2001, the Senatepassed by voice vote H.R. 3338 , the FY2002 DOD appropriations bill aftermaking major changes to the bill as reported by Committee ( S.Rept. 107-109 ). Both theSenate and House bills appropriated $317.6 billion for the Department of Defense andallocated $20 billion in emergency supplemental funding to combat terrorism that waspreviously appropriated on September 14 in response to the terrorist attacks of September11 ( P.L. 107-28 ), but there were significant differences between the bills. As in the House, debate on the defense appropriations bill in the Senate focused on the adequacy and allocation of the emergency funding (see below). (8) During Senate floor debate,the additional $15 billion in funding for homeland security that was included by theAppropriations Committee was stripped from the bill through a series of proceduralmotions. (9) The President threatened to veto anyfunding beyond that already appropriated inthe emergency supplemental. Once the additional funding was deleted, the allocation of the$20 billion was adjusted in response to the policy priorities of Senator Byrd and other members pressing for additional funding. The Senate bill as passed shifted $5.3 billion infunds requested for Department of Defense to homeland security and aid to New York, acompromise that laid the groundwork for the final version of the bill. On November 28, 2001, the House passed the FY2002 DOD appropriations bill, H.R. 3338 , by 406 to 20 after turning aside attempts by Representatives Obey,Walsh, Lowey, and Murtha to add funds for homeland security for both defense andnon-defense needs. In a compromise agreement worked out with the Administration severaldays earlier, an additional $1.5 billion out of the $20 billion was allocated to New York inthe House version of H.R. 3338 . Action on the major defense funding bills was delayed by a series of events in addition to the dispute between the Administration and congressional leaders about funding to combatterrorism. Before that, the week-long evacuation of some congressional offices for anthraxtesting, a dispute between the Administration and Congress about the total amount fordiscretionary spending, and congressional passage of the $40 billion emergency supplementalfor FY2001 in response to the terrorist attacks on the World Trade Center and the Pentagonall moved consideration of the Defense bill to late in the congressional session. The President had requested that DOD receive a total of $21.1 billion in emergencysupplemental funds, including $14 billion that was distributed by the President, and $7.3billion, which would become available if included in an appropriations act (see above). (10) With enactment of the FY2002 DOD appropriations bill, the total amount that DOD receivesfrom the emergency supplemental is $17.5 billion, or $3.8 billion less than requested by theAdministration (see Table 2 ). All but $57 million of the $40 billion in emergency funds hasnow been allocated. (11) Passed on September 14, 2001, P.L. 107-38 / H.R. 2888 , the FY2001 Emergency Appropriations Act for Recovery from and Response to Terrorist Attack on theUnited States provided $40 billion in emergency spending to be allocated by theAdministration in consultation with Congress. The funds are to be spent for the followingpurposes: federal, state, and local preparedness for relief from and for responding to the attack; support to counter, investigate and prosecute domestic and internationalterrorism; increased security for transportation; repairing damage to public facilities and transportation systems;and supporting national security. Funds designated as emergency spending are not subject to the limitations set in concurrent budget resolutions. The President was required to consult with the chairmen and ranking minority members of the appropriations committees prior to the transfer of the funds to individual agencies.After consultation with the appropriations committees about the allocation of the funds, theinitial $10 billion becomes available immediately. (DOD refers to these funds as 'cash'.)The second $10 billion became available 15 days after the Office of Management and Budgetsubmitted a proposed allocation and plan for use of the funds to the appropriationscommittees. (DOD refers to these funds as '15 day notification' funds). An additional $20billion became available if included in a later appropriation bill. These funds are includedin P.L. 107-117 , the enacted version of H.R. 3338 (see above). According to the Emergency Terrorism Response supplemental, P.L. 107-38 , not less than $20 billion of the $40 billion "shall be allocated for disaster recovery activities andassistance related to the terrorist acts in New York, Pennsylvania, and Virginia on September11, 2001." (12) The law also provides that thePresident may submit detailed requests toCongress if further funding is required. Although the emergency supplemental required thatthe Director of OMB was to provide quarterly reports to the appropriations committees onthe use of funds, beginning on January 2, 2002, that reporting requirement was supercededby the one included in the DOD appropriations act, calling for quarterly reports 30 days afterenactment (by February 9, 2002). On September 14, Congress also passed S.J.Res. 23 authorizing the President to use military force against those responsible for the terrorist attack. Three weekslater, on October 7, the U.S. initiated the bombing of Afghanistan to destroy the terroristtraining camps of Osama bin Laden and dislodge the Taliban government. Funding for thewar is included in the emergency supplemental (see section on defense spending below). Since September 21, OMB has sent Congress eight notifications of intended and requested allocations of the $40 billion emergency supplemental, including a notice onOctober 16 that contained details of the $20 billion proposal that needed to be approved byCongress in an FY2002 appropriation bill. (13) Boththe House and Senate AppropriationsCommittee included their allocations of the Administration's request for that $20 billion ina separate section of the FY2002 DOD Appropriations bill ( H.R. 3338 , H.Rept.107-298 , S.Rept. 107-109 ). As costs of recovery and response efforts have risen, however,policy differences emerged over the amount, timing, and priorities of the supplementalspending. The White House, concerned over potential rising budget deficits for FY2002, argued that the $40 billion emergency total was sufficient for the moment, but that the Presidentwould entertain more spending next year if needs exist. Many lawmakers, including seniorAppropriations Committee members, however, called for the infusion of immediateresources well above the $40 billion figure, with an emphasis on funds for New York Cityin order to meet the $20 billion allocation directive in P.L. 107-38 . President Bush said thathe would veto legislation that would spend more than the $40 billion already enacted. Theseissues were considered during floor debate on the DOD appropriations bill in both the Houseand the Senate floor debate. (14) Of the total $40 billion supplemental, the White House had proposed that the majority of funds be allocated to the Defense Department, with a lesser share for non-defenseagencies, specifically: $21.1 billion for DOD (53%); $18.6 billion for non-defense agencies (47%);and $.3 billion (less than 1%) not yet allocated (see Figure 1 below). (15) As illustrated in Figures 1 and 2 , Congress, through enactment of H.R. 3338 ,altered the President's plan by providing that $22.5 billion or 56% of the total is providedto non-defense activities, and $17.5 billion, or 44%, supports defense programs. A smallamount remains unallocated. Allocation by Federal Agency. Other than the Department of Defense, the other major recipients of funds based on notified andproposed allocations thus far are the Federal Emergency Management Agency ($6.6 billion),which provides disaster assistance relief, Health and Human Services ($2.9 billion), Housingand Urban Affairs ($2.7 billion), Justice, ($2.2 billion), and Transportation ($2 billion) (see Table 4 ). Policy Priorities of Emergency Supplemental Allocations. There has been broad bipartisan support for the enactment ofsignificant additional resources for recovery and response to the September 11 terrorismattacks. Nevertheless, sharp differences emerged as to whether the original $40 billionpackage is sufficient, whether the allocations matched the most critical priorities, especiallyregarding homeland security needs, and whether New York and other jurisdictions directlyaffected by the attacks are received adequate funds. Many assumed that New York wouldreceive about half, or $20 billion of the total emergency supplemental. (For additionalinformation about current and proposed spending for non-defense agencies. see AppendixA1, and CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on EmergencySupplemental Allocations by [author name scrubbed] and [author name scrubbed], CRS Report RL31168(pdf) , Terrorism Funding: FY2002 Appropriation Bills , by [author name scrubbed], CRS Report RL31173, Terrorism Funding: Emergency Supplemental Appropriations - Distribution of Funds toDepartments and Agencies , by James R. Riel, and individual CRS appropriations reportsavailable at http://www.crs.gov/products/appropriations/apppage.shtml . Table 4 and Figures 3 and 4 provide estimates of how Congress changed theAdministration's planned and proposed allocations of the $40 billion by ten major policypriorities. (16) The two chief areas reduced byCongress are defense activities - decreased to$17.5 billion or 44% of the total - and recovery resources, which were cut slightly. The areasreceiving more emphasis are bioterrorism, aviation and infrastructure protection, andinvestigation and law enforcement activities. Table 4. Allocations of Anti-Terrorism Supplemental by Agency (in billions of dollars and percentage of total) Note: Totals may not add due to rounding. Sources: OMB, House and Senate Appropriations Committees, CRS calculations. Changes to Defense Request. Despite Congress' cut of $3.5 billion in the $7.3 billion DOD request for the emergencysupplemental, the President's general priorities for defense spending to combat terrorismremained largely intact. In both the President's request and in the enacted bill, about 30%of the $17.5 billion allocated for Defense in the Emergency Terrorism Responsesupplemental is for funding of the Afghan war and related operations, and another 30% isfor intelligence and surveillance activities. The remaining funds are distributed amongself-defense weapons for ships and upgraded security at bases (8.6%), improved command and control (8%), precision-guided munitions (10%), repair and upgrade of the Pentagon, andinitial crisis response (8% and 4% respectively ). For more detail, see Table A1 in theAppendix. Congress was able to accommodate the $3.5 billion cut to defense by providing funding within the regular defense bill, by deferring less urgent requests, and by inserting a provisionthat permits DOD to transfer up to $1.65 billion, or 1.5% of the FY2002 appropriations, forRDT&E and procurement to fund the Afghan war or DOD's homeland defense activities,should that prove necessary. (17) Congress alsorestored the funding requested to repair andupgrade the Pentagon by transferring $300 million of the funds remaining in the emergencysupplemental that were to be distributed by the President. (18) Finally, in floor debate, severalmembers of Congress noted that the President was expected to submit another supplementalwith additional funding for defense when Congress reconvenes in January 2002. The allocation process established in P.L. 107-38 for the Emergency Supplemental spending measure guaranteed Congress a central role in deciding how half of $40 billionanti-terrorism money would be spent. On October 16, OMB submitted its plan for thesecond $20 billion portion of the supplemental that must be subsequently approved byCongress. Under the President's plan for use of that $20 billion (see Figure 5 below), the two largest shares of the supplemental request were to go to DOD (over one-third) and torecovery activities (over one-quarter), for a total of $12.5 billion. Assistance to victims ofthe terrorist attacks represented about 11%, or $2.3 billion. Infrastructure and aviationsecurity would have received 9%, or about $1.8 billion, while funding to combat bioterrorismand investigative activities represented slightly smaller shares of 7% or $1.4 billion, and 6%or $1.2 billion, respectively. There was no humanitarian and other foreign assistanceproposed in the second $20 billion request. On December 20, 2001, Congress cleared for the White House H.R. 3338 , including $20 billion in emergency supplemental spending for homeland security, increaseddefense needs, and other efforts to combat terrorism. The package sent to the President,however, differs significantly from what had been proposed in mid-October for allocatingthe second $20 billion. The legislation roughly doubles the request for bioterrorism, lawenforcement, and infrastructure security activities, while reducing by more than half the $7.3billion proposed for defense. The final compromise - to increase homeland security andNew York aid and decrease defense resources - partially accommodates the position of thosewho sought more spending for domestic programs, but without exceeding $20 billion. (See Figure 6 .) Conference Agreement for DefenseFunds. H.R. 3338 Table 5 (19) halving the funding for "increased situational awareness" (intelligence and surveillance activities) from $1.74 billion to $850 million; eliminating $881 million in funding for "enhanced force protection" (self-protection systems for weapons and protection to DOD facilities), offset in part by anincrease of $478 million provided in the regular FY2002 DOD appropriations for similaractivities; eliminating $219 million in funding for improved command and control; halving the funding for "increased worldwide posture" (funding for the Afghan war and DOD's homeland defense activities) from $2.9 billion to $1.45 billion,although up to $1.64 billion can be transferred to those activities from regular FY2002appropriations for RDT&E and procurement should it prove necessary (see Section 306 of P.L. 107-117 ). decreasing funding for "offensive counter-terrorism" (munitions) from $545 million to $372 million; decreasing funding for "initial crisis response" from $106 million to $39 million; reducing funding for repair and upgrade of the Pentagon from $925 million to $640 million, offset by a transfer of $300 million remaining in the emergencysupplemental but not yet allocated by the President; and an increase of $104 million for military construction projects. To track the expenditure of these funds, Congress requires DOD to provide quarterly reports to the defense committees showing the appropriation accounts where funds have beentransferred, obligations of those funds, and a forecast of expenditures. Because DOD'sfunding is being provided in these unique and fairly general categories, the reports are to bemore detailed, showing spending by project, and by categories for military personnel andoperation and maintenance spending that have been used to report previous contingencyoperations. The reports are also to identify offsetting savings due to cancellation of peacetimetraining or other activities. The first report is due 45 days after enactment (February 26,2002), and quarterly thereafter. (20) Table 5. Congressional Action on DOD's Share of $20Billion Supplemental (As of December 20, 2001) NS = Not specified. Notes: a. P.L. 107-38 , theFY2001Emergency Terrorism Response supplemental provides that atotal of $10 billion is available immediately ('cash'), another $10 billion is available15 days after the request is submitted to Congress, and $20 billion is available toagencies after being enacted in a subsequent appropriations act. b. H.R. 3338 transfers $300 million in 'cash' resources remaining in theemergency supplemental ( P.L. 107-38 ) for reconstruction, and hardening of commandcenters in the Pentagon; these funds were to be distributed by the President. c. Except for the Pentagon, the Senate-passed version of H.R. 3338 does notspecify how individual categories would be affected. d. The category 'other' includes potential increases in fuel costs. e. Funding added by Congress for military construction. f. The House and conference version of H.R. 3338 transfers $30 million ofDOD funds to the Former Soviet Union Threat Reduction appropriation in theDepartment of State, and the conference version also provides up to $100 million formilitary and logistical support to Pakistan and Jordan for their support in the Afghanwar. g. Section 306 of the conference version provides that up to 1.5% of the total in FY2002funding for RDT&E and procurement can be transferred to support the Afghan war(Operation Enduring Freedom) or DOD's homeland defense activities (Operation NobleAnvil). Sources: P.L. 107-38 , 2001 Emergency Response Terrorism supplemental; OMB submissions onallocations for supplemental, dated September 21, 28, October 5, 16, 22, November 5, 9, 30,see http://w3.access.gpo.gov/usbudget/fy2002/amndsup.html ; see also materials providedto Appropriations committees; House of Representatives, H.Rept. 107-299 , Report ofCommittee on Appropriations to accompany H.R. 3338 , DOD AppropriationsBill, 2001, and supplemental appropriations; U.S. Senate, S.Rept. 107-109 , Report ofCommittee on Appropriations to accompany H.R. 3338 , and Department ofDefense Appropriation Bill, 2002, and supplemental appropriations, and H.Rept. 107-350 ,Conference report to accompany H.R. 3338 , Department of DefenseAppropriations Bill, and supplemental appropriations. Conference Agreement for Non-Defense Funds. H.R. 3338 , as enacted, follows much of the frameworkproposed by the Senate: transfer of defense resources to fund homeland security and recoveryneeds. Major non-defense elements of the conference agreement include: Bioterrorism - $2.84 billion, nearly double the Administration's $1.59 billion request. Recovery for New York and other affected areas - $8.2 billion, slightly higher than the amount proposed by the President, but programmed in a way thatmore directly targets New York. The House Appropriations Committee estimates thatamounts provided in H.R. 3338 for recovery efforts in New York and otherjurisdictions, when combined with previously allocated funds, will bring the total to $11.2billion out of the entire $40 billion supplemental. Border security - $759 million, mostly for the Coast Guard and the Immigration and Naturalization Service to upgrade border and port security, compared to$600 million requested by the President. Aviation security - $540 million, one-third higher than the $405 million requested. Counterterrorism aid - $2.1 billion, 75% more than the $1.2 billion request. The agreement includes $745 million for the FBI, more than requested and passedby either the House or Senate, and $400 million for counterterrorism aid to state and localgovernments, as proposed in both bills but not in the request. Postal Service assistance - $500 million to repair Postal Service facilities destroyed in the attacks, protect workers handling the mail, and establish a systemto sanitize and screen the mail, an addition to the $175 million allocated from the first $20billion portion of the supplemental. Securing nuclear materials - $226 million, including $135 million to secure nuclear materials at sites in Russia and other former Soviet states, and fornonproliferation programs aimed at retaining Russian nuclearscientists. Senate Passage of Funding to Combat Terrorism. During Senate debate of H.R. 3338 on December6 and 7, 2001, a number of Senators objected to the extra $15 billion funding for homelandsecurity and New York added to the bill by the Senate Appropriations Committee. In aprocedural motion, the Senate voted to remove the emergency designation for those funds. By doing so, the homeland security and New York funds were added to the othernon-emergency funding in the bill, which pushed the total amount appropriated over theallowable allocation under Section 302 (a) of the concurrent budget resolution. That madethe entire bill subject to a point of order. On December 7, the Senate adopted a compromise amendment offered by Senators Byrd, Stevens, and Inouye that reduced the emergency anti-terrorism spending to $20 billionbut retained many of the program spending priorities adopted by the Committee, althoughat lower levels. Relative to the House bill and the Administration request, the Senate versionof the bill reduced the amount for the Department of Defense (see below), and added fundsfor bioterrorism, New York recovery, and security of infrastructure, nuclear facilitiesairports, and borders (For additional information, see CRS Report RL31187(pdf) , TerrorismFunding: Congressional Debate on Emergency Supplemental Allocations by [author name scrubbed]and [author name scrubbed]). With some adjustments in specific funding levels, this formula ofreducing funding for defense in order to add monies to non-defense needs proved to be thebasic compromise that was reached in the conference version. Senate Consideration of Defense Request. Under the Byrd, Stevens, Inouye amendment that was adopted on the Senate floor, theDepartment of Defense would have received $2.0 billion of the $20 billion included in theSenate bill, a reduction of $5.3 billion from the funding included in the House bill and fromthe Administration's request. Of that $2 billion, $475 million was designated as militaryconstruction funding to be used for reconstruction and renovation of the Pentagon. The billdid not specify where the remaining $1.53 billion would be spent among the categoriesdeveloped by the Administration to describe DOD spending; those categories range fromfunding for the Afghan conflict to increased funding of intelligence and surveillanceactivities (see Figure 6 and Table 5 ). Under the President's proposed allocations, the Defense Department would have received a total of $21.1 billion, the largest share of both the total funding available underthe supplemental (53%) and of the $20 billion supplemental request currently underconsideration in Congress (37%). Under the Senate bill, however, DOD's share of the $40billion would have totaled $15.7 billion or 39% of total supplemental funding, smaller thanproposed by the House or the Administration. Of that $15.7 billion, $13.7 billion wasalready available to Defense from the first $20 billion allocated by the President; theremaining $2 billion was in the Senate bill. (21) Secretary of Defense Rumsfeld called on Congress to give DOD the entire $7.3 billion requested by the President in order to "maintain the president's priorities for fighting this war[in Afghanistan]," and to ensure that DOD would not need to curtail training andoperations. (22) In floor debate, Senator Stevenssuggested that the Department of Defense hadalready received a large increase of over $42 billion compared to the previous year, andunder the emergency supplemental, the President could submit requests for additionalsupplementals for any further requirements to combat terrorism. Senator Stevens alsomentioned that the Department of Defense has authority under the Food and Forage Act(Section 3732 or Title 41 U.S.C. Section 11) to obligate monies in advance of appropriationsfor emergency expenses. (23) DOD also had alreadybeen allotted $3.6 billion for expensesassociated with the conflict in Afghanistan from the first $20 billion distributed by thePresident Table 6 describes the purposes for the Administration's defense requests, ranging from support for the conflict in Afghanistan to repair and renovation of the Pentagon, andcompares the amounts provided by the House and Senate with the Administration's request. Unlike submissions by other agencies and normal budget proposals, the funding for DODis appropriated to a central fund, the Defense Emergency Response Fund, rather than toindividual appropriation accounts in order to give DOD additional flexibility and to ensureseparate tracking of these emergency funds. (24) Ifnecessary, DOD could, for example, transferadditional funds from one category to "Worldwide Military Posture, " the category thatprovides monies for the conflict in Afghanistan or for additional training (see Table 6 ). (25) Senate Markup of DOD Appropriations Bill. H.R. 3338 , as reported by the Senate AppropriationsCommittee on December 4, 2001, not only allocated the $20 billion in funding provided by P.L. 107-38 in the amounts that were requested by the President but also included anadditional $15 billion in funding as proposed by Senator Byrd. The additional $15 billionwas to be split evenly between homeland security and recovery activities and aid to NewYork, Virginia, and Pennsylvania. (See section on action on FY2002 DOD Appropriationsbill for change to regular DOD appropriations.) For aid to New York, the Senate bill provided an additional $7.5 billion to FEMA for recovery activities. For other non-defense homeland security, the Senate bill emphasized thefollowing areas: bioterrorism prevention and response and food safety; federal anti-terrorism law enforcement; security for borders; and security for nuclear power plants and federalfacilities. For more details about increases provided for non-defense activities, see CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on Emergency SupplementalAllocations, by [author name scrubbed] and [author name scrubbed]. House Passage of Funding to Combat Terrorism. Attempts to add funding for homeland security in bothdefense and non-defense programs were rejected during floor debate on the House side. After negotiations between Committee leaders and the White House, Representative Walshreached an agreement with the Administration to provide an additional $2.1 billion for NewYork that would be drawn from other programs to provide a total of $11.5 billion. The House endorsed many of the funding priorities recommended by the President, including the amounts proposed for defense and those for investigation and law enforcementprograms in the Department of Justice (see discussion below). The House bill, however, alsomade various changes to the allocations in both defense and non-defense programs (see CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on Emergency SupplementalAllocations , by [author name scrubbed] and [author name scrubbed]). During House consideration, several amendments that would have added funding to the Administration's request were rejected by the Rules Committee or on the floor: Representative Obey's amendment to add $6.5 billion in funding primarily for non-defense agencies (rejected 31 to 34 and ruled out of order on thefloor); Representative Walsh's amendment to add $9.7 billion to meet theneeds of those people most directly affected by the attacks in New York, Pennsylvania, andVirginia (rejected 31 to 33); Representative Lowey's amendment to add $10.4 billion in additionalaid for New York, Virginia, and Pennsylvania by setting up a contingent emergency fund(ruled out of order); and Representative Murtha's amendment to add $6.5 billion to theDepartment of Defense primarily for intelligence and precision-guided munitions and otherequipment (rejected by voice vote). Prior to markup, some Members questioned whether $20 billion was sufficient to meet all of the pressing needs related to the terrorist attacks. Some argued that the President'sproposal lacked enough funding for such things as law enforcement, bioterrorismpreparedness, border protection, and other homeland security priorities. Others, especiallyMembers from New York, contended that the President's plan fell far short of the $20 billionthat they anticipated would be allocated out of the $40 billion total to meet the specific needsof New York City, Virginia, and rural Pennsylvania where the attacks had the most directimpact. They estimated that only about $9.7 billion was slated for New York. Still othersbelieved that additional defense resources were required beyond the $7.3 billionrecommended by the Administration in the $20 billion plan. This issue became morecontroversial when President Bush, on November 6, said he would veto the appropriationmeasure if it exceeded the $20 billion he had proposed. House Consideration of the Defense Request. Although the House provided the same amount as requested by the Administration for theDepartment of Defense - $7.3 billion - H.R. 3338 shifted more than $600million in funding from the allocation proposed by the Administration to reflect Housepriorities. Indicating its policy priorities, the House Appropriations Committee added fundsin for precision guided munitions ($79 million), for equipment for special operations forces($145 million), for chemical-biological protection projects ($105 million) and other areas. House Consideration of the Non-Defense Request. The most significant change during floor debate was thereallocation of an additional $1.5 billion to New York in the Rules Committee amendmentthat reflected an agreement reached between Representative Walsh and the White House. (26) With this change, some estimated that the total for New York out of the entire $40 billionsupplemental would have been about $11.5 billion. The Committee also recommendedsignificant increases bioterrorism ($600 million) and included funds for counterterrorism aidto state and local governments that was not requested ($400 million), and passenger andbaggage screening activities ($1.25 billion) that was to be offset by fees collected frompassengers and airlines. The House also proposed reductions to the President's non-defenserequest, including transferring funds for dislocated workers assistance ($2 billion) andFEMA grants ($500 million) to New York. Similarities in House and Administration's Priorities for Non-Defense Programs. H.R. 3338 as passed by the House supportsmany of the funding priorities recommended by the President including $4.9 billion forFEMA to remove debris in New York City ($2.15 billion), reconstruct buildings ($1 billion),and repair highways and subways in New York ($1.75 billion). Other major policy prioritiesendorsed by the both the committee and the President include: Dislocated worker grants to States - $2 billion Medicines and other supplies for the National Pharmaceutical Stockpileand smallpox vaccines - $1.15 billion Operation expenses of the FBI, INS, and U.S. Marshals - $1.05billion. See CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations for more details on the actions taken by Congress in H.R. 3338 to change non-defense funding. Under the President's proposed allocations of the Emergency Terrorism Response supplemental, the Defense Department was to receive a total of $20.7 billion constitutingboth the largest share of total funding available under the supplemental (52%) and the largestportion of the $20 billion supplemental request currently under consideration in Congress(37%). DOD received a total of $17.5 billion in funding under the Emergency TerrorismResponse supplemental, including $14.0 billion in funding that was immediately availableor subject to the 15-day wait period, and $3.5 billion that was provided in DOD's FY2002appropriations act. (27) (See discussion above forcongressional action on the Administration'srequest.) Table 6 shows the Administration's request and congressional action on DOD's share of the $40 billion, using the categories developed by the Administration specifically for theemergency supplemental. (28) Those purposes rangefrom support for the conflict inAfghanistan to repair and renovation of the Pentagon. Unlike submissions by the domesticagencies and normal budget proposals, the funding for DOD is being appropriated to acentral fund, the Defense Emergency Response Fund, rather than being appropriated tospecific accounts. (Funds will be transferred from the central fund to particular accounts inthe services.) This approach was adopted to give DOD additional flexibility and to ensureseparate tracking of these emergency funds. The discussion below describes the rationalefor the Administration's allocation of funds; for congressional action on those allocations,see discussion above. Estimating the Cost of the Afghan Conflict. The largest single category in the Administration's request was $6.5 billion to support thehigher operating tempo associated with ongoing operations in Afghanistan or elsewhere -categorized by DOD as "Increased worldwide posture." (Since the funding is not specificallytagged for Afghanistan but rather for higher operating costs, the Administration can use thefunding for operations elsewhere.) That funding covers the cost of higher operating tempofor forces that are deployed, the cost of airlifting supplies and setting up operations, andadditional pay for activating reservists and for active-duty forces (e.g., hazardous duty pay). According to DOD, that $6.5 billion request represented a rough estimate of the additional funding that may be necessary to conduct operations in Afghanistan for sixmonths, or until mid-March, 2002. The estimate reflected a 15% increase above normaloperating tempo costs (i.e. for unit training and related areas) of all of DOD's forces, ratherthan the number and makeup of forces likely to be deployed, and is intended to ensurefunding for the Afghan conflict through mid-March after the convening of the nextCongress. (29) With rapid and unpredictable changes in the situation in Afghanistan, any estimate of costs is uncertain, and initial estimates are likely to be revised in the coming months. TheDepartment of Defense has not released any estimates of costs incurred in the conflict thusfar. This funding is to be administered centrally by the Department of Defense with theservices submitting requests as expenses for deployments and other areas are incurred. Improving Intelligence and Surveillance. The second largest category of funding - $5.8 billion, referred to by DOD as "Increasedsituational awareness"- covers classified programs, including upgrades to reconnaissanceplatforms (aircraft, unmanned vehicles, communications stations), and improvements tointelligence collection and processing. Early reports suggested that the funding wouldinclude the purchase of additional unmanned vehicles such as RC-135 and EP-3reconnaissance aircraft, assets in heavy use in Afghanistan. Enhancing Physical Security. An additional $2.4 billion has been requested by DOD for "Enhanced Force Protection," to purchase avariety of self-defense weapons and sensors for ships, aircraft and other forces, upgrades toand more physical security systems at bases, and increases in the number of active-dutymilitary personnel doing security duty at bases. Some of the purchases were based on therecommendations of the Cole Commission, which reported on ways to improve security afterthe terrorist attack on the USS. Cole. Purchasing More Precision Guided Munitions. DOD requested another $2 billion for "Offensive Counter-terrorism" to purchase additionalprecision-guided missiles and other munitions (Tomahawks, JDAMS, ALCMs, laser-guidedbombs) that are being heavily used in the bombing attacks in Afghanistan. These expensivemissiles are the 'weapon of choice' in conflicts where the military is particularly concernedabout accurate targeting. The funding level in the supplemental was set to buy the maximumnumber of missiles that could be produced by defense contractors in FY2002 rather than aspecific estimate of the number that would be used in the conflict. Improving Command and Communication Systems. DOD requested another $1.5 billion to improveconnections both within the military and to local, state, and federal governments. Repairing the Pentagon. Repair, renovation, and removal of debris at the Pentagon, as well as leasing of temporary space was anticipatedto cost another $1.5 billion. Aiding New York, Patrolling the Coasts, and Protecting Airports . The initial response to the bombing of the World Trade Center, aswell as the new mission of conducting combat air patrols off the east and west coasts, andstationing National Guard personnel at airports - was estimated to cost almost $1 billion. The additional funding provided to DOD in the supplemental appeared to include a mixture of one-time or temporary expenses (such as the cost of the conflict in Afghanistanand repair of the Pentagon), accelerations in current programs now given higher priority, andrecurring costs reflecting longer-term changes in mission. In the months and years ahead,Congress may assess whether these programmatic changes are permanent, requiringcontinuing investments in people, equipment or facilities, or whether DOD will need toreorient its missions, and force structure to reflect the new emphasis on combating terrorism. Table 6. DOD Allocations under $40 billion EmergencyTerrorism Response Supplemental Notes: a. P.L. 107-38 , making emergency supplemental appropriations for FY2001 in response to the September11, 2001 tragedy, provides that a total of $10billion is available immediately, another $10 billion is available 15 days after the request is submitted to Congress,and $20 billion is available toagencies after being enacted in a subsequent appropriations act. b. H.R. 3338 allocates $300 million that was available for additional 'cash' transfers by thePresident to reconstruction and hardening ofcommand centers in the Pentagon. c. The category 'other' includes potential increases in fuel costs. d. The conference version of H.R. 3338 transfers $30 million of DOD funds to the Former SovietUnion Threat Reduction appropriationin the Department of State, and provides that up to $100 million can be provided to Pakistan and Jordan for theirmilitary and logistic support in theAfghan war. e. Section 306 of H.R. 3338 provides that up to 1.5% of the total amount appropriated in FY2002for RDT&E and procurement can betransferred to support the Afghan war (Operation Enduring Freedom) or DOD's homeland defense activities(Operation Noble Anvil). f. The total for the Administration includes the $300 million in 'cash' resources transferred by Congressfor reconstruction of the Pentagon in H.R. 3338 . Sources: P.L. 107-38 , 2001 Emergency Response Terrorism supplemental; OMB submissions on allocations forsupplemental, dated September 21, 28, October5, 16, 22, November 5, 9, 30, see http://w3.access.gpo.gov/usbudget/fy2002/amndsup.html ; see also materialsprovided to Appropriations committees;House of Representatives, H.Rept. 107-299 , Report of Committee on Appropriations to accompany H.R. 3338 , DOD Appropriations Bill,2001, and supplemental appropriations; U.S. Senate, S.Rept. 107-109 , Report of Committee on Appropriations toaccompany H.R. 3338 ,and Department of Defense Appropriation Bill, 2002, and supplemental appropriations, and H.Rept. 107-350 ,Conference report to accompany H.R. 3338 , Department of Defense Appropriation Bill, and supplemental appropriations. See also, TonyCapaccio, "Emergency DefenseFunds going to improve military intelligence," http://www.bloomberg.com , September 27, 2001; Frank Wolfe,"Zakheim: supplemental includes RC-135Upgrades, Global Hawk Acceleration, Defense Daily, September 25, 2001; and "Zakheim: New Defense Spendingin 2001 will lead to increases in 2002and 2003," Aerospace Daily, September 25, 2001, and CRS calculations. There is no consensus about either the definition of activities that are designed to combat terrorism or the categories to use to describe spending for those activities. Some use the term 'homeland defense' for programs designed to combat terrorism. In its 2002 report to Congress, OMB uses a set of categories for spending to combatterrorism that differs from those used by the Department of Defense for its currentspending in response to the terrorist attacks, making a comparison between previousand current spending impossible based on the reporting provided thus far (see below). In an amended version of its August 2001 report to Congress, OMB estimated that the national security community funding to combat terrorism in FY2001 totaled$5.5 billion, or 57% of that total. (30) That totalincludes funding for both theDepartment of Defense and intelligence agencies; for security reasons, OMB did notsegregate the portion for the Department of Defense. The OMB report also estimatesthat DOD was spending an additional $1.8 billion in FY2001 to protect criticalinfrastructure, such as computer and communications networks. For FY2002, the Administration's estimated request for funding for the national security community to combat terrorism was $6.4 billion, or $930 million more thanthe previous year. This revised estimate reflected the amended budget request sentto Congress by the President on June 27 rather than the initial "current services"estimate included in OMB's annual report to Congress that was issued in August2001. ( Table 7 shows the revised estimates from OMB.) Using a set of categoriesthat apply to all government agencies, the table below divides DOD's spending intofive categories: Law enforcement and investigative; Physical security of government; Physical security of national populace; Preparing for and responding to terrorist attacks;and Research and Development. With the attack on the World Trade Center and the Pentagon, both these estimates and the amount of funding, as well as the role of the various federalagencies, are being reviewed both within the executive branch and by Congress onan ongoing basis. Table 7. OMB Estimate of National Security Community Funding to Combat Terrorism, FY2000 - FY2002 (in millions of dollars and percent of total) Sources: OMB, "Annual Report to Congress on Combating Terrorism," revised estimates as of September 2001 http://www.whitehouse.gov/omb/legislative/nsd_annual_report2001.pdf and CRScalculations. a. Figures include funding for both the Department of Defense and intelligence agencies and an estimated $609 million in FY2002 for defense against weaponsof mass destruction. Prior to the terrorist attacks, 93% of the national security funding for FY2002 was concentrated in two areas - $2.9 billion for law enforcement and investigativeactivities and $3.1billion for physical security of government (see Table 6 ). Fundingfor law enforcement, as described by OMB, includes all monies provided to DOD'sinvestigative services and military police even though some of those assets may notbe specifically directed against terrorism. In a similar fashion, the funding forphysical security includes protection of federal facilities, including those locatedoverseas where DOD has a substantial presence along with the State Department. The remaining funding included $249 million for preparing for and responding to terrorist attacks and $199 million for R&D. The total for preparing for andresponding to terrorist attacks includes funding to protect DOD facilities againstattacks that rely on weapons of mass destruction (WMD), and DOD's role as acoordinator of the actions by federal, state and local agencies who are the first torespond to terrorist incidents. R&D efforts include funding to develop responses tobiological warfare and DOD's contribution to interagency efforts to develop newtechnologies and equipment to counter terrorism. Because DOD adopted a unique set of categories in its request under the Emergency Terrorism Response supplemental, and because few details are availableabout the composition of both sets of categories, it is difficult, if not impossible, tocompare funding to combat terrorism before and after the September 11th attacks. Since the terrorist attacks of September 11, the budgetary context for decisionson spending levels for federal programs has changed dramatically. At the beginningof September, leaders of both parties were debating whether higher spending fordiscretionary programs - including an additional $18.4 billion above theAdministration's initial request for the Department of Defense - could beaccommodated after the tax cut in the spring without tapping the surplus generatedby social security revenues. With the recession that began in the spring of 2001 andthe new spending to combat terrorism, the possibility of keeping the social securitysurplus "off-limits" has disappeared, and both the Administration and theCongressional Budget Office are predicting deficit spending in 2002 and 2003. (31) In August 2001, CBO estimated that the total surplus in 2002 would be $176 billion (see Table 8 ), with all but $2 billion resulting from the surplus in socialsecurity revenues. (32) The lower CBO estimatereflected primarily the effects of the tax decreases enacted in the spring as well as the downturn in the economy. (33) Withhigher funding for DOD as well as other agencies under consideration, it was likelythat Congress would have to tap the surplus in the Medicare Hospital Insurance Fund(HI) and social security revenues. After the attacks of September 11, however, withthe new concern about combating terrorism, and the ongoing conflict in Afghanistan, the fiscal debate shifted from the potential problem of tapping the social securitysurplus to adding funding for defense programs and homeland security. Thatadditional spending, coupled with the recession, made worse by the terrorist attacks,made that prospect inevitable. A bipartisan estimate, "Budget Committees Lay Out Revised Surplus Estimates," released on October 4, 2001, by the House and Senate BudgetCommittees suggested that the effects of a recession, coupled with additionalemergency spending to combat terrorism, as well as additional discretionary spendingfor defense, education, and disasters agreed to by the Administration and Congress,could reduce the total surplus to $52 billion in FY2002 and $65 billion in FY2003. (34) That would absorb much of the social security surplus that the Administration andcongressional leaders had hoped to reserve for debt reduction (see Table 8 ).Endorsed by the Chair and Ranking Minority of both budget committees, thatestimate reflected the following factors: the possible economic effects of a recession; the effect of holding spending to $686 billion for discretionaryprograms, as agreed to by the Administration and Congress at the end ofSeptember; (35) the effect of the $40 billion emergency anti-terroristsupplemental spending passed by Congress in the wake of the September 11attacks; the effect of the Airline Assistance Act;and the higher interest costs associated with servicing a largerpublic debt than previously assumed. Table 8. Bipartisan Estimate of the Post September 11, 2001 Budgetary Outlook: FY2002-FY2011 (Outlays in billions of dollars) Sources: Adapted from Senate Budget Committee, Senators Kent Conrad, Chairman and SenatorPete V. Domenici, Ranking Minority Member and House Budget Committee, Representative JimNussle, Chairman, and Representative John M. Spratt, Jr., Ranking Minority Member, House BudgetCommittee, tables accompanying "Budget Committees Lay Out Revised Budget Outlook, Principlesfor Economic Surplus," October 4, 2001; see http://www.house.gov/budget . For breakout ofsurplus, see Congressional Budget Office, The Budget and Economic Outlook: An Update , (August2001), Table 1-1, p. 1. a. Totals may not add due to rounding. b. Reflects estimate of the surplus included in CBO's mid-session update of August 28, 2001, whichassumes that discretionary spending continues at the level enacted in 2001 with increases inlater years for inflation, and that current tax policies, including the tax cuts enacted this springare in effect. c. On-budget surplus includes the Medicare Hospital Insurance (HI) surplus. d. Off-budget surplus is made up of surplus in the social security trust fund as well as net cash flowof the Postal Service. e. Reflects congressional actions as of October 4, 2001, including passage of the Airline AssistanceAct, the $40 billion Emergency Anti-Terrorism supplemental, and agreement between Congressand the Administration to hold total discretionary spending to $686 billion in 2002. f. Reflects estimate by budget committee of potential effect on the surplus of a recession; theestimate is higher than the Congressional Budget Office's estimates that are based on the1990-91 recession - reducing the surplus by $47 billion in the first year and $63 billion in thesecond year; see Congressional Budget Office, The Budget and Economic Outlook , January2001, p. 102. g. Reflects agreement between the Administration and Congress reached at the end of Septemberthat total discretionary spending would be held to $686 billion in FY2002, $24.2 billion morethan was included in the Concurrent Budget Resolution passed by Congress; that total includes$18.4 billion for defense, $2.2 billion for emergencies, and $4 billion for education. Out yearestimates assume a level of $686 billion adjusted for inflation after 2002. h. Reflects outlays from $40 billion emergency supplemental enacted on September 14, 2001 ( P.L.107-38 ). Assumes $20 billion to combat terrorism, adjusted for inflation, in each subsequentyear. i. Preliminary staff estimates of costs of the Air Transportation Safety and System Stabilization Act( H.R. 2926 ). j. Higher interest costs associated with a larger public debt. k. Does not include "other possible claims on the surplus," listed in the following table. l. Difference between initial surplus and the effect of congressional actions as of October 4, 2001. These estimates were uncertain. For example, estimating the effect of a recession - shown below as $80 billion in the first year, $56 billion the second year,and $8 billion the third year - will vary with the length, depth, and timing of adownturn, none of which is easily predicted. Although the budget committee staffestimates below were somewhat larger than CBO's estimates of the effects of arecession - $47 billion the first year, $63 billion, the second year, tapering off to $18billion in the third year - that were included in CBO's January 2001 report ( modeledon the experience of the 1990-1991 recession), those estimates have turned out to betoo low. (36) New predictions from CBO, in its latestupdate in January 2002, predictthat economic and technical changes will reduce the surplus by $242 billion ratherthan $80 billion as predicted by the budget committees last October. (37) On the other hand, the estimate of $686 billion for total discretionary spending, $10 billion in outlays more than assumed in the concurrent budget resolution, turnedout to be correct as Congress did, in fact, conform to the agreement reached betweenthe President and Congress to allow $24.6 billion more in new discretionary budgetauthority - $18.4 billion more for defense, $4 billion more for education, and $2.2billion more for disasters that would together increase government outlays by about$10 billion. (38) Although Congress also conformedto the $40 billion emergencysupplemental as assumed in the October. estimates of anti-terrorism spending infuture years are uncertain. Estimates by the budget committee staff estimates belowgenerally assumed a continuation of the policies agreed to in 2002, for example, acontinuation of $686 billion (with increases for inflation) for discretionary spendingand an additional $20 billion for emergency anti-terrorism spending each year. The two budget committees also noted that Congress is considering a variety of other changes to current entitlement programs and tax policies that could placeadditional demands on the budget. Those policy changes - ranging from additionsfor the farm bill to coverage of prescription drugs for seniors and changes to thealternative minimum tax - could reduce the surplus further (see Table 9 ). Inaddition, because of a lack of consensus, the budget committees did not include twoother changes that could place large additional demands on federal spending - aneconomic stimulus package that could reduce revenues by $50 billion to $100 billionand additional unspecified increases for the Department of Defense apart from theemergency supplemental. In light of these various demands, along with the ongoingrecession, deficits are predicted to resurface in 2002 and 2003 if not beyond. Table 9. Other Potential Claims on the Surplus (Inbillionsof dollars) Sources: Adapted from Senate Budget Committee, Senators Kent Conrad, Chairman and Senator Pete V.Domenici, Ranking Minority Member and House Budget Committee, Representative Jim Nussle,Chairman, and Representative John M. Spratt, Jr., Ranking Minority Member, House BudgetCommittee, see tables accompanying "Revised Budgetary Outlook and Principles for EconomicStimulus, October 4, 2001;" see http://www.house.gov/budget . Notes: NS = Not specified a. Numbers may not add due to rounding. b. Includes increases for particular programs that are specified in the "reserve" funds set up in the2002 Concurrent Budget Resolution. A "reserve" fund was set up for additional defensespending but no specific amount was specified. c. Assumes annual outlays (adjusted for inflation) that would result from average historicalspending of $5.6 billion for emergencies. d. Assumes extension of expiring provisions in H.R. 1836 , the "Economic Growth andTax Relief Reconciliation Act of 2001," as estimated by the Joint Committee on Taxation. e. Includes Alternative Minimum Tax Relief provision in Joint Committee on Taxation document#01-1-144R, excluding the treatment of non-refundable personal credits. On December 20, 2001, the House and the Senate passed the conference versionof H.R. 3338 , the FY2002 DOD appropriations bill ( H.Rept. 107-350 )by 408-6 in the House and 92-2 in the Senate. In addition to DOD's regularappropriations, the FY2002 Defense bill allocates the $20 billion in funding from theEmergency Terrorism Response supplemental that had to be included in anappropriation act (see discussion above). For regular defense appropriations, the enacted version of H.R. 3338 provides DOD with $317.2 billion, $1.7 billion below the Administration'srequest. Congress reduced the amount for DOD in order to provide higher fundingfor defense-related activities that are funded in the Department of Energy (+$750million), Military Construction (+$500 million), and defense-related activities thatare funded in other appropriations (+$200 million) (see Table 2 ). With theseadjustments, the $343.3 billion appropriated by Congress for national defense,including all defense-related funding, is close to the total requested by theAdministration. (39) Congress also significantly changed the allocation of the emergency response terrorism supplemental funds in the enacted bill by reducing the Administration'srequest for emergency spending for DOD from $7.3 billion to $3.5 billion and shiftedthose funds to homeland security and recovery activities. On the non-defense side, the chief changes in funding for homeland defense activities are a doubling of the Administration's funding requests for bioterrorism,law enforcement, and infrastructure security activities. On the defense side, theenacted version halves the Administration's request for funding forintelligence-related activities, higher operating tempo related to the Afghan war and homeland defense, and efforts to protect DOD facilities, personnel, and weapons (seediscussion above). Throughout the fall, much of the debate on the defense bill focused on the emphasis to be given to various policy priorities (see CRS Report RL31187(pdf) , Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by [author name scrubbed] and [author name scrubbed]). Senate Action on H.R. 3338. On December 7, the Senate passed H.R. 3338 , which reflected the markup by the Senate AppropriationsCommittee on December 5; (the committee substituted its version in H.R. 3338 , see S.Rept. 107-109 ). That bill included $317.6 billion forregular Department of Defense spending, the same amount as in the House-passedbill. With the amounts already appropriated for Military Construction and nationalsecurity-related programs for DOE, the total for the national defense function is thesame as requested by the President. (The Senate provided $1.9 billion less thanrequested for the Department of Defense, and $500 million more for militaryconstruction and $1.2 billion more for DOE Nuclear Weapons Activities.) Military Pay and Benefits. Following the authorizers, the Senate Appropriations Committee endorsed theAdministration's proposals for increases in military pay and benefits, acceleratingincreases to housing allowances, and fully-funding the Defense Health program,including the new benefit for seniors, TRICARE for life. The committee alsoprovided $60.9 billion for procurement, $440 million more than requested by thePresident and made a variety of changes to particular programs (see SummaryTables A2 and A3 ). Missile Defense. The Senate appropriators provide $8.3 billion for missile defense, but provided that the Presidentcould re-allocate $1.3 billion of that total to combat terrorism, a provision that is notincluded in the House bill. The Senate bill also does not transfer missile defenseprograms to a separate title as provided in the House bill, a provision that is opposedby the Administration (see below). Savings in Operation and Maintenance. Like the House, the Senate appropriators includeseveral general provisions that would reduce funding for Operation and Maintenance(O&M) for pricing adjustments or savings as a result of management reforms whilepreserving funding in readiness-related programs. In the Senate version, theseadjustments total $1.9 billion in O&M (for contract savings, travel, and foreigncurrencies), less than half the amount that is included in the House bill (see below). Proposal on Tanker Aircraft. The Senate Appropriations Committee also included a potentially controversial provisionto lease commercial transport aircraft for up to ten years and eventually convert themto military tanker aircraft. As written, the language in the bill was categorized byCBO as an operating lease, which permits Congress to fund the proposal on anannual basis rather than provide $20 billion in funding upfront as would be requiredin a lease/purchase arrangement. An operating lease, however, can only be used forcommercial assets, but the aircraft would need to be modified for use as militarytankers, a modification permitted by the legislation at a later date. The validity of this approach was debated on the Senate floor. The House bill does not have a similarprovision. Major Procurement Programs. Both the Senate and the House version of the bill fully-funded the Air Force's F-22Captor program and criticized the Navy for poor management of its shipbuildingprogram (including large cost growth of $3 billion in the next five years for currentships) and poor definition of its new cruiser program (DD-21/DD(X)). Both housescut the troubled V-22 tilt-rotor Osprey helicopter (see below) and added funds toaccelerate conversion of retiring ballistic missile submarines (SSGNs) to useconventional cruise missiles. The Senate, like the House, also added $500 millionfor procurement of equipment for the Guard and Reserve (see Table A3 ). Overall Level. On November 28, 2001, the House passed its version of H.R. 3338 . In its first markup ofthe regular DOD bill on October 24, 2001, the House Appropriations Committeeprovided a total of $317.5 billion for the Department of Defense, about $2 billionbelow the Administration's request, and almost $24.3 billion above the amountavailable to the Department of Defense in 2001. (40) For national defense as a whole,however, both houses provided the same amount in total. The Committee reduced theAdministration's request in order to meet funding guidelines set by the fullcommittee that allocated additional amounts - beyond the Administration's request- to defense-related programs in other appropriations, i.e. the Military Constructionand the Department of Energy bills. Military Pay and Benefits. In large part, the committee endorsed the Administration's request, including providing anacross-the-board pay increase of 4.6% plus additional targeted pay raised, improvedhousing allowances, and full funding of the 50% increase in the Defense HealthProgram to cover the new Tricare for Life program for over-65 military retirees. Ballistic Missile Defense. The House Appropriations Committee approved $7.9 out of the $8.1 billion request, allbut $300 million, of the funding for ballistic missile defense programs but transferredthe programs to a separate title covering all counter-terrorism funding. New Appropriations Title for Counter-terrorism. The House bill created a new appropriationstitle, "Counter-terrorism and weapons of mass destruction," with $11.8 billionincluding: - the transfer of funding requested for ballistic missile defense, RDT&E for chemical and biological weapons, Patriot PAC-3 procurement, and the Defense ThreatReduction Agency; and - an additional $1.7 billion in funding for enhancements to intelligence and military capabilities to prosecute Operation Enduring Freedom, the conflict inAfghanistan, and other actions to combat terrorism, to be split between the CIA($451 million), DOD ($1,219 million), as well as transferring $180 million toother agencies. (41) Savings in O&M and Military Personnel. The House appropriations bill preserved fundingin readiness-related accounts but decreased funding by $5.3 billion, $4.4 billion inOperation and Maintenance (O&M) accounts, and the remaining $.8 billion inmilitary personnel to reflect various pricing adjustments (e.g. more favorable foreigncurrency rates), efficiencies (e.g. a saving of almost $1.2 billion from reducing thenumber of contractor workyears and headquarters staff), and fact-of-life changes (e.glower utilities rates). (42) This amount isconsiderably larger than similar savingsincluded in the Senate bill and is opposed by the Administration. Major Procurement Programs. The House bill added funding for an additional DDG-51 ship ($820 million) to offset adecrease of $493 million in the RDT&E for the DD-21, the new surface combatant,eliminated one LHD-1 amphibious assault ship (-$267 million), and funded theconversion of four rather than two Trident submarines from a strategic platform toa cruise missile carrier (+$463 million). Like the Senate, the House also added about$500 million for National Guard and Reserve equipment (see Table A3 for changesto major weapon programs). The conference version of the Military Construction appropriations bill was passed by the House and Senate on October 17 and October 18, respectively, andsigned by the President on November 6, 2001 ( P.L. 107-64 ). The Act provides $10.5billion in funding, $500 million above the Administration's request (see CRS Report RL31010 , Appropriations for FY2002: Military Construction, by Daniel Else). Earlier, the House Appropriations Committee passed its FY2002 MilitaryConstruction appropriations bill ( H.R. 2904 ) on September 21 aftercompleting its markup the previous day. The Senate Appropriations Committeepassed its version on September 26 ( S. 1460 ) after completing markupon September 25th. On July 20, both houses approved a conference agreement on a bill ( H.R. 2216 ) providing supplemental appropriations for FY2001. Themeasure includes $5.5 billion for the Department of Defense, and $5.8 billion fornational defense as a whole. Unlike other recent supplementals for defense, whichtypically provided funds mainly for contingency operations, this bill - submitted bythe new Administration on June 1 - provided additional funding for day-to-dayoperating expenses and unanticipated cost growth in health and other areas. The billwas initially passed by the House on June 20, ( H.R. 2216 ) and by theSenate on July 10 ( S. 1077 ), and signed into law on July 24 ( P.L.107-20 ). On December 13, the House and Senate passed the FY2002 DOD AuthorizationAct by 382 to 40 in the House and 96 to 2 in the Senate ( P.L. 107-107 , H.Rept.107-333 , see Table 1b ). The Act provides the $343.3 billion as requested by theAdministration, an 11% increase over FY2001 without taking into account fundingfrom the emergency supplemental. Like the appropriators, the authorizers' actionreduces the amount for the Department of Defense by $1.2 billion, and re-allocatesthose funds to military construction (+$600 million) and defense-related activities ofthe Department of Energy (+$600 million). Passage of the FY2002 DOD Authorization Act was delayed by the difficulty in resolving the issue of authorizing another round of base closures in 2003 asproposed by the Administration. Initially, the House opposed an additional round andthe Senate supported another round. (44) In the finalcompromise included in theconference version, Congress agreed to authorize a round of base closures butdelayed the date until 2005. As part of the compromise, the conference version alsorequires that a 'super-majority' of at least seven of the nine commissioners approveany decision to add bases to those suggested by the Secretary of Defense. (45) DuringHouse floor debate, several members raised concerns about the base closureprovision. On the Senate side, the chief concern raised during floor debate was thepotentially de-stabilizing effects of President Bush's decision to withdraw from theABM Treaty announced on December 13, particularly at a time of rapid buildup inthe U.S.'s ballistic missile defense program, an increase that was largely endorsed byCongress in the 2002 budget. Completion and passage of the conference report was also delayed by the need to resolve the issue of the Navy's access to the training vase at Vieques (see below),and by the debate about the allocation of emergency supplemental spending (seeabove). Earlier, congressional action on FY2002 defense authorization andappropriations bills had been delayed because the Administration did not submit itsamended request until June 27 because of the ongoing review of military strategy andbecause of the evacuation of Congress due to the delivery of anthrax-laden letters. Major issues resolved in the conference report and changes made in each house arediscussed below. The conference version of S. 1438 resolve several contentious issues as follows: Approves the President's request for another round of base closures, but delayed the date to 2005, and changed the procedures proposed byDOD; Authorizes the Secretary of the Navy to close the trainingfacilities at Vieques (and transfer the facility to the Department of the Interior) aftercertifying that alternative training sites are available; Provides $7.0 billion for ballistic missile defense as requestedby the President but authorizes the President to transfer $1.3 billion of that total toefforts to combat terrorism, permitting the President to fund the requestfully; Adopts provisions that reduced non-readiness related spendingfor Operation and Maintenance by $2.1 billion and Working Capital Funds by $400million to reflect savings in management reforms, fuel and utility prices, foreigncurrency decreases. (46) The conference version of the bill also authorizes the increases in pay (5% across-the-board and up to 10% for targeted skills) and housing allowances asrequested by the Administration, and fully funds the increase for the Defense Healthprogram, including the new benefit for seniors, TRICARE for life. The conferencebill also increases funding beyond that requested by the Administration for militaryconstruction and family housing and equipment and training for the reservecomponents. Congress also authorizes $21.2 billion in emergency funding to combatterrorism (see above), providing an upward limit on spending. (47) ( Combining thefunding allocated at the Administration's discretion with the amounts provided bythe appropriators, DOD received a total of $17.5 billion as discussed above.) Although the act endorses the proposal to authorize military retirees to receive VA disability compensation without a reduction in retirement benefits (known as"concurrent receipt"), the bill provides that the program will not go into effect untilthe President submits legislation and Congress offsets the $55 billion in costs overthe next 10 years (see below). DOD objects to this additional benefit both becauseof its high cost and because the two programs (retirement and disability payments)were designed to reach two different groups of beneficiaries. (48) For changes to specificprograms, see below. The House matched the total amount requested by the Administration and made relatively few changes to individual programs. House Floor Action. After considering the DOD Authorization bill, H.R. 2586 , on September 20,24, and 25, the House passed the bill by a vote of 398-17. The act provided a totalof $343.5 billion for the national defense function, matching the Administration'srequest. The Rules Committee limited the number of floor amendments, and debatewas less extensive because of the bipartisan support for defense spending in responseto the terrorist attacks. (49) The major amendments passed were the following: an add of $250 million for testing of the F-22 aircraft; a $400 million increase for combating terrorism that was offsetby cuts to BMD programs and consulting services (see discussion above);and an amendment offered by Representative Traficant permittingthe Secretary of Defense to assign active-duty military personnel to assist with borderpatrol. Other amendments that were passed would (1) permit military installations to be used as polling places; (2) allow private donations to repair the Pentagon; and (3)establish a new medal to be awarded to civilians who are killed or wounded as aresult of hostile action. (See Summary Tables A2 and A3 for changes to majorweapon system programs.) Markup by House Armed Services Committee. The House Armed Services Committee markup of H.R. 2586 provided $343.5 billion for the national defense function,generally endorsing the Administration's request. In military personnel, theCommittee not only supported the Administration's requests for substantialimprovements in military pay but also provided for other improvements incompensation and health care. In the case of funding for Operation and Maintenance(O&M), the Committee supported the Administration's request for additionalfunding for readiness-related funding but cut non-readiness related O&M by about$1 billion and redistributed some of those funds to enhancement of training ofreserve forces. See below for more detailed discussions of individual issues. The Committee provided $47.4 billion for RDT&E, $300 million more than the Administration's request, and supported all but $135 million of the President'srequest for $8.2 billion for missile defense (see CRS Report RL31111 , MissileDefense: The Current Debate , coordinated by [author name scrubbed] and Amy F.Woolf). The Committee also added $525 million to the Administration's request forprocurement funds, citing it as the "weakest link" in the Administration's budgetbecause decisions about modernization are awaiting completion of the QuadrennialDefense Review. Although the Senate bill, S. 1438 , provided total funding of $344.8, $1.3 billion above the Administration's request, the Senate initially included morechanges likely to be controversial. In a bipartisan compromise, however, the mostcontroversial provisions requiring congressional approval of anti-ballistic missiletesting were removed prior to floor debate (see below). Senate Floor Action. On October 2, as a bipartisan compromise in the wake of the terrorist attacks, the Senateconsidered a new version of the DOD Authorization Act on the floor that stripped thebill of controversial provisions. ( The new version, S. 1438 , replaced S. 1416 , the bill that was reported out of committee.) The new versionpassed unanimously. The compromise version no longer required that the Presidentto certify and Congress to approve the funding of any activity that could violate theABM Treaty. (50) The President had threatened toveto the bill if these provisions wereincluded. Those provisions were included in a separate bill, S. 1439 . The Senate permitted the President to restore $1.3 billion in funding cut fromballistic missile programs by authorizing the President to allocate those funds eitherto combating terrorism or to the BMD program, a compromise that was adopted inthe final version of the bill. That change increased the total amount authorized to$344.8 billion, or $1.3 billion above the Administration's request. The Senate passed S. 1438 by a vote of 97 - 0 on October 2. (51) In floor action, the Senate included the following significant amendments: adopted a provision restoring $1.3 billion that the Senate Armed Services Committee cut from ballistic missile defense (BMD) programs, andallowing the President to allocate those funds to either RDT&E for BMD, orcombating terrorism; and rejected an amendment that would have removed provisionsadopted by the Senate Armed Services Committee providing for a new round of baseclosures in 2003; and adopted the Reid amendment permitting "concurrent receipt"of benefits for military retirees with service-connected disabilities that wouldincrease entitlement spending by $2.9 billion in FY2002 by allowing eligible personsto receive both retirement and VA disability payments without the reduction requiredin current law. Long-Term Effect of Expanded Benefits to Veterans. Authorizing "concurrent receipt" to improve the benefitsreceived by military retirees with service-connected disabilities would have asignificant effect on future budgetary requirements for the government as a whole. According to cost estimates from CBO, authorizing "concurrent receipt"of bothretirement benefits and VA disability payments without requiring an offset to thoseeligible for benefits under both programs would increase mandatory or entitlementspending by $2.9 billion in FY2002 and $40.6 billion over the next ten years. Inaddition, the Defense Department would have to provide about $1 billion annuallyto cover the estimated cost of providing this benefit in the future for service memberscurrently in the force. (52) (The House version ofthe bill contained the language thatwas originally included in the Senate bill, which stated that the benefit would not beprovided until the Administration provided an offset to cover the mandatory orentitlement spending.) The Administration supports current law. Markup by Senate Armed Services Committee. Like the House Armed Services Committee, the SenateArmed Services Committee markup of S. 1416 provided $343.3 billionfor the national defense function, the same amount as the Administration's request. The Senate Armed Services Committee, however, required that authorization of$15.2 billion of the Administration's $18.4 billion increase would be contingent uponapproval of additional funds for Defense by the Chair of the Senate BudgetCommittee as provided in the FY2002 concurrent budget resolution (see sectionbelow for a more detailed discussion of the budget resolution). (53) The Senate Armed Services Committee also adjusted the Administration's request to reflect the Committee's priorities (see Summary Tables A2 and A3 forchanges to major weapons programs.) The Committee's markup included the majorchanges outlined below. The committee added funds in the following areas: $450 million for family housing and military construction; $250 million for military compensation (primarily to reduceout-of-pocket housing costs for military personnel); $400 million for procurement of additional helicopters andother equipment; $307 million to convert four Trident ballistic missilesubmarines (SSBNs) to carry Tomahawk cruise missiles; $625 million more for theater missile defense systems likePAC-3 and THAAD; over $800 million for "transformational" RDT&E programs,including over $250 million for science and technologyprograms; over $600 million for new initiatives to deal withnon-traditional threats including over $200 million to combat terrorism (see sectionbelow); and $270 million to Operation and Maintenance to improvereadiness. At the same time, the Senate Armed Services Committee reduced the Administration's request in the following areas: $590 million less for the V-22 tilt-rotor Osprey aircraft; $247 million less for the Joint StrikeFighter; $1.3 billion less for ballistic missile defense;and $1.6 billion reduction for savings from managementefficiencies. To improve the efficiency of defense operations and management, the Committee also authorized another round of base closures in 2003 and directed theDefense Department to save $1.6 billion by applying best commercial practices andimproving defense management. DOD was directed to achieve that $1.6 billionreduction in the relevant appropriations. Congress completed action on the FY2002 congressional budget resolution( H.Con.Res. 83 ) in early May - the House approved a conferenceagreement on the resolution on May 9, and the Senate on May 10 - before theAdministration had determined its defense spending plans. The conferenceagreement established a provisional target of $324.8 billion in new budget authorityfor the national defense budget function (which includes Department of Energydefense-related activities and defense-related activities of other agencies as well asof the Department of Defense). To allow for further increases in defense, the resolution used the mechanism ofreserve funds, separately administered in the House and the Senate, to accommodateincreased spending in FY2002 and over the whole FY2002-FY2011 period. With the lower mid-session estimates of the surplus issued by both OMB and CBO in August(reflecting the effect of the tax cut in the spring as well as other changes), thedownturn in the economy, and additional spending in response to the terrorist attacks, it will be impossible to accommodate the defense increase without tapping socialsecurity revenues. In fact, both CBO and the Administration now predict deficitspending in FY2002 through FY2004, in addition to fully using the Medicare andSocial Security surplus (see above). Section 302 of the Congressional Budget Act established procedures through which budget resolution ceilings on spending are implemented in the appropriationsprocess. Under Section 302 (a) procedures, the congressional budget resolutionallocates funds to the appropriations committees. Section 302 (b) then requires thatthe appropriations committee in each house report how funds are subdivided amongthe appropriations subcommittees. These "302 (b) allocations" ultimately determinehow much money will be available for each of the regular appropriations bills,including defense. The 302 (b) allocations may be adjusted at any time, and oftenchange as action on appropriations bills proceeds. In the conference version of the FY2002 DOD appropriations act, ( P.L. 107-117 , H.R. 3338 ), Congress raised the initial ceilings set for Defensein the FY2002 concurrent budget resolution to amounts appropriated by Congress. (54) Prior to submission of the Administration's revised request, on June 8, 2001, theHouse Appropriations Committee released its initial 302(b) allocations for FY2002appropriations bills. The Subcommittee on Defense received $300.3 billion inbudget authority, compared to $301 billion anticipated in the Bush Administration'sApril 9 "placeholder" request. (Note that this is below the $310.5 billion indiscretionary funding requested for the Department of Defense because it does notinclude funds provided to DOD in the military construction appropriations bill.) OnJune 21, 2001, the Senate Appropriations Committee approved its initial allocations- the Subcommittee on Defense received $298.6 billion in new budget authority. Following receipt of a revised budget request, the budget resolution allowed thedefense allocation to increase, with the approval of the chairs of the House andSenate Budget Committees. The Bush Administration released an initial outline of its overall budget plans, A Blueprint for New Beginnings , on February 28, and its official, more detailed budget request was submitted on April 9. Both the "Budget Blueprint" and the April9 budget included $310.5 in discretionary budget authority (56) for the Department ofDefense, about the level the Clinton Administration had planned. Note that this doesnot include defense-related activities of the Department of Energy and other agencies- with all defense-related activities added, the April 9 budget projected $325.1 billionin FY2002 for the national defense budget function. The defense totals in the February 28 "Budget Blueprint" and in the April 9 budget request were, however, characterized simply as "placeholder" numbers. TheAdministration's plan was to submit a revised budget request by the summer,following completion of a review of defense strategy and plans. Defense budgetestimates beyond FY2002 simply reflected projected growth of the original FY2002$310.5 billion for DOD at the rate of inflation rather than the results of any policyassessment (see Table 10 ). On June 27, the Administration submitted an amended FY2002 defense budget request totaling $328.9 billion dollars in discretionary funding for the Department ofDefense - $18.4 billion more than the April 9 budget, and $32.6 billion above theamount initially enacted for FY2001 (not including FY2001 supplementalappropriations). For the national defense budget function, the revised total amountsto $343.5 billion. The Administration revised its estimates of defense spendingbeyond FY2002 in the mid-session update in August 2001 (see Table 10 ). Table 10shows the actual FY2000 level, the original FY2001 enacted level, supplementalappropriation for FY2001, the FY2002 amended request, and the enacted level inFY2002. In discussing the amended budget, Administration officials said that increased spending - $32.6 billion above the FY2001 level appropriated by Congress last yearfor DOD - was necessary to "address severe shortfalls in readiness, healthcare,operations, maintenance, and infrastructure ... inherited" from the previousadministration. (57) The amended request was 11%higher than the FY2001 levelpassed by Congress last year. Taking into account the effect of inflation, the requestreflected real growth of 7%, a reversal of the modest declines in spending that havecharacterized the second half of the 1990s, with the exception of an increase in 1999to fund the conflict in Kosovo (58) . TheAdministration modified projections of fundingbeyond 2002 in its Mid-Session Review issued on August 22, 2001 (see below). Final projections of funding for later years, however, will not be provided until DODsubmits the FY2003 budget after completion of the national strategy review inSeptember 2001. Table 10. Department of Defense Funding, FY2000 through the Amended FY2002 Budget Request (billions of dollars) Sources : U.S. Office of Management and Budget, Budget of the United States Government, FY2002 ,April 2001; Conference report to accompany H.R. 2216 , H.Rept. 107-148 , Congressional Record , July 20, 2001, pp. H4388-4389, and CRS calculations. a. In April, 2001,the Bush administration submitted its FY2002 budget to Congress including "placeholder" numbers for the Department of Defense. The President sent Congress a requestfor supplemental appropriations for FY2001 on June 1, 2001 and an amended FY2002 budgetrequest on June 27. Congress passed the FY2001 supplemental on July 20, 2001, and thePresident signed the bill on July 24, 2001. b. Discretionary budget authority is appropriated to the Department of Defense annually. c. Mandatory funding is governed by standing law - in DOD it reflects primarily offsetting receiptsreceived by certain DOD activities. On August 22, 2001, OMB issued its Mid-Session Review of the FY2002 budget, including revised estimates of not only the surplus but also new estimates ofdefense spending in later years (see Table 11 ). Those estimates added $98 billionto projected spending between FY2001 and FY2006, compared to theAdministration's initial April 2001estimates. The increase was designed to makelater years consistent with the amended budget request for FY2002, which added$18.4 billion to the defense budget. Table 11. Changes in Administration's Estimates for National Defense, FY2000-FY2006 (Budget authority inbillions of current and constant FY2002 dollars) Sources: U.S. Office of Management and Budget, Budget of the United States Government, FY2002 Historical Tables, April 2001; U.S. Office of Management and Budget, Mid-SessionReview, FY2002 (August 22, 2001); deflators from Department of Defense Comptroller;Conference Report to Accompany H.R. 2216 , H.Rept. 107-148 . a. Reflects the Bush Administration's initial April request for the Department of Defense forFY2002 - 2006. b. Reflects amended budget for FY2002 submitted on June 27, 2001, excludes FY2001supplemental enacted on July 20, 2001, and includes new estimates for FY2003-2006included in Mid-Session update of August 22, 2001. c. Reflects amended budget request for FY2002 submitted on June 27, 2001, supplementalfunding for FY2001 enacted on July 20, 2001, and new estimates for FY2003-2006 includedin Mid-Session update of August 22, 2001. Quadrennial Defense Review. Sent to Congress on September 30, the much-anticipated Quadrennial Review (QDR)set out four key goals for U.S. military strategy: assuring U.S. allies; dissuading competitors from challenging the U.S. or ourallies; deterring aggression; and defeating adversaries decisively should deterrencefail. (59) Citing the unpredictability of threats in the post-Cold War world, the QDR called for adopting a "capabilities-based" strategy rather than a regional approachoriented to conflicts in two particular regions (i.e. the two "major regional conflicts"endorsed in the previous QDR). Under a "capabilities" approach, the military wouldfocus more on "how an adversary might fight rather than specifically whom theadversary might be or where a war might occur." (60) In light of the September terrorattacks, the report called for restoring "the emphasis once placed on defending theUnited States and its land, sea, air, and space approaches." (61) At the same time, U.S. military forces are still to be prepared to defeat attacks in "two theaters of operation in overlapping time frames," with a decisive defeat inone theater, and holding the enemy in the second, as well as being ready to conductsmaller-scale contingencies (SSCs) of varying durations. (62) In the new capabilitiesapproach, however, U.S. military forces are to emphasize information operations,ensuring U.S. access to distant theaters, and defending the United States. Despite theshift in approach, the QDR did not propose any changes in the current force structureor military end strength. Unlike most of the report, which is very general, the QDR specifically required the services to make plans to redeploy forces to re-orient the global posture of theU.S. to give additional emphasis to the Middle East and South Asia rather than thecurrent emphasis on western Europe and northeast Asia; for example, the Secretaryof the Air Force is tasked to develop plans to base more forces in the Arabian Gulf. (63) Calling for a "transformation" of U.S. forces, operational capabilities, and management practices, the new QDR emphasized: improving U.S. capabilities in information warfare, intelligence, and space; strengthening joint operations, command and control, andtraining; "selectively" replacing current equipment;and reforming DOD management and acquisition practices toachieve efficiencies, including achieving $3.5 billion in savings throughconsolidations. Citing the new requirements arising from the September terrorist attacks, the QDR abandoned previous plans for gradual increases in defense spending to beachieved through savings from efficiencies and stated that DOD was developing newestimates of future funding needs. (64) Of the $32.6 billion increase in requested FY2002 DOD discretionary funds compared to FY2001, fully three-quarters was allocated to Operation andMaintenance (54%) and Military Personnel (21%) accounts, which fundreadiness-related and other support activities and military compensation (see Table12 ). Another 20% of the increase was allocated to RDT&E, reflecting, in large part,the growth in spending for ballistic missile defense - half of the $6 billion increasein R&D was allocated to a 61% increase in funding for ballistic missile defense, withthe remainder spent on increases for "transformational R&D," such as digitizationof weapon systems and unmanned combat vehicles, and other R&D programs. The FY2002 request included only small changes in funding for weapons procurement, reflecting the fact that the Administration had not yet completed itsstrategic review. Completed by the end of September 2001, the conclusions in Quadrennial Defense Review (QDR), are to be reflected in the FY2003 budget, ratherthan in FY2002, where spending on Procurement is slated to decrease by $.5 billion. Table 12. Composition of Changes Between FY2002 Amended Request and FY2001 Enacted Amounts (billions of dollars) Sources: FY2002 amended request from Office of Management and Budget, Transmission of the FY2002 Amended DOD budget to the Speaker of the House ofRepresentatives, June 27, 2001; FY2001 original enacted levels from U.S. Office ofManagement and Budget, Budget of the United States, FY2002 , April 2001, Table22-1; CRS calculations. Table 13 and the discussion that follows provide a more detailed breakdown of the Administration's $32.6 billion increase in funding between FY2001 and FY2002. Military Personnel. The amount for Military Personnel in the FY2002 amended budget reflected the Administration'sdecision to exploit a variety of tools to improve military compensation in order tomeet recruitment and retention goals, a major concern of the services and Congressin recent years. Those tools include: an increase in basic pay that averages 5% (including a 4.6% across-the-board increase in basic pay and higher raises for certaingrades); a 15% increase in the housing allowance provided to militarypersonnel; $1 billion for improvements in pay targeted to particular gradesand skills where retention problems have persisted; and $2.9 billion of additional funding for bonuses and otherincentive payments. Table 13. Major Changes in FY2002 AmendedBush Budget (budget authority in billions of dollars) Sources: CRS calculations based on DOD, Under Secretary of Defense Comptroller, National Defense Budget Estimates for FY2001, March 2000; Transmission ofFY2002 DOD Amended Budget to Congress, June 27, 2001; FY2002 DOD Briefingto the Press (with slides); Office of the Under Secretary of Defense (Comptroller),Department of Defense Amended Budget, Fiscal Year 2002, Military PersonnelPrograms, Programs, (M-1), June 2001. Note: Totals may not add due to rounding. a. Reflects April 2001 estimate for FY2001; does not include 2001 supplementalappropriations passed by both houses on July 20, 2001 and signed into law onJuly 24. b. Includes both active-duty and reserve pay. c. Includes appropriations to Revolving and Management funds and legislativecontingencies. Operation and Maintenance. Funding for O&M in the Administration's FY2002 request grew dramatically - from$108 billion in FY2001 to $126 billion, a 16% increase of almost $18 billion. Thisincrease pushed O&M's share of the DOD budget to 38%. Although O&M spendingis commonly associated with readiness, this increase boosted spending in a varietyof areas reflecting the fact that O&M funds support activities that range from trainingoperational units to cutting the grass on military installations. Chief areas that grew in the amended request included - Defense Health: (65) The amended budget included an additional$3.7 billion for the expanded health care coverage that Congress authorized last yearfor military retirees over the age of 65 (see below for more detail about the Tricarefor Life program), and $2.6 billion more to cover expanded benefits and higher costsfor dependents of active-duty personnel. The Administration claimed that this reflectsmore "realistic" estimates for pharmacy costs and contracts for managed care. (66) Optempo-related activities and depot maintenance: For theday-to-day training of military units, typically referred to as "optempo-relatedactivities," the new budget provided an additional $2 billion. (67) That 15% boost infunding over the FY2001 level did not necessarily mean a higher pace of training ofoperational units (except for naval aviation units) but rather more funding for thepurchase of spare parts, higher levels of depot repair, and improving firing ranges inresponse to concerns raised by military leaders about shortfalls that could affectreadiness. (68) An additional $1.3 billion for depotmaintenance, a 20% increase, wasalso intended to improve readiness. Base support: Another $2.8 billion proposed addition in O&Mwas for base support, 16% above last year's level. (69) The Administration argued thatsuch increases are necessary to improve the condition of military installations, whichthe services suggest have been shortchanged in recent years. Other areas: Other areas within O&M grew by about10%. Procurement Funding. The FY2002 amended budget included $61.6 billion for procurement of new weaponsystems, $0.5 billion below last year's level. Procurement spending largely followedplans laid in previous years because the Administration had not yet decided on itsinvestment strategy pending its review of the national military strategy. RDT&E. Of the $6.4 billion or 16% increase in the R&D budget proposed for this year: $3 billion was for the Administration's more ambitious pursuit of missile defense, a decision that generated considerable controversy (see below),and additional funding of more than $1 billion was for programscharacterized as "transformational,"(e.g. unmanned systems like GlobalHawk). Funding for basic research (the Science and Technology share of R&D) was pegged at $8.8 billion, some $200 million below the level provided in 2001. (70) Military Construction and Family Housing. (71) Military construction andfamily housing - programsdesigned to maintain and modernize the defense infrastructure - were slated forincreases of 11% ($0.6 billion) and 14% ($0.5 billion) respectively. TheAdministration justified the increase for military construction as part of a long-term initiative to improve the condition of facilities. At the same time, the Administrationproposed an "Efficient Facilities Initiative" - including a round of base closures inFY2003, coupled with expansion of a new way to share the use of land and facilitieson military facilities, based on a pilot project at Brooks Air Force Base. After muchdebate, Congress approved a new round of base closures, and agreed to an expandedpilot program of the Brooks Air Force base initiative. Several issues emerged as key matters of debate on the FY2002 defense budgetthough the salience of some of these issues changed in response to the September 11terrorist attack and new issues emerged about the appropriate role for the Departmentof Defense in combating terrorism, and the changes in funding should flow from thatrole (see discussion above about funding to combat terrorism). Major issues raisedduring this year's debate on the defense budget included: Was the $343.5 billion requested by the new Administration the appropriate amount relative to defense needs, and could that amount beaccommodated without dipping into the Medicare surplus inFY2002? Was increased funding of over 60% and proposed restructuringof the ballistic missile defense program appropriate, and how would theAdministration's plans affect the Anti-Ballistic Missile Treaty(ABM)? Was funding for procurement - slightly below last year's level- adequate? What, if any, implications arise from the rapid growth indefense health costs? Were the large proposed increases in operation andmaintenance funding necessary to support readiness, and will higher funding forO&M squeeze out other defense needs in the future? A variety of other important issues - ranging from the level of military compensation to finding alternatives to Navy live fire training on Vieques - were alsobe considered, and are discussed in later sections of this report. The Administration characterized the defense budget increase in FY2002 as an initial down payment designed to make up for several years of shortfalls in fundingof the day-to-day requirements of the services. Some argued that the increase wasinsufficient. In response to a request from Representative Skelton, the rankingminority member in the House Armed Services Committee, the military services,submitted a list of "unfunded" requirements that totals another $32 billion inFY2002. The total for this list was twice as large as that submitted by the serviceslast year. Supporters of higher funding argued that the Administration's request didnot correct "shortfalls" in long-term funding for weapon systems designed to"recapitalize" and "modernize" the force, an issue that has been the focus of debatein recent years. Members of the defense committees expressed their dissatisfactionwith the procurement levels proposed in the amended request. Others, however, argued that the Administration's request could not be accommodated without dipping into the surplus generated by the Medicare HospitalInsurance Fund or shortchanging competing demands for higher funding foreducation, new coverage for Medicare prescription drugs, and adequate support ofother domestic programs. Critics complained that the size of the Administration'stax cut left little or no room for defense increases. Although this perennial "guns versus butter" debate grew more intense when new, lower estimates of the FY2002 federal budget surplus - reflecting the effect ofthe tax cut on revenues and recent downturns in the economy - were published inAugust in OMB and CBO's mid-session updates, these concerns dissipatedtemporarily, at least, with the terrorist attacks. The defense appropriations bill wasdelayed because of congressional response to the terrorist attack, and eight continuingresolutions were passed that covered government spending through January 10, 2002when the final appropriation bills were signed into law. During this congressional session, attention focused on the Administration's proposals about allocation of the $40 billion provided in the emergencysupplemental. Congress was less concerned with reconciling increases for defensewith other competing spending demands, although concerns about the effect ofhigher defense spending in the future could resurface with the re-emergence of deficitspending and the reliance on the social security surplus to fund governmentprograms, rather than using those funds to pay down the debt and reduce the burdenof payments for social security and Medicare for the baby boomer generation. Constraints in the Congressional Budget Resolution. The final Congressional Budget Resolution approvedin May established "reserve funds" for defense and certain other high-priority areas.The Chair of the Budget committees in each House could tap the "reserve funds" - in other words, approve higher levels of spending than those included in theCongressional Budget Resolution - only if the proposed increases would not reducethe surplus in the Medicare Hospital Insurance (HI) Fund, and if certain otherconditions are met. (72) If the proposed increase,taken together with all previouslyenacted legislation, tapped the Medicare HI Fund surplus, any member could raisea point of order against the proposal. (73) On theSenate side, sixty votes were requiredto override a point of order. On the House side, the Rules Committee would decidewhether a point of order could be raised. (This limitation applied to all the reservefunds except for Medicare itself, where the HI surplus could be used to finance a newprescription drug benefit.) Unlike the other reserve funds, the one set up for defensein the Senate did not include any specified limits on the amount of additional fundingthat may be provided. The Chairman of the Budget Committee could adjustcommittee allocations to reflect use of this reserve fund. (74) See CRS Report RL30977, Defense Budget for FY2002: An Overview of Bush Administration Plansand Key Issues For Congress , by [author name scrubbed] for a more extensive discussionof the budget resolution. These guidelines - which were included in the concurrent budget resolution and hence did not have statutory effect - were essentially set aside by Congress during thedebate on the DOD appropriations bill because no member raised a point of order.Support for higher defense spending was high because of the September 11th attacks,and overcame concerns about protecting the Social Security and Medicare surpluses. (This section was prepared by Steve Hildreth and Amy Woolf) Whether and when the United States should deploy defenses designed to protect against attack from long-range ballistic missiles has been a divisive defense issue fornearly 20 years. Although the Bush Administration has not outlined a specificarchitecture for missile defense, it has indicated that the development anddeployment of missile defenses would be part of a broader shift in the framework forinternational strategic stability, away from reliance on nuclear and conventionaldeterrence and towards a growing reliance on a mix of offensive capabilities andmissile defenses. Where the Clinton Administration sought to develop and deploy a system that consisted of land-based interceptor missiles and radars, with some reliance onspace-based sensors, the Bush Administration has suggested that the United Statesdevelop and deploy land- and sea-based interceptors, along with more extensivespace-based capabilities for identifying and tracking attacking missiles. (For anoverview of national and theater missile defense, see CRS Report RL31111 , Missile Defense: The Current Debate , coordinated by [author name scrubbed] and Amy F.Woolf.) The amended FY2002 budget included a dramatic overall increase in missile defense funding - a 60% increase compared to FY2001 funding. It does not appear,however, that the new Administration significantly changed the relative prioritiesgiven to the main categories of missile defense - terminal, midcourse, andboost-phase defenses - that the Administration is using to present the program (see Table 14 ). The Administration did not propose different rates of increase forindividual programs, however. In congressional testimony, the Administrationemphasized these new categories for classifying various programs, as well as certainorganizational changes - programs that were initially designed for an air defense role(to shoot down missiles launched from aircraft) are being transferred from thepurview of the Ballistic Missile Defense Organization to the services. (75) Debate about the Administration's missile defense program focused on the following issues: the foreign policy and arms control implications of the Administration's plans; the pace, long-range cost, design, and acquisition strategy of theAdministration's program; the potential squeeze on other R&D efforts;and the blurring of the distinction between the threats posed bytheater and long-range missiles as well as the defense systems to be developed tomeet those threats. In a test on July 14, 2001, which came on the heels of two previous failures, an interceptor destroyed a dummy missile warhead in space about 140 miles above theocean. Supporters contended that these results justify accelerating the program. Inresponse, critics suggested that the test was not realistic because there was only onerather than many decoys, and the target emitted a signal whereas the decoy did not. Such differences in interpreting test results have been common in the past. The large increase in funding - from $5.1 billion in FY2001 to $8.3 billion in FY2002 - reflected the Administration's decision to accelerate R&D efforts on systems currently in development in order to deploy missile defenses as soon aspossible. On December 13, 2001, President Bush announced that the U.S. wouldwithdraw from the ABM Treaty, in order to pursue testing, development, anddeployment of missile defense system without constraint. Despite concerns that theRussians would react negatively, the growing cooperative relationship between thetwo nations in the wake of September 11th blunted the expected response. Thewithdrawal was prompted partly by plans to construct a missile defense test site inFt. Greely near Fairbanks Alaska in spring of 2002 and to test the capabilities of theNavy's AEGIS radar system (a tactical system) during a missile defense test, andpartly by pressure by some within the Administration to get rid of a "relic of the ColdWar." (See CRS Report RL30967 , National Missile Defense: Russia's Reaction , by[author name scrubbed]. ) The Bush program included R&D on systems designed to intercept missiles at each stage from the initial "boost" phase, to mid-course, to the "terminal" phase ofthe flight. Secretary of Rumsfeld's plan to pursue a wide range of programs, anddeploy a rudimentary system as soon as possible - before the technologies are fullymature - is a new and more risky acquisition strategy that has raised concerns. Somehave questioned whether such an approach is merited, particularly in light of thepotential effects on arms control, and the strain put on defense resources. In congressional testimony, DOD emphasized the common elements in long-range, national ballistic missile defense (NMD) and short-range, theater missiledefense (TMD) systems, a new approach that blurs the distinction between strategicand tactical threats and the missile defense responses to those threats. That approachconcerns many, both inside and outside of Congress. The Administration has not developed cost estimates for its new missile defense plan, and some legislators have questioned whether sufficient funding will beavailable in light of the overall budget squeeze, as well as other competing defenseneeds. For example, funding for missile defense could limit funding for otherdefense R&D and procurement. Congressional Action. The conference version of the authorization bill, S. 1438 , provided that $1.3 billion in funding could be used by thePresident either for RDT&E for BMD programs or for activities to combat terrorism. If the President allocated the funding to BMD, the Administration's request wouldbe funded fully. This provision mirrored a compromise adopted on the Senate floorafter September 11th when Senator Levin agreed to remove controversial sectionsincluded in the markup by the Senate Armed Services Committee that would havereduced funding for BMD by $1.3 billion and required congressional approval ofactivities that would violate the ABM Treaty; the President had threatened to veto thedefense authorization bill if those provisions were included. The authorizers alsotransferred three terminal defense programs - PAC-3, MEADs, and Navy AreaDefense - from the services to BMDO because of concern that the services would notadequately fund those programs. In their conference report, the appropriators approved a total of $7.7 billion, reducing the President's request by over $500 million, and did not include theprovision permitting a transfer of funds that was recommended by the authorizers(see Table 14 below). The size and rationale for the cuts made by Congress are: Sea-based Terminal or Navy Area Defense - a cut of $289 million reflecting a Navy's decision to cancel the program leaving only funding forcancellation costs; Sea-based Midcourse/Navy Theater Wide - a cut of $120million because Congress considered the Navy's request for missiles that would beused for testing or contingencies to be premature; Space Sensors/Space-Based Infrared System (SBIRS) Low - acut of $135 million in response to the announcement of a 2-year delay in theprogram. Notwithstanding the reduction, congressional action appears to preserve the general priorities of the Administration as well as approve the substantial increaserequested by the Administration. Table 14. Congressional action on Ballistic Missile Defense Funding: FY2001 to FY2002 Enacted (Inmillions of dollars or percent of total) a Sources: CRS calculations based on H.Rept. 107-350 and Office of the Undersecretary of Defense (Comptroller), "Department of Defense Amended Budget,Fiscal Year 2002," (June 2001); Ballistic Missile Defense Organization, "FY2002Amended Budget Submission," June 2001; Ballistic Missile Defense Program,Briefing of 30 July 2001; Office of the Undersecretary of Defense (Comptroller),"Department of Defense Amended Budget, Fiscal Year 2002, RDT&E Program(R-1)," June 2001; and Office of the Undersecretary of Defense (Comptroller),"Department of Defense Amended Budget, Fiscal Year 2002, Procurement Programs(P- 1)," June 2001. Prepared with the help of Yeonmin Cho. a . Comparisons reflect April estimate for FY2001 and FY2002 Amended budget request, and final FY2002 congressional action. Funding includes RDT&E,procurement, and military construction. b. Arrow and RAMOS were both funded under International Cooperative Programsin FY2001. The new Administration decided to delay major changes in funding for new weapon systems pending completion of its national defense review. Presumably forthat reason, the procurement budget in the amended FY2002 budget was $61.6billion, $0.5 billion below last year's level. (76) Untilthe review was completed, theAdministration decided to emphasize "funding of systems that will continue to benecessary even with significant shifts in defense strategy" - purchases of airliftaircraft was given as one example. (77) Based onthat rationale, the Administration'sprocurement request included only modest changes in current plans. Limited funding procurement fueled concerns among some defense supporters in Congress, particularly in light of the debate in recent years about alleged"shortfalls" in long-term defense funding, particular for weapons modernization. That debate has centered on whether the spending on new weapon systems needs tobe increased - and at what rate - to "recapitalize" or replace those systems as theyage. Although estimates of the amount necessary to replace current systems havevaried widely, there is near consensus among Members of the defense committeesin Congress that some increase in the procurement budget in the near term isneeded. (78) In testimony, Secretary of Defense Rumsfeld acknowledged that the current budget did not address the replacement issue. But he argued that decisions on thatissue could not be made until completion of the Quadrennial Defense Review, whichwould incorporate the findings of the National Defense Review. Those decisions,which are to be included in the FY2003 budget, are likely to be contentious withinthe Defense Department as well as in Congress, in part because changes in strategyand the "transformation" of today's forces to meet new military goals could requirea different mix of forces. (79) (See SummaryTables A2 and A3 for the number andprocurement and RDT&E funding for major weapon systems requested by theAdministration as well as congressional action.) Congressional Action. Reflecting these concerns, the authorizers added about $500 million to the President's request, making a variety of changes to selectedprograms (e.g. UH-60 Black Hawk helicopters). The appropriators, however,generally funded weapon systems at the request. See discussion of individualweapon systems below.). This issue is likely to resurface in the FY2003 budgetdebate. (This section was prepared by Richard Best) The Defense Health Program (DHP) has been a matter of considerable congressional interest in recent years because of initiatives to expand medicalcoverage to military retirees and their dependents and, also, because of concern aboutcontinuing cost growth, particularly for managed care contracts. The substantialincrease for the Defense Health Program in the new budget reflected both additionalbenefits for military retirees, a 15% increase in the cost of drugs, and a 12% increasein the managed care contracts that provide care to the dependents of militarypersonnel. (80) DOD spokesman said that thesehigher funding levels were designed toeliminate the practice in recent years of turning to supplementals to cover earlier,unrealistic estimates. (Some $1.4 billion of the $5.5 billion supplemental recentlypassed by Congress, was for higher-than-anticipated costs in the Defense HealthProgram.) The FY2001 Defense Authorization act provided new benefits - dubbed "TRICARE for Life" - for Medicare-eligible military retirees. The measure requiredthat the Defense Department pay the full cost of the program for current beneficiariesout of appropriated funds in FY2002, but established a trust fund to pay future costs,which will be counted as mandatory spending financed outside of the defense budgetin later years. (81) In future years, the Defense Department's cost will reflect an actuarial estimate of the cost of future benefits for current personnel, the same approach now used forretirement benefits. There is great uncertainty about the size of those estimated,future costs. (82) If the estimated costs are smallerthan the $3.9 billion included forthese benefits for Medicare-eligible military retirees in the FY2002 budget, thepressure on DOD's budget created by the Defense Health Program may subside inlater years. Otherwise, DOD could continue to face significant, or even additionalpressure on its total resources because of the obligation to provide this new benefit. Meanwhile, the costs of other medical care in DOD continued to increase, and just as importantly, the Defense Department has seldom been able to project itsrequired expenditures accurately. According to one congressional committee, theDefense Department has requested either substantial reprogramming of funds orsupplemental appropriations to meet unbudgeted health care costs for 12 of the past16 years. (83) Faced with both the obligation to provide more extensive benefits and rapidly rising costs, senior DOD officials suggested that Congress may want to considertransferring other defense health costs to the mandatory side of the overall federalbudget to relieve this pressure. Although such a transfer would free up resources inthe defense budget, the government would, of course, still pay those costs. Along with the economy-wide pressure on medical costs from rising drug costs and technological advances, DOD's health care system lacks mechanisms such ascopayments that restrain the usage of medical services. (84) With removal of mostcopayments for active-duty beneficiaries, and only modest copayments for retirees,DOD cannot rely on the tools that are typically used in the civilian sector to restrainhealth care usage and, thus, contain costs. Congressional Action. The authorizing and the appropriating committees both endorsed the Administration's request. The appropriators also added $235 million forresearch into breast and prostate cancer. (85) The amended FY2002 defense budget request included an increase of $17.7 billion in spending on operation and maintenance. Of that total, about $2 billion wasadditional funding for flying hours, steaming hours, and training, the funding that ismost clearly related to military readiness. (Day-to-day training of operational units,or operational tempo, is typically referred to as "optempo," a shortened version of theterm.) Other funding increased with a direct effect on readiness included depotmaintenance - ensuring that weapon systems are available for training. (86) A large share of the increase in the Operation and Maintenance budget this year, however, was for objectives that may not contribute so directly to military readiness. Some $6.3 billion is for the Defense Health Program (see discussion above).Although better benefits for retirees may contribute, in some fashion, to the moraleof some military personnel, showing a direct effect on readiness would be difficult. The other major increase in the O&M budget was to upgrade the facilities on militaryinstallations. DOD justified those increases as a readiness-related expense - a wayto improve the morale of military personnel by improving the quality of theirworkplace - but it may be difficult to show how such spending directly affects thereadiness of units to go to war. Congressional Action . Although Congress has generally supported increases in the O&M budget in order to preserve and protect readiness, this year, both theauthorizers and the appropriators cut O&M funding by about $3 billion, partly on thebasis that DOD could achieve savings from a variety of management reforminitiatives as well as specific pricing adjustments for fuel, utility costs, and foreigncurrency and cuts to administrative areas like headquarters. Citing testimony bySecretary of Defense Rumsfeld that DOD should be able to save 5% overall, theauthorizers included a variety of reform initiatives, particularly for procurement ofservices, on which DOD spends over $50 billion, and cut funding by $1.3 billion. (87) The Administration argued that such savings could not be achieved so quickly, andthat funding might therefore be drawn from readiness-related accounts. (88) Theappropriators also reduced funding for the Overseas Contingency Operations Transferfund, set up to give the Secretary resources for unexpected costs, by $650 million inresponse to GAO work that found poor oversight of that spending, as well as cuts inmanagement headquarters and administrative areas. (89) Military Recruiting, Retention and Compensation. (This section was prepared by Robert Goldich.) As did the Clinton Administration in its last years, the Bush Administration enteredoffice emphasizing the need to increase pay and benefits for military personnel todeal with serious recruiting and career retention problems, or continue a recoveryprocess which had already begun. In February, President Bush announced that hewould request a 4.6% pay raise for military personnel, with additional increasestargeted to particular skills and grades. The Administration later raised its minimumto 5%, and Congress ended up approving that 5% request plus some targeted raisesfor members in particular pay grades and years of service up to 10%, essentiallyratifying the Administration proposal. There were proposals for higher minimum raises-some close to 8%-but they were defeated. For the third year in a row, Congress refused to repeal a statute whichrequires that any Department of Veterans' Affairs (VA) disability compensationreceived by a military retiree must be offset by an equivalent reduction in DODretired pay (i.e. prohibiting 'concurrent receipt' of benefits). In separate legislation,Congress also approved a substantial increase in GI Bill educational benefits andallowed limited transferability of such benefits to dependents. These increases in military pay and benefits in recent years were a response, in part, to problems in recruiting and retaining sufficient numbers of qualified militarypersonnel that began in the late 1990s. Frequently cited reasons include (1)competition for qualified workers from a growing economy; (2) a rise in consumerliving standards against which military families measure their own quality of life; (3)increased military operations and training away from home and family; (4) adecreased propensity for military service among young people; and (5) theavailability of federal educational assistance that does not require military service. Although recruiting improved in 2000 and 2001, with the services meeting orexceeding their goals, few if any observers felt that long-term solutions have beenfound. It is not yet clear what effects the ongoing war against terrorism which began on September 11, 2001 will have on military personnel issues. A sense of near-totalnational support, military successes with minimal combat casualties, andcompensation increases, could well contribute to easier recruiting and retention. Arecovering economy, the possible need to increase the strength of the active dutyforces to replace reservists who will have to be released, and the stark realization thatmilitary service could indeed lead to combat could possibly hamper it, or at leastincrease military compensation costs. In the short term, war-related personneldeployments and military administrative action-known as "stop-loss"-to preventskilled personnel in particular occupational specialties from leaving active duty atleast mask the underlying significance of retention statistics. Congressional Action. There was little if any fundamental disagreement between the two Armed Services Committees in their yearly reworking of theAdministration's proposed military personnel programs; both houses of Congressendorsed the Administration's proposal to expands compensation increases of recentyears, including the following actions: Accepting the Administration proposal for a January 1, 2002 basic pay raise of a minimum 5% and a maximum 10% for military personnel,depending on pay grade and years of service. This was the largest annual raise sincethat of October 1, 1981 (FY1982), as well as being higher than the 4.6% that thepermanent statutory formula would have provided. Increasing the proportion of housing costs that are reimbursedas part of an effort to completely eliminate "out-of-pocket" housing costs not coveredby military housing allowances by FY2005. Increasing reimbursements for a wide range of movingcosts. Authorizing officer accession bonuses for some officercandidates up to $60,000. Increasing the maximum age to commission college ROTCscholarship recipients to from 27 to 31. Creating a new re-enlistment bonus of up to $30,000 in U.S.savings bonds for those with critical skills who agree to serve at least six additionalyears of active duty. Allowing military personnel with critical skills to transfer upto 18 months of Montgomery GI Bill benefits to family members in return for servingat least another four years. In a matter with major implications for both government-wide and DOD funding that is of great interest to military retirees, the FY2002 defense authorization act, forthe third year in a row, did not repeal a statute that requires that those military retireeswho receive VA disability compensation must take an offset to their militaryretirement that is equal to their VA disability payment (the prohibition against'concurrent receipt' of benefits). DOD opposes any change in this prohibition,arguing that the two programs - military retirement and VA disability payments -were intended for different groups, veterans who are eligible for retirement andveterans who are eligible for disability payments but not for retirement. To ensurethat military retirees with service-connected disabilities do not receive less thandisabled veterans who are not eligible for retirement, the current law permits disabledveterans to choose the larger of the two payments, as long as the veteran waives theequivalent amount of retirement compensation. Although both the House and the Senate version of the authorization act eliminated this offset and permitted veterans to receive full benefits under bothprograms, the houses differed in their approach to funding the program. The Senate adopted an amendment, which would have provided that concurrent receipt wouldbe considered an entitlement program that would go into effect on October 1, 2002. That change would have triggered an additional $3 billion in mandatory spending in2002 and $40 billion in spending over the next ten years as well as requiring thatDOD provide an additional $1 billion annually. Under the House version, thisauthorization of "concurrent receipt" of the two benefits would have becomeeffective only if the President submitted a budget proposal to offset the mandatoryspending costs of the change in law, and if Congress approved legislation to providesuch an offset. (90) By accepting the House version,Congress guaranteed thatconcurrent receipt would not take place unless the Administration reversed itsconsistent opposition. Possibly as partial recompense, Congress expanded theeligibility for some severely disabled military retirees. Social Issues. (This section was prepared by David Burrelli.) Social issues are frequently matters of debate in thedefense authorization process. This year it was speculated that there could be effortsto revisit a number of issue including the current policy under which, in all servicesexcept the Marine Corps, males and females receive basic training together. Likewise, Congress required last year that DOD notify congress in advance of anyplans to change the current policy of assigning only males to duty on submarines. Inaddition, according to press accounts, a panel reviewing the Uniform Code ofMilitary Justice had concluded that sodomy between consenting adults should not beprohibited under the code. Despite that speculation, these issues were not consideredduring this legislative session. However, efforts to expand the availability ofabortion services to members of the armed forces and their dependents appear to bea subject of annual debate. Congressional Action. On September 25, by a vote of 217-199, the House rejected an amendment offered by Representative Sanchez that would have allowedDOD facilities overseas to perform privately-funded abortions for military personneland their dependents. The Administration's FY2002 budget does not reflect decisions on major weapons programs, but is largely a continuation of previous plans. This leavesunresolved two key budget issues: (1) how much is needed for weapons procurementover the next several years, and (2) whether some programs should be terminated tofree up money for leap-ahead technologies that would support a transformation indefense capabilities. Aviation Forces. (This section was prepared by [author name scrubbed].) Air Force Transformation. Many airpower advocates argue that the Air Force's emphasis on long range precision strikeand stealth technology best reflects the goals of defense transformation. The debateabout the Air Force's transformation approach has centered on 1) whether emergingcapabilities will enable air forces to "halt" enemy ground forces single-handedly,without relying on U.S. ground forces for followup; and 2) what is the most effectivebalance between shorter-range combat aircraft (e.g. F-22, Joint Strike Fighter) andlonger-range combat aircraft (B-52s, and B-2s) in light of the threats posed bysurface-to-air missiles, ballistic missiles, and weapons of mass destruction. Combat Aircraft. Currently three theater-range combat aircraft modernization programs are in procurement ordevelopment - the Air Force F-22, the Navy F/A-18E/F, and the multi-service JointStrike Fighter (JSF). (See CRS Issue Brief IB92115.) The central issue for policymakers is whether DOD can afford to pursue all three programs simultaneously, anissue raised by President Bush himself in an impromptu discussion with reporters,and whether threats today or in the future would justify the need for these threeprograms. Some advocates of defense transformation argue that DOD is placing too much emphasis on short range combat aircraft, like the JSF, at the expense of long rangecombat aircraft like the B-2 bomber. Most recently, however, one of the panelscontributing to the Administration's defense policy review strongly recommendedgoing ahead with the JSF as well as with other planned theater aircraft programs. Congressional Action. Authorization and appropriation conferees both matched the administration's request for JSF funds despite an initial $250 million cut proposed by the Senate Armed Services Committee in expectation of a likely delayin the selection of the final contractor. Funding at the level of the request keeps theR&D program on track but both committees expressed concern about industrial baseissues. Both conference committees also matched the F-22 funding requests, and theauthorizes removed the $20 million legislative cost cap on F-22 EngineeringManufacturing development designed to control costs. Long-Range Bombers. The proposal in the Administration's FY2002 budget amendment to reduce the number of B-1s inservice from 93 to 60 and to consolidate operations at two, rather than the currentfive bases, which would have eliminated the B-1 mission of the National Guard. This proposal was ultimately overturned by legislators in states where B-1 operationswould have been reduced. (See CRS Report RS20859 .) Restarting B-2 production,retiring the B-1 entirely, and embarking on a new bomber program was alsodiscussed. Congressional Action. Both the House and the Senate Armed Services Committees expressed concern about the Administration's proposal to consolidatebasing of B-1s, and restored funds to the Air National Guard to maintain its B-1capabilities. To restore their B-1 role, appropriations conferees provided the AirNational Guard with an additional $100 million in O&M funding . Unmanned Aviation Systems. Unmanned aerial vehicles (UAVs) and unmanned combat aerial vehicles (UCAVs)are seen as useful in performing missions too dangerous or too onerous for mannedaircraft, potentially at less cost. The high altitude, long endurance Global Hawksurveillance UAV will augment and may replace the U-2, and UCAVs in researchand development (R&D) may eventually augment or replace numerous combataircraft. The precise capabilities of these unmanned systems are still unclear as is thepace at which they will be developed. Many observers predict that the PredatorUAV's successful performance and the deployment of the prototype Global Hawkin the war in Afghanistan will lead to the acceleration of many UAV programs. (See CRS Report RL30727 and CRS Report RL31014.) Air Mobility. A 2001 Air Force study found a significant shortfall in the long-range airlift fleet's ability to meet the currentnational military strategy. Ongoing operations in Afghanistan - with its long-rangedeployments - raise this issue anew. The best way to resolve a shortfall - eitherthrough procurement of additional C-17s, refurbishing some C-5s, or increased useof commercial variants - continues to be debated. Increased use of commercialvariants is also being explored (See CRS Report RS20915.) Replacing aging KC-10and KC-135s that provide aerial refueling, a key capability for expeditionaryoperations, was also addressed this session. Recapitalizing this fleet is potentially a$50 billion dollar endeavor. (See CRS Report RS20941.) Congressional Action. Both committees endorsed the Administration's request for an additional 15 C-17 aircraft in FY2002, and also added a provision authorizingthe Secretary of the Air Force to enter into another multi-year contract. Section 8159of the P.L. 107-117 gives DOD the authority to lease 100 commercial Boeing 767aircraft and convert them into replacements for the oldest KC-135 tanker aircraft,using an operating lease and O&M rather than procurement funds to obtain theaircraft. Providing this authority generated controversy in Congress and theadministration partly because some (including the Administration) argue that theoperating lease would be far more expensive than buying the aircraft, and partlybecause some suggest that alternatives have not been adequately explored. V-22 Tilt-Rotor Aircraft. Another controversial aviation program is the V-22 tilt-rotor aircraft (that takes off and landslike a helicopter but flies like an airplane). The centerpiece of Marine Corps plans totransport forces within theaters, this program is also designed to satisfy Air Forcespecial operations forces needs. The program has been blemished by four crashes,(three of which resulted in crew fatalities), as well as recent findings by DOD'sInspector General that V-22 maintenance records were falsified. Critics havesuggested cancelling or drastically curtailing the V-22 program. In December 2001,Undersecretary of Defense Aldridge approved the resumption of V-22 testing at thesame time expressing his concerns regarding the program. Congressional Action. Reflecting congressional concerns about the technical maturity of the program, authorization conferees cut one aircraft from the Navy's 12aircraft procurement request and deleted Air Force procurement funds. Appropriation conferees reduced Navy procurement by three aircraft rather than theone cut by the authorizes. The appropriators also eliminated Air Force procurementfunds, but increased Air Force RDT&E funding by $226 million to purchase twodevelopment aircraft. Both committees cut $100 million from Navy. Naval Forces. (This section was prepared by [author name scrubbed].) Naval Transformation. Navy transformation plans center on the concept of network-centric warfare (NCW), whichentails using computers, data links, and networking software to tie naval personnel,ships, aircraft, and installations into highly integrated networks. The defensecommittees have closely followed certain Navy programs for implementing NCW,particularly the Cooperative Engagement Capability (CEC) program for ship airdefense and the Navy-Marine Corps Intranet (NMCI) program for tying togetherNavy and Marine Corps shore installations. Some Members of the defense oversightcommittees have also expressed some interest in other proposals for navaltransformation, such as the "Streetfighter" concept for building smaller ships to fightin heavily-defended littoral waters. Some analysts have suggested that turning tothese types of smaller (and less expensive) ships could help relieve the pressure tomaintain the current size of the fleet. (See CRS Report RS20851 and CRS Report RS20557 .) Congressional Action. The conference report of the defense authorization bill permits the Navy to proceed with the NMCI project after meeting certain testingrequirements. The provision also requires the Navy to submit to Congress a reporton the scope and status of NMCI testing, and requires GAO to study the impact ofNMCI implementation on the rate structure of naval shipyards and other repairdepots. The conferees expressed concern about delays in implementing the programand the resulting shortage of data about the viability and performance of NMCI. Size of the Navy. The Bush Administration's 2001 Quadrennial Defense Review (QDR), submitted to Congresson September 30, 2001, did not make any substantial changes to the ClintonAdministration's plan for maintaining a Navy of about 310 ships, including 12aircraft carriers, 116 major surface combatants, 55 attack submarines, 12 amphibiousready groups. The 2001 QDR report did note, however, that as DOD'stransformation effort matures, "DOD will explore additional opportunities torestructure and reorganize the Armed Forces." Some analysts, noting the pace of Navy operations in recent years, have questioned whether a 310-ship fleet is adequate. They and some Navy officials havecalled for increasing the planned size of the Navy to about 360 ships, including 15aircraft carriers, about 135 major surface combatants, 60 to 70 attack submarines, and14 amphibious ready groups. Other analysts have questioned the need formaintaining forward deployments of carriers and other naval forces, particularly inthe Mediterranean Sea. They have advocated reducing naval-forward presencerequirements in this region, which could lead to a reduction in the planned size of theNavy below 310 ships. The Bush Administration echoed concerns raised by the defense committees in recent years about the rate of Navy ship procurement, which has been about 6 shipsper year since the early 1990s, less than the average of about 9 ships per year(assuming an average 35-year service life) that would be needed over the long run tomaintain a 310-ship fleet (the so-called steady-state replacement rate). An evenhigher procurement rate of 10 to 12 ships per year (a "catch-up rate") may berequired to eliminate the backlog of deferred ship procurement that has accumulatedrelative to the steady-state rate since the early 1990s. A similar situation existsregarding the rate of naval aircraft procurement. (See CRS Report RS20535.) Ship Financing Alternatives. In the last two years, some Members of the defense oversight committees have begun toexplore alternative ways to finance ship procurement. Under longstanding policy,known as the "full funding" policy, the full cost of a ship is appropriated at one time,even though funds may be obligated and expended over several years. Alternativesto full funding include incremental funding, which has been approved for the LHD-8amphibious ship, and advance appropriations (which can be thought of as alegislatively locked-in form of incremental funding), which some Navy officialsproposed last year. Cost Overruns and Schedule Delays. Various ships procured in previous fiscal years have experienced cost overrunstotaling at least $2.4 billion. The Navy requested $800 million in FY2002 to coverthe portion of these overruns that the Navy says must be covered that year if work onthese ships is to continue. Congressional Action. The defense authorizers and appropriators both approved about $725 million in FY2002 for prior year cost overruns, reducing the request by$75-million reduction overruns on previously appropriated LPD-17 class amphibiousships. New DD(X) Future Surface Combatant Program. On November 1, 2001, in the midst ofcongressional deliberations on the defense budget, the Navy announced that it wasreplacing the DD-21 destroyer program with a restructured program, called DD(X),for developing a family of surface combatants (rather than a single destroyer incoming years. Under the Navy's plan, the two industry teams that were competingfor the DD-21 program would now compete for the DD(X) program, with a winningteam to be selected on April 30, 2002. The DD(X) program raises potential issuesfor Congress regarding the rationale for ending the DD-21 program, the potentialimpact of the DD(X) program on the shipbuilding industrial base, the Navy'sproposed acquisition strategy for the DD(X) program, and future Navy capabilities. The replacement of the DD-21 program with the DD(X) program also created an immediate issue regarding the treatment of the $643-million request for FY2002funding for research and development work on the DD-21 program. The Navy, inbriefings to Congress, explained that the initial DD(X) ship would use many of thesame technologies as the DD-21 and that all of the $643 million requested for theDD-21 program in FY2002 would be needed for the new DD(X) program. Congressional Action. Because the authorization conferees did not have specifics about the DD(X) program, the conferees recommended a $50-millionreduction in the $643-million funding request "resulting from the delay in thedown-select to a future destroyer detail design;" the conferees plan to review theNavy's decision to restructure the DD-21 program when more information isavailable. (91) To protect the destroyer industrialbase, the authorization conferees callon the Secretary of the Navy to "include procurement of three Arleigh Burke[DDG-51]-class destroyers in the fiscal year 2003 budget request to attain aneconomic rate of production and consider options for maintaining and transitioningthe industrial base, including second tier suppliers, to future destroyer production." (92) Echoing the authorizers concerns, the appropriation conferees reduced the$643-million DD-21/DD(X) research and development funding request by $125million. Submarines. The Bush Administration's amended FY2002 budget requested $116 million in R&D andprocurement funding to begin converting two Trident ballistic missile submarines(SSBNs) into cruise-missile submarines (SSGNs), and additional funds to retire anddismantle two other Trident SSBNs. Congressional supporters of the SSGNconversion program were interested in increasing the conversion funding so as tosupport a 4-boat SSGN conversion program. Congressional Action. The authorization conferees' increase of $66 million is intended to support a 4-boat conversion program but falls short of the $163-millionincrease that the Navy considers the minimum for such a program. The appropriationconferees provided a $324 million increase, more than needed for a faster conversionof four boats. (See CRS Report RS21007 ). Ground Forces. (This section was prepared by Edward Bruner.) Army Transformation. The Army's current transformation plans were reflected in the amended FY2002 budget. Thegoal is to build a new "Objective Force" centered on a Future Combat System to bedeveloped over the next ten years, that would be fully fielded by 2020. Morecontroversial may be the size of the Army's "Legacy Force", the current mix of lightand heavy forces. The Army plans some modernization and recapitalization of this"Legacy Force" to maintain combat readiness. In the meantime, to meet the need forforces that would be both mobile and yet lethal enough to survive in a high-intensity,fast-breaking conflict that could arise in many regions - a gap in the current mix offorces - the Army is creating an "Interim Force" of 6 to 8 Interim Brigade CombatTeams (IBCT) that would be deployable in C130 aircraft. (See CRS Report RS20787 .) Congressional Concerns. Some have questioned whether a major effort to transform ground forces should be a prioritytoday, given the current superiority of U.S. military forces and a perceived low-levelof conventional ground combat threats. In particular, there is great concern thattransformation be properly balanced with current readiness and recapitalization. Evenif future dangers justify a transformation, has the Army picked the right path? Perhaps it need not cover the entire spectrum of combat capabilities, leaving moretasks to other services. Perhaps the Objective Force should create less stress onairlift assets by relying more on sealift. Some have suggested that a radicalreorganization of current units could yield a more agile ground component for jointstrike forces now, long before any Future Combat System is fielded. In general,capabilities envisioned for the Objective Force will have more utility in situationslike Afghanistan than the current legacy force. Affordability is a second major question. Critics have suggested that the transformation plan pays for three separate armies at once: the Legacy, Interim, andObjective Forces. The Army's counter argument is that the overall size of theArmy's force structure remains constant throughout the transformation. Yet, theArmy Chief of Staff testified that Army plans require a sustained increment of $10billion annually beyond its average post-Cold War expenditures for R&D andprocurement. In FY2002, Congress supported the Army's transformation efforts. Weapon Systems Issues. A key aviation component of the future Objective Force, the Army's Comanche (RAH-66),an armed reconnaissance helicopter, is being designed with stealth and otheradvanced features, and will replace aging helicopters. (See CRS Report RS20522 .)The Army received full funding for two systems scheduled for fielding in FY08 - theComanche helicopter, and the more controversial (because of its weight) 40-tonCrusader, which is designed to improve fire support in the Legacy Force. The Army also received its request for its largest effort to recapitalize the Legacy Force, the $1 billion to rebuild and upgrade the current fleets of M1Abramstanks and M2 Bradley fighting vehicles. Some of that money is dedicated to"digitizing" the battlefield in order to enable systems to operate in computer nets, animprovement that the Army eventually wants to include in all its systems in theObjective, Interim, and Legacy forces. A $4 billion program over six years, theArmy's new Light Armored Vehicle III - a 20 ton wheeled platform - is intended tobe the linchpin for equipping the new IBCTs of the Interim Force. (This section was prepared by Jack Moteff.) In its June 27 budget amendment, the Bush Administration requested $47.4 billion in research and development for the Department of Defense (DOD) inFY2002, almost $7 billion more than the 2001 level. About half of that increase wasslated for missile defense, however. Although the Bush Administration proposedincreasing DOD's research and development by $20 billion over the next 5 years, the$8.8 billion requested for DOD's science and technology (S&T) part of the request(i.e. basic and applied research and advanced technology development), traditionallya congressional concern, was slightly below the $9 billion provided in FY2001. TheAdministration stated that it wants to redirect investments away from legacy systemsand toward more forward-looking systems such as lasers, nonotechnology,space-based systems, miniaturization, and unmanned combat platforms (See CRS Issue Brief IB10063, Defense Research: DOD's Research, Development, Test andEvaluation Program , by John Moteff.) Table 15 shows the total obligational authority for RDT&E over the last three years, the amended FY2002 request, and the enacted version of the defenseauthorization and appropriations bills. Congressional Action. Congress authorized $46.5 billion for research and development, with just under $9.0 billion of that going toward S&T. This includedthe Senate's proposal to reduce BMDO's RDT&E funding by $1.3 billion to set upa fund from which the President may support either ballistic missile defense RDT&Eor other activities to combat terrorism. Congress appropriated $49.0 billion forRDT&E, with almost $10 billion going toward S&T. The final appropriation actincludes $113 million for RDT&E within a new Counter-terrorism Transfer Fund,which supports antibiotics and vaccines development, research on unconventionalnuclear threats, post-biological-exposure therapeutics, and information assuranceattack warning/response. Table 15. Department of Defense RDT&E: TotalObligational Authority (in millions of dollars) Source: FY2000 to FY2002 figures based on Department of Defense Amended Budget, Fiscal Year 2002 RDT&E Programs (R-1), June 2001. FY1999 figures fromDepartment of Defense, Budget for Fiscal Year 2000, RDT&E Programs (R-1),February 2000. Totals may not add due to rounding. a. Includes only RDT&E funding for the Ballistic Missile Defense Organization (BMDO). Does not include procurement and military construction. b. Includes funds for Developmental and Operational Test and Evaluation. c. Does not include the additional funds and rescissions associated with the FY2001Supplemental P.L. 107-20 . The bill added $5 million to the Army, $128 millionto the Navy, $275.5 million to the Air Force, and $84.1 million to DefenseAgencies RDT&E accounts. The bill also rescinded $7 million from theDefense Agencies account. d. Includes the $1.3 billion reduction, some of which the President may decide to putback into BMDO's RDT&E program e. Does not include $150 million in general reductions associated with managementreform initiatives allocated to Title II RDT&E authorizations. Although thesereductions were allocated for each Service and across agencies, and are to beallocated without prejudice, their impact at the budget activity level is not yetknown. Nor does this figure include the $1.3 billion reduction in BMDOfunding, since it is not yet known how that reduction will affect budget activity. Note: this figure also does not include the $53 million reduction in BMDOfunding the authorization report suggested be taken as a result of Congresstargeting that amount for the Arrow program. The BMDO line item thatincludes this program accounted for those targeted funds. f. Does not include the $113 million in additional RDT&E funding appropriated tothe Counter-terrorism Transfer Fund, since it is not specified to which Serviceor agency all of those funds should be transferred. The conference report doesspecify $30 million of this, however, goes to DARPA. The DARPA figure inthis column does include this addition. g. Does not include a net $46.5 million in general reductions associated withmanagement reform initiatives and other adjustments made in the appropriationsconference report. Although the general reductions were allocated by Serviceand across agencies, and are to allocated without prejudice, their impact at thebudget activity level is not yet known. Cooperative Threat Reduction. (This section was prepared by Amy Woolf.) Established by Congress in 1991 afterthe collapse of the Soviet Union, the Nunn-Lugar Cooperative Threat ReductionProgram (CTR) is dedicated to help Russia and the former Soviet republicssafeguard, store, or destroy their nuclear weapons. After a comprehensive review, theBush Administration requested $403 million, slightly below the 2001 level. Congressional Action. Both the final defense authorization and appropriations acts approve the Administration's request for DOD's CTR programs, includingfunding for construction of a chemical weapons destruction facility in Russia that hadbeen withheld for the past two years. The emergency supplemental appropriationsbill transferred $30 million from existing CTR accounts to the State Department, tohelp fund programs designed to reduce the threat of biological weapons proliferationfrom Russia. The authorization conferees provide $776.9 million for Department of Energy's defense nuclear non-proliferation programs, many of which are geared to improvingthe security and control over nuclear materials in Russia and other former SovietRepublics, restoring the program to its 2001 level, and providing$100 million morethan requested by the Administration. A January 2001 report to DOE, authored byformer Senator Howard Baker and Lloyd Cutler, recommended sharp increases infunding for these programs, calling the proliferation risks created by nuclearmaterials in the former Soviet Union the "greatest unmet national security need" forthe United States. Congress also increased funding for two DOE programs designedto provide alternative employment for nuclear weapons scientists in the former SovietUnion, as did the emergency supplemental appropriations bill reflecting growingconcerns about proliferation from Russia and the threat of terrorist use of WMD. Chemical Weapons Destruction Program. (This section was prepared by [author name scrubbed].) Thisprogram is designed to carry out the congressional mandate, stated in 1985, to destroyobsolete U.S. chemical weapons (CW) stockpile. The chief issues in this program areescalating costs, public concerns about methods of destruction, and whether theprogram will meet its 2007 deadline. The Chemical Weapons Convention, ratifiedby United States in 1997, mandated that destruction be completed by 2007, with apossible extension of five years if approved by the Organization for the Prohibitionof Chemical Weapons. Incineration or neutralization facilities are being constructedat each depot where the weapons are currently stored. (See CRS Issue Brief IB94029,The Chemical Weapons Convention: Issues for Congress.) Congressional Action. Congress appropriated the $1.1 billion requested by the Administration for the Chemical Weapons Destruction program, which is the samelevel as in the previous year. Base Closure and Realignment. (This section was prepared by David Lockwood.) An important issue for Membersin the 107 Congress was whether or not to authorize new rounds of military baseclosures. (93) For the past four years, DOD hassought congressional approval for oneor two more rounds of base closures, but to no avail. Although most Members ofCongress acknowledge the need for additional base closures, Members have beenreluctant to authorize additional rounds because of continued resentment overPresident Bill Clinton's controversial 1995 intervention in the closing of McClellanAir Force Base in California and inherent concern for the economic and socialdislocations that local communities would face. By FY2002, DOD completedimplementation of the 1988, 1991, 1993, and 1995 rounds as scheduled. About 451installations and facilities have been closed or affected in some fashion during thepast 12 years. On August 3, 2001, the Administration submitted a proposal to Congress for another round of base closures in FY2003, as well as a new "Efficient FacilitiesInitiative" (EFI) designed to share facilities and land on some military bases. TheAdministration's proposal would have enhanced the role of the Secretary of Defensecompared to the procedures used in previous base closures. The EFI was awide-ranging proposal that would permit base commanders to waive currentregulations and statutes and contract with public or private entities for use of militaryfacilities and services in return for payments that would be deposited in anInstallation Efficiency Project Fund that would be available to the Secretary ofDefense to use at his discretion. Congressional Action. The House opposed any new round of closures and the Senate supported another round. The impasse was finally resolved when theauthorization conferees reached a compromise that authorized a new round butdelayed the date to 2005. The authorizers also basically extended the procedures usedin previous rounds but as part of the compromise, made it more difficult for the BaseClosure Commissioners to add bases to those recommended by the Administration;any additions would require approval by a 'super-majority' of at least seven of thenine commissioners. The authorizes also permitted DOD to extend the pilot programfor alternative uses of military bases but with more restrictions than proposed by theDepartment. Competitive Sourcing. (This section was prepared by Valerie Grasso.) The Bush Administration promised to mount ambitious efforts to improve efficiencyby relying on the method that DOD also pursued under the Clinton Administration- competitive sourcing - where private companies can compete with governmentorganizations to perform work. Conducted under the rules established by OMBCircular A-76, the program remains controversial because estimates of savings areconsidered problematic, and the economic, social and political ramifications fromcuts in government jobs are painful.(See CRS Report RL30392, DefenseOutsourcing: The OMB Circular A-76 Policy .) Congressional Action. The FY2002 Department of Defense Appropriations Act ( H.R. 3338 ) prohibits the conversion of certain DOD activities orfunctions to contractor performance, if the activities are performed by ten or morecivilian DOD employees, until a "most efficient and cost-effective analysis" iscompleted and certified to the congressional appropriations committees (see Section8014). The DOD appropriation conferees also reduced O&M funds by $25 millionto reflect their belief that the schedule for studies assumed by the Administration wasoverly optimistic. (94) Shipbuilding Industrial Base. (This section was prepared by [author name scrubbed].) Until recently, the sixprivate-sector shipyards that build the Navy's major ships were owned by threeorganizations - General Dynamics Corporation (GD), which owned three of theyards, Northrop Grumman Corporation (NOC), which owned two of them, andNewport News Shipbuilding (NNS), which was an independent, publicly tradedshipbuilding company. In the Spring of 2001, both GD and NOC made offers to buyNNS. Implementing either merger proposal would consolidate ownership of the sixyards under two organizations and very likely end a process of consolidation in theownership of these yards that began in 1995. The Department of Defense and theDepartment of Justice reviewed both merger proposals for several months. OnOctober 23, 2001, the two departments announced that they would oppose GD's offeron the grounds that it would reduce competition and innovation in navalshipbuilding, but would not oppose NOC's Northrop's offer. NOC completed itsacquisition of NNS on November 30, 2001. The two competing merger proposalsraised issues for Congress regarding the potential savings they would generate andtheir potential impact on competition in Navy ship acquisition, on the shipyards'employment levels, and on the shipyards' strength in the political process. (See CRS Report RL30969.) Navy Live-Fire Testing at Vieques. (This section was prepared by [author name scrubbed].) On June14, 2001, the Bush Administration announced that it had decided to end militarytraining operations at the U.S. naval training range on the small Puerto Rican islandof Vieques by May 2003. The Bush Administration's new plan superceded a January2000 agreement between President Clinton and the previous Governor of PuertoRico, Pedro Rossello, that called for holding a referendum on Vieques (firstscheduled for November 2001, then rescheduled for January 2002) in which voterscould choose to either end the military's use of the range by May 2003 or allow it tocontinue indefinitely beyond that point. To implement the Clinton-Rossello plan,Congress in 2000 approved $40 million in assistance funding for Vieques and otherlegislation as part of P.L. 106-246 ( H.R. 4425 ) and P.L. 106-398 ( H.R. 4205 ). The Bush Administration had previously supported theClinton-Rossello plan as implemented by Congress, but the new Governor of PuertoRico, Sila Maria Calderon, who took office in January 2001, did not and has insteadworked toward an immediate end to the military training operations on the island. Congressional Action . The conference report on the defense authorization bill contains a provision (Section 1049) that (1) cancels the requirement for holding theJanuary 2002 referendum; (2) authorizes the Secretary of the Navy to close theVieques range if the Secretary certifies that equivalent or superior training facilitiesexist and are immediately available; (3) requires the Secretary, in making thisdetermination, to take into account the views of Navy and Marine Corps leaders; and(4) transfers the lands to the Department of the Interior if the range is closed. (See CRS Report RS20458 , Vieques, Puerto Rico Naval Training Range: Background andIssues for Congress .) National Security Space Programs. (This section was prepared by Marcia Smith.) Today,approximately $14.5 billion per year is spent on national security space activities (foran overview, see CRS Issue Brief IB92011, U.S. Space Programs: Civil, Military,and Commercial , by Marcia Smith). Concern about how DOD and the intelligencecommunity manage and execute space programs led to creation by Congress of acommission, chaired by now Secretary of Defense Donald Rumsfeld, to assessnational security space program management. In May 2001, Secretary Rumsfeldannounced a number of management changes in the Air Force and DOD toimplement many of the Commission's recommendations. Recommendations madeby two other congressionally created commissions--one on the National Imageryand Mapping Agency (NIMA); the other on the National Reconnaissance Office(NRO)--may also impact the national security space program. Among the national security space programs that received attention during the FY2002 budget cycle were space control (the means to deter and defend againsthostile acts directed at U.S. space assets, and against the uses of space hostile to U.S.interests); space-based weapons (lasers or kinetic energy weapons) for missiledefense; and a new early warning satellite system consisting of two sets of satellites,SBIRS-High and SBIRS-Low. Both SBIRS programs have been the subject ofmanagement and technological readiness concerns. SBIRS-Low was transferredfrom the Air Force to BMDO, while SBIRS-High remains an Air Force program. Congressional Action . Although the House and Senate sought to codify some of the recommendations of the Space Commission, the final version of the FY2002DOD authorization bill requires only reports to Congress on DOD's actions toimplement the Commission's recommendations. Congress approved the full requestof $33 million for space control in the final versions of the appropriations andauthorization bills. For space-based weapons, the authorizers fully funded the $165million requested for space-based laser (SBL) development and the $20 millionrequested for kinetic energy weapons, but the appropriators cut the SBL request by$120 million, and cut kinetic energy weapons by $10 million. Although SBIRS-Highand SBIRS-Low were both almost fully funded in the authorization bill, theappropriations bill cut all $94 million requested for procurement for SBIRS-High butincreased the $405 million in RDT&E funding for that program by $40 million. ForSBIRS-Low, the appropriations bill cut the entire $385 million requested but createda new line item funded at $250 million which the Secretary of Defense may chooseto spend on SBIRS-Low or development of other sensor technologies. Intelligence. (This section was prepared by Richard Best.) Most of the funding for the nation's intelligence effort isprovided in national defense authorization and appropriations bills. The budget ofthe Central Intelligence Agency, which is separate from the Defense Department, is,from a practical standpoint, overseen by the two intelligence committees, but isincluded in various parts of the defense budget to preclude public disclosure. The work of intelligence agencies that are part of the Defense Department, including the Defense Intelligence Agency, the National Security Agency, theNational Reconnaissance Office, and the National Imagery and Mapping Agency, isoverseen by armed services and defense appropriations committees as well as by thetwo select intelligence committees. Budgetary allocations for specific intelligenceprograms are usually classified and discussed only in separate annexes to committeereports that are not available to the public, though issues sometimes may becomematters of open debate in Congress. (See CRS Issue Brief IB10012, IntelligenceIssues for Congress , by Richard A. Best, Jr.). Congressional Action. Changes to specific programs made by the authorizing committees are covered in a separate, classified annex to their reports. Radiofrequency Spectrum for DOD. (This section was prepared by Lennard Kruger and Linda K.Moore.) The Department of Defense uses various portions of the radiofrequencyspectrum to support its operations and activities. Many in the wirelesscommunications industry would like to use part of this spectrum for deployment ofa next generation wireless service known as "3G". That portion of the spectrum -the 1755-1850 MHz - is currently used by DOD for such applications as satellitesystems, precision guided munitions, tactical radio relay communication systems, aircombat training systems, targeting, intelligence, and other communications systems. Citing a shortage of available spectrum for 3G, the Clinton Administration directed the two agencies charged with management of the spectrum - the FederalCommunications Commission for commercial users and the NationalTelecommunications and Information Administration for federal government users- to identify suitable 3G spectrum for commercial services by July 2001, and toauction licenses to competing applicants by September 30, 2002. On June 26, 2001,however, FCC Chairman Michael Powell recommended to Secretary of CommerceDonald Evans the extension of this deadline so that other ways to make additionalspectrum available for advanced wireless services could be considered. One option is to relocate DOD to other frequency bands and auction the 1755 - 1850 MHz band for commercial use. To meet requirements in the FY1999 andFY2000 DOD's authorization acts, DOD must be reimbursed for relocation costs andprovided with spectrum that has comparable technical capabilities so there is no lossof mission capability in case of any transfer to the civilian sector. (See CRS Report RL30829, Radiofrequency Spectrum Management: Background, Status, and CurrentIssues, and CRS Report RS20993 , Wireless Technology and Spectrum Demand:Third Generation (3G) and Beyond ). DOD now contends that full migration to another frequency band could take many years because satellites currently in orbit cannot be reprogrammed to operateon another frequency. For that reason, they argue that relocation could not occuruntil 2010 for non-space systems, and 2017 for satellite control systems, assumingthat DOD also received alternative, comparable spectrum width and compensation.Thus far, no comparable bandwidth for DOD has been proposed. In a new report,GAO concluded that more analysis is needed before making decisions about the1755-1850 MHz band (GAO-01-795, August 2001). Congressional Action. Neither the House nor the Senate Armed Services Committees included any language about the issue of relocating DOD to anotherfrequency. H.Con.Res. 83 (Nussle) A concurrent resolution establishing the congressional budget for the UnitedStates government for FY2002, revising the congressional budget for the UnitedStates government for FY2001, and setting forth appropriate budgetary levels foreach of fiscal years 2003 through 2011. Reported by the House Budget Committee( H.Rept. 107-26 ), March 23, 2001. Passed the House (222-205), March 28, 2000. Passed the Senate (65-35), April 6, 2001. Conference report filed ( H.Rept. 107-55 ),May 8, 2001. Conference report passed the House (221-207), May 9, 2001, and theSenate (50-48), May 10, 2001. P.L. 107-20 , H.R. 2216 / S. 1077 An original bill making emergency supplemental appropriations for the fiscalyear ending September 30, 2001, and for other purposes. H.R. 2216 reported by the House Committee on Appropriations ( H.Rept. 107-102 ), June 19,2001; passed the House (223-205), June 20, 2001. S. 1077 reported bythe Senate Committee on Appropriations ( S.Rept. 107-33 ), June 21, 2001; passedSenate July 10. Conference report ( H.Rept. 107-148 ) passed the House and theSenate on July 20, 2001. Signed into law July 24, 2001. P.L. 107-38 , H.R. 2888 Making emergency supplemental appropriations for fiscal year 2001 foradditional disaster assistance, for anti-terrorism initiatives, and for assistance in therecovery from the tragedy that occurred on September 11, 2001, and for otherpurposes. Passed by the House and Senate on September 14, 2001. P.L. 107-40 , S.J.Res. 23 Authorizing the use of United States armed forces against those responsible forthe recent attacks launched against the United States. Passed House and Senate onSeptember 14, 2001. H.J.Res. 79 / P.L. 107-97 Making continuing appropriations for the fiscal year 2002 through December15, 2001, and for other purposes. Signed by the President on December 21, 2001. H.R. 2586 (Stump) A bill to authorize appropriations for FY2002 for military activities of theDepartment of Defense, to prescribe military personnel strengths for FY2002, and forother purposes. Ordered to be reported by the House Committee on Armed Services,August 1, 2001; reported ( H.Rept. 107-194 ) on September 4. Considered by the fullhouse on September 20, 24, and 25, 2001. Passed the House on September 25, 2001(398-17). S. 1438 and S. 1416 (Levin) A bill to authorize appropriations for FY2002 for military activities of theDepartment of Defense, for military construction, and for defense activities of theDepartment of Energy, to prescribe personnel strengths for such fiscal year for theArmed Forces, and for other purposes. S. 1416 ordered to be reportedby the Senate Committee on Armed Services on September 7, 2001; reported( S.Rept. 107-162 ) on September 12, 2001. Senate took up S. 1438 (anamended version of S. 1416 ) on September 21, 24, 25, 26, and October2. S. 1438 passed by the Senate with amendments on October 2, 2001.House took up S. 1438 , substituted the text of H.R. 2586 ,and considered and passed the bill on October 17, 2001. Conference agreementreported on December 12 ( H.Rept. 107-333 ), and passed by the House on December13 (382-40) and the Senate (96-2). President signed the bill into law ( P.L. 107-107 )on December 28, 2001. H.R. 3338 (Young) A bill making appropriations for the Department of defense for the fiscal yearending September 30, 2002, and for other purposes. Ordered to be reported by theHouse Committee on Appropriations on November 19, 2001 ( H.Rept. 107-298 ).Passed House on November 28, 2001 (406-20). Senate took up H.R. 3338 , and adopted an amendment in the nature of a substitute and reported out thebill on December 5 ( S. Rept 107-109 ); it passed the Senate on December 7, 2001 byvoice vote. Conference report was filed on December 19, 2001 ( H.Rept. 107-350 ). Approved by the House (408-6) and the Senate (94-2) on December 20, 2001. CRS Report 95-387 . Abortion Services and Military Medical Facilities , by [author name scrubbed]. CRS Report RS20859 . Air Force Transformation: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL31010 . Appropriations for FY2002: Military Construction , by [author name scrubbed]. CRS Report RS20787 . Army Transformation and Modernization: Overview and Issues for Congress , by [author name scrubbed]. CRS Issue Brief IB96022. Defense Acquisition Reform: Status and Current Issues , by [author name scrubbed]. CRS Report 98-756 . Defense Authorization and Appropriations Bills: A Chronology, FY1970-2001 , by Gary K. Reynolds. CRS Report RL30976(pdf) . Defense Budget for FY2002: Data Summary, Final Version , by Mary Tyszkiewicz. CRS Report RL30002(pdf) . A Defense Budget Primer , by Mary Tyszkiewicz and [author name scrubbed]. CRS Report RL30392. Defense Outsourcing: The OMB Circular A-76 Program , by Valerie Grasso. CRS Report RL30639(pdf) . Electronic Warfare: EA-6B Aircraft Modernization and Related Issues for Congress , by [author name scrubbed]. CRS Issue Brief IB87111. F-22 Raptor Aircraft Program , by [author name scrubbed]. CRS Report RL30113 . Homosexuals and U.S. Military Policy: Current Issues , by [author name scrubbed]. CRS Issue Brief IB10012. Intelligence Issues for Congress , by Richard A. Best. CRS Report RL30563 . Joint Strike Fighter (JSF) Program: Background, Status, and Issues , by [author name scrubbed]. CRS Report RL30624 . Military Aircraft, the F/A-18E/F Super Hornet Program: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL30051 . Military Base Closures: Time for Another Round? , by [author name scrubbed]. CRS Report RL30440 . Military Base Closures: Where Do We Stand? , by [author name scrubbed]. CRS Issue Brief IB93103. Military Medical Care Services: Questions and Answers , by Richard A. Best. CRS Issue Brief IB85159. Military Retirement: Major Legislative Issues , by Robert Goldich. CRS Report RL31111 , Missile Defense: The Current Debate , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report RL30427 . Missile Survey: Ballistic and Cruise Missiles of Foreign Countries , by [author name scrubbed]. CRS Report RS20151(pdf) . National Guard & Reserve Funding, FY1990-2001 , by Mary Tyszkiewicz. CRS Report RL30654(pdf) . National Missile Defense and Early Warning Radars: Background and Issues, by [author name scrubbed]. CRS Report RS20967. National Missile Defense: Russia's Reaction , by [author name scrubbed]. CRS Report RS20851 . Naval Transformation: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS21007 . Navy Trident Submarine Conversion (SSGN)Programs: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS20643 . Navy CVN-77 and CVX Aircraft Carrier Programs: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS20557 . Navy Network-centric Warfare Concept: Key Programs and Issues for Congress , by [author name scrubbed]. CRS Report RS20535. Navy Ship Procurement Rate and the Planned Size of the Navy: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL30969. Navy Shipbuilding: Proposed Mergers involving Newport News Shipbuilding: Issues for Congress , by [author name scrubbed]. CRS Report RL30699 . Nuclear, Biological, and Chemical Weapons and Missiles: the Current Situation and Trends , by Robert S. Shuey. CRS Report 97-1027 . Nunn-Lugar Cooperative Threat Reduction Programs: Issues for Congress , by [author name scrubbed]. CRS Issue Brief IB94040. Peacekeeping: Issues of U.S. Military Involvement , by Nina Serafino. CRS Report RL30828(pdf) . Radiofrequency Spectrum Management: Background, Status, and Current Issues, by Lennard Kruger. CRS Issue Brief IB93062. Space Launch Vehicles: Government Activities, Commercial Competition, and Satellite Exports , by Marcia Smith. CRS Report RS20915, Strategic Airlift Modernization: Background, Issues, and Options by [author name scrubbed]. CRS Report RL30457(pdf) . Supplemental Appropriations for FY2001: Defense Readiness and Other Programs , by [author name scrubbed]. CRS Issue Brief IB92115. Tactical Aircraft Modernization: Issues for Congress , by [author name scrubbed]. CRS Report RL30345(pdf) . U.S. Nuclear Weapons: Policy, Force Structure, and Arms Control Issues , by [author name scrubbed]. CRS Issue Brief IB92011. U.S. Space Programs: Civilian, Military, and Commercial , by Marcia Smith. CRS Issue Brief IB86103. V-22 Osprey Tilt-Rotor Aircraft , by [author name scrubbed]. CRS Report RS20458 . Vieques, Puerto Rico Naval Training Range: Background Issues for Congress, by [author name scrubbed]. CRS Report RS20993 , Wireless Technology and Spectrum Demand: Third Generation (3G) and Beyond, by [author name scrubbed] Information regarding the defense budget, defense programs, and congressional action on defense policy is available at the following web sites. Congressional Sites/OMB House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ House Armed Services Committee http://www.house.gov/hasc/ Senate Armed Services Committee http://www.senate.gov/~armed_services/ CRS Appropriations Products http://www.loc.gov/crs/products/apppage.shtml Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management and Budget http://www.whitehouse.gov/OMB/ FY2002Federal Budget Publications http://w3.access.gpo.gov/usbudget/index.html Defense Department and Related Sites Defense LINK http://www.defenselink.mil/ Defense Issues (Indexed major speeches) http://www.defenselink.mil/speeches/ Under Secretary of Defense (Comptroller) FY2001 Budget Materials http://www.dtic.mil/comptroller/fy2001budget/ Assistant Secretary of the Army (Financial Management & Comptroller) Budget http://www.asafm.army.mil/budget/budget.asp Army Link -- the U.S. Army Home Page http://www.army.mil/ Navy On-Line Home Page http://www.navy.mil/index-real.html Navy Budget Resources http://navweb.secnav.navy.mil/pubbud/01pres/db_u.htm Navy Public Affairs Library http://www.navy.mil/navpalib/.www/subject.html United States Marine Corps Home Page http://www.usmc.mil/ AirForceLINK http://www.af.mil/ Air Force Financial Management Home Page http://www.saffm.hq.af.mil/ Air Force Budget Resources http://www.saffm.hq.af.mil/FMB/pb/2001/afpb.html Table A1. Defense Appropriations, FY1998 toFY2002 (budget authority in billions of current year dollars) Sources: Office of Management and Budget, Budget of the United States Government, Fiscal Year 2002 , Apr. 2001, for FY1998 through FY2000; FY2001includes estimate from OMB, Budget of the United States Government, April 2001plus additional appropriations for Department of Defense included in P.L. 107-20 ,Supplemental Appropriations Act, 2001; FY2002 request from the White House,Transmission to Congress of the FY2002 amended budget request, June 27, 2001. Notes: These figures represent current year dollars; exclude permanent budget authorities and contract authority; and reflect subsequent supplementalappropriations, rescissions, and transfers. a. Includes regular FY2001 DOD appropriation of $287.4 billion, non-emergencysupplemental of $5.5 billion, and $14.0 billion from Emergency TerrorismResponse supplemental allocated to FY2001 by CBO. b. Includes regular FY2002 DOD appropriation of $317.2 billion and $3.5 billionfrom Emergency Terrorism Supplemental allocated to FY2002 by CBO. Table A2. Congressional Action on Major Weapons Programs,FY2002:Appropriations (amounts in millions of dollars) * Notes : All amounts exclude initial spares, advance procurement, and military construction. V-22 Osprey, C-17, and Global Hawkdata for FY2001 Estimate include adjustments made in the DOD Non-Emergency Supplemental Appropriation forFY2001. SBIRSLow funds are to be drawn from a central Satellite Sensor Technology Program within BMDO and are includedwithin the BMDOtotal. Conferees specified that the National Guard and Reserve components should control equipment modernizationfunds. Guardand Reserve funding includes $436 million for the acquisition and modernization of 10 UH-60 Blackhawkhelicopters and four C-130Jtransport aircraft. Sources: Office of the Secretary of Defense (Comptroller), Department of Defense Amended Budget, Fiscal Year 2002 (June 2001),Procurement Programs (P-1), Reserve Components (P-1R), RDT&E Programs j(R-1), H.Rept. 107-350 ,Conference report onDepartment of Defense Appropriations, 2002, and H.Rept. 107-298 , S.Rept. 107-109 , and CRS calculations byDaniel Else. Table A3. Congressional Action on Major Weapons Programs, FY2002: Authorization (amountsin millions of dollars) * Notes : All amounts exclude initial spares, advanced procurement, and military construction. BMDO procurement includes 72 Patriot PAC-3 missilesn the House and Senate authorization report. SBIRS-Low funds are to be drawn from a central Satellite SensorTechnology Program within BMDO andare included within the BMDO total in FY2002. V-22 Osprey, C-17, and Global Hawk data for FY2001 Estimateinclude adjustments made in the DODNon-Emergency Supplemental Appropriation for FY2001. Sources: Office of the Secretary of Defense (Comptroller), Department of Defense Amended Budget, Fiscal Year 2002 (June 2001), ProcurementPrograms (P-1), Reserve Components (P-1R), RDT&E Programs j(R-1), H.Rept. 107-333 , Conference reporton National Defense Authorization Act,2002, and H.Rept. 107-194 , S.Rept. 107-62 , and CRS calculations by Daniel Else.

Summary: On June 27, the Administration submitted an amended fiscal year 2002 defense budget request to Congress. The request totaled $343.5 billion in funding for the national defense budget function,$32.9 billion above the amount originally enacted for FY2001, an 11% increase. The total includedfunding for the Department of Defense and for defense-related activities of the Department of Energyand other agencies. Both House and Senate versions of the DOD appropriations bill provided thetotal for national defense that the Administration requested. To accommodate that level, Congressadjusted limitations in the 1997 Balanced Budget Act and set aside provisions in this year'sconcurrent budget resolution that were designed to protect the social security surplus. With the onset of a recession last spring, along with higher defense spending and additional federal spending in response to the terrorist attacks, and lower revenues due to the tax cut, thegovernment is expected to run a deficit as well as use all of the surplus generated by social securityrevenues. With the destruction of the World Trade Center and the extensive damage to the Pentagonby terrorists on September 11th, congressional concerns shifted from whether the overall federalbudget could accommodate higher defense expenditures without spending the budget surplus toadding funding for defense programs that combat terrorism. Funding to aid the victims and provide for recovery from the attacks, for the ongoing conflict in Afghanistan, and for other programs to combat terrorism, was approved in the $40 billionEmergency Terrorism Response supplemental appropriations act ( P.L. 107-38 ) that passed CongressSeptember 14, 2001. Of that total, DOD receives $17.5 billion of the total funding in the EmergencyTerrorism Response supplemental, about 44% of the total (see P.L. 107-117 and H.Rept. 107-350 )with about 56% going to other agencies. Allocation of half of the $40 billion was included in P.L.107-117 / H.R. 3338 , the FY2002 DOD appropriations act, which was signed by thePresident on January 10, 2002. Although there had been broad bipartisan support for adding funds for recovery and response to the September 11 terrorism attacks, sharp differences emerged about whether the total amountwas sufficient and whether the allocations matched the most critical priorities, particularly for NewYork and other homeland security needs. The President, however, threatened to veto any spendingmeasure this year that went beyond the $40 billion. Faced with this threat, both the House and theSenate rejected proposals to add more emergency funding to H.R. 3338 when theypassed the bill. Instead, within the $20 billion total that was acceptable to the President, theconference bill shifts $3.4 billion of the $7.3 billion funds allocated to Defense by the Administrationto homeland security and recovery of New York. The conference version of the National Defense Authorization Act for FY2002 was passed by the House and the Senate on December 13, 2001, and signed by the President on December 28, 2001( P.L. 107-107 / S. 1438 , H.Rept. 107-333 ). The Act provides $343.3 billion as requestedby the Administration and authorizes another round of base closures but delays the date to 2005,settling the chief issue in contention. Key Policy Staff Abbreviations: FDT = Foreign Affairs, Defense, and Trade Division G&F = Government and Finance Division RSI = Resources, Science, and Industry Division