Many of the Department's problems with civilian retention stem from the problems I have already mentioned about recruitment of civilians, and we hope that the Federal Employees Pay Comparability Act will not only help us recruit but also retain highly skilled civilians. As the civilian work force is reduced, our Priority Placement Program will become increasingly important in keeping employees with the skills we continue to need. This program provides employees whose positions are adversely affected by base closure, contracting out, functional transfer, or other actions that result in a reduction-in-force the opportunity to be placed in vacant DOD positions for which they are qualified. We will also be working with OPM and other Federal agencies to maximize efforts to place our employees in other Federal positions.

TOOLS: COMPENSATION, QUALITY OF LIFE

Our ability to recruit and retain the people we need is significantly affected by our ability to provide adequate compensation and quality of life incentives. The next section of my statement discusses these incentives.

Compensation

We appreciate this subcommittee's efforts in the compensation area for fiscal year 1991 and seek your continued support. The challenge for us in fiscal year 1992 and beyond will be to maintain our competitive position given the fiscal constraints we face.

The President's budget requests pay raises of 4.2 percent in fiscal year 1992 and 4.7 percent in fiscal year 1993 for military personnel. We have been using the civilian wages and salaries component of the Employment Cost Index (ECI) as the basis for comparison with military wages. According to this measure, since 1983 the military pay raise has been less than the increase in the ECI, except in 1989. Recent economic research by the Department has raised questions, however, about the validity of this index as the appropriate standard of comparison because of demographic and structural differences between our force structure and the civilian labor market. The Seventh Quadrennial Review of Military Compensation (QRMC) is studying the selection of an appropriate index. Regardless of the standard that is chosen, we remain committed to closing any pay gap completely over the long run. Our incentive programs will become increasingly important in helping us to align a reduced personnel inventory with future force structure. As the force is reduced and the need to recruit high-quality personnel becomes more pronounced, competition for a declining youth population will provide a continuing challenge. The enlistment and selective reenlistment bonus programs are two of our most effective tools in meeting recruiting and retention requirements. Maintaining adequate levels of funding for these bonuses will be critical in attracting enlistees to and retaining members in the highly skilled, mission-critical, and arduous duty specialties.

Two areas of particular concern to us that are being addressed by special pays and bonuses are pilots and health care professionals. The recently enacted increase in aviator continuation pay, the extension of the aviator retention bonus, and a declining force structure-operating together-should resolve some of our pilot shortages within the next few years. However, pending changes to drive up the wage scale and increases in hiring in private industry could reduce the positive impact of our programs. We will continue to monitor retention in this critical area closely. Congress, and the Department, have long recognized the need to augment normal military compensation in order to attract and retain physicians. As a result, they are among the highest paid professionals in military service; however, we still have shortages in certain specialties, especially surgical, where the total compensation package we offer lags significantly behind private sector comparability. The fiscal year 1991 Defense Authorization Act significantly modified special pay authority for physicians on active duty, establishing a permanent multi-year contract retention pay. We provided specific rates and eligible physicians for the new Multi-Year Special Pay, along with new directions on Incentive Special Pay, to the services in recent implementation guidance, and a report to Congress describing implementation is currently being prepared. As for nurses, the fiscal year 1990 Defense Authorization Act authorized Incentive Special Pay of up to $6,000 per year for nurse anesthetists. The fiscal year 1991 Defense Authorization Act expanded this authority to include other nurse specialties when they demonstrate critical staffing shortages. We are working with the services to determine if critical staffing shortages will exist after the bonus is expanded to general nursing staff skills.

Moving to allowances, in the spring of 1990 the Department completed its biennial survey of housing expenses incurred by members drawing allowances for housing in the United States. Over 620,000 valid responses were received for residences in

over 334 military housing areas. The survey concluded that housing costs rose 8.2 percent on average compared to a 7.8 increase in housing allowances over the same 2-year period. The 4.1 percent funding increase in the fiscal year 1991 Variable Housing Allowance (VHA) program, while welcome, was insufficient to overcome past years of funding constraints. To overcome the shortfall and to pay the full VHA entitlement in fiscal year 1991, it was necessary for us to reprogram the additional funding required. We hope to avoid reprogramming in the future and have programmed funding for future years based on full VHA entitlement.

In January of this year, we implemented the provision in the fiscal year 1990 DOD Authorization Act that limited the amount of any decrease in a member's pay due to reductions in his or her VHA resulting from adverse housing market conditions. We have also implemented the overseas up-front Move-In Housing Allowance (MIHA). MIHA assists overseas members by defraying the initial cost of local economy housing at the time these expenses are actually incurred. This lump sum payment has significantly reduced the financial burden imposed on many of our overseas service members and has improved the accuracy of overseas housing allowance reimbursements.

Desert Storm has highlighted several aspects of military compensation that come into play in a combat situation. Our military personnel in the Persian Gulf area are receiving Imminent Danger Pay, Family Separation Pay when applicable, and Certain Places (Foreign Duty) Pay. These special pays helped to make up for the loss of Basic Allowance for Subsistence (BAS) for enlisted members upon deployment to the Persian Gulf that occurred because deployed members are fed by the government. They should not be construed, however, as a replacement income because the purpose for these payments is not to replace BAS, but rather to compensate members for arduous and hazardous duties away from their families. Congress has asked the Department to submit a report on various options for reforming the BAS entitlement. We have reviewed several alternatives but will not propose any changes to the BAS entitlement until the 7th QRMC has completed its full review of the overall compensation system.

Beyond the special pays mentioned above, in a combat zone all compensation of members other than commissioned officers is excluded from taxable income. Commissioned officers may exclude $500 per month. There is no withholding of Federal income tax for service in a combat zone. In addition, various tax-related actions such as filing returns, paying tax, and claiming refunds may be delayed for the period in a combat zone and 180 days thereafter. For members who take advantage of this delay, there will be no penalty or interest payable on taxes owed. In addition, thanks to the passage of H.R. 4, interest on refunds will be payable from April 15 when filing of the return is delayed.

The Persian Gulf Conflict Supplemental Authorization provides for increases to existing special pays and new benefits for participants in the Persian Gulf conflict. We are grateful to the Congress for recognizing with this piece of legislation the dangers and sacrifices endured by our troops.

Quality of Life

As we move forward with restructuring and downsizing of our force, we intend to sustain, and, where needed, bolster support systems operating in our military communities. Reductions in community services will be taken cautiously to ensure that we do not withdraw support systems prematurely. Such shortcuts during this process would have a negative impact on the morale of our departing service members, many of whom are overseas. For those leaving, we must address specific concerns for proper reintegration into the civilian work force and community. For those who will remain, a stable quality of life will help us retain the best.

Our involvement in Operation Desert Storm has demonstrated that past investments in quality of life have been sound. The military exchange and our Morale, Welfare, and Recreation (MWR) programs have provided tremendous aid to and support for forces in the Persian Gulf. Here at home, our network of family support programs has proven its worth in the outstanding assistance provided to our military families. I believe we have demonstrated our commitment to these programs in funding as well as policy. Some highlights of specific quality of life programs follow. The Department has established the Transition Support and Services Directorate to facilitate development and implementation of transition assistance benefits for separating military personnel, civilians, and their families. We have developed a DOD-wide core Transition Information Program, which will be enhanced by specific service initiatives. We believe that by treating departing personnel fairly and with dignity, the Department will maintain its image as a quality employer, and by so doing, continue to be able to recruit the best and brightest.

The successful readjustment of veterans into civilian life is a mutual responsibility and concern of the Departments of Defense, Labor (DOL), and Veterans Affairs (DVA). As part of the DOD Transition Information Program, we have entered into agreements with DOL and DVA to expand pilot and ongoing outplacement and readjustment programs. All three Departments are committed to establishing and maintaining a program to furnish counseling, assist in identifying employment and training opportunities, insure awareness of veterans' benefits programs, and provide any other information that will ease the return of veterans to the private sector. In addition, as has always been our policy, members who are separated will be provided retirement or separation benefits where eligible under existing laws. I am particularly pleased about the eligibility changes recently enacted for separation pay; for the first time, regular enlisted members are now eligible for this pay. Also, the transition benefits package that we are putting together based on legislation passed by Congress last year will make our program compare favorably with the best found in the private sector. We are still concerned, however, about the need to expand unemployment compensation benefits to 26 weeks for involuntarily separated service members.

Other important aspects of the DOD program include the development of innovative automated systems to assist separating personnel in determining the private sector opportunities that best suit them: a resume data base for voluntary referral to private sector companies, an electronic bulletin board for publication of job and training opportunities, a decision information tool to explore career and training information, and a personalized training and occupational verification profile. In addition, we are enhancing relocation assistance services, including the introduction of automation, which will not only assist service members who are leaving, but also will continue to be a mainstay for military personnel changing duty stations.

In the area of child care, the Department has progressed in its implementation of the Military Child Care Act of 1989. We have a strong commitment to quality care and are continuing to expand availability, primarily through care in family homes. Increases to caregiver wages and improved caregiver training are reducing staff turnover and enhancing staff professionalism. We have established inspection teams throughout the services and DOD to monitor compliance with standards for health, safety, and quality. In addition, we have issued standard fee guidance to ensure comparability of fees within DOD and to establish affordable rates for service members. The system is still adjusting to these changes and needs time to implement and adjust fully to new guidance.

The Family Advocacy Program addresses child and spouse abuse. We expect demands on this program to increase as military families are faced with the uncertainty caused by world conflict, transition, fear of job loss, and impending economic hardship. Current funding levels are inadequate, and caseloads carried by counselors are three times larger than standards established by leading national agencies. The services have identified additional requirements for fiscal years 1992 and 1993, and we have increased funding for prevention efforts and treatment programs to meet 55 percent of those requirements. We must prepare to assist our families through crisis and therefore ask you to support the program increase we have inIcluded in our budget request.

Another program crucial to our families is our dependents education program, which enrolls over 195,000 students, mostly overseas. During the drawdown, our goal is to maintain the high quality of education currently provided by dependent schools worldwide. Many schools will decline in enrollment rather than closing; in this event, we must recognize that the cost per student will increase as economies of scale decrease.

Regardless of the drawdown, the Department remains committed to excellence in our dependents schools. We are emphasizing achievement of the President's National Education Goals and have set objectively measurable goals to support these goals, including doubling the percentage of high school graduates who complete physics and calculus courses. This year, 2,300 teachers are being trained to improve the teaching of mathematics at all grade levels. The quality of our education system is evidenced by the results of our performance at all grade levels on nationally administered standardized tests and in participation and performance on the SAT college entrance exam. Yet, considering direct educational costs, we spend at the national average per pupil.

The DOD Morale, Welfare and Recreation program is a major contributor to community life on military installations. Libraries, sports and athletic programs, military exchanges, military clubs, youth services, craft shops, and other activities serve approximately 12 million people, generate over $10 billion in sales, employ 220,000 people, and account for about $5.2 billion in program cost, exclusive of cost of goods

sold. About $1.2 billion is funded by appropriated funds; the remainder is provided through nonappropriated funds support.

With congressional assistance, the Department has restructured MWR activities to make them more business-like. This has resulted in MWR business programs becoming more efficient and therefore less reliant on appropriated fund support. Other recent changes to MWR programs include the expansion of patronage eligibility to a larger population of the Reserve components and their families. MWR, with its makeup of revenue- and non-revenue generating community programs must maintain a minimum level of appropriated funds to sustain a strong quality of life on each installation. We are faced with a potential drop in revenue as installations close and we bring some of our forces back from Europe. We intend to monitor carefully the impact of this transition on the quality of life of our service members and their families.

The Persian Gulf mobilization has reinforced the direct link between mission readiness and morale support activities for our forces. The establishment of stressrelieving activities and essential services for our service members became an issue of paramount importance for a "waiting" force. Recreation kits, televisions with VCRs, Desert FAX, and culturally acceptable reading material and entertainment for our troops contributed to morale. We also leased a cruise ship to provide secure Rest and Recreation (R&R) for service members on 48 to 72 hours leave from the peninsula.

For the family members left at home during Desert Storm, Family Centers have provided the focal point through which we could best organize contact and assistance. The centers established hot lines to assist in information flow and expanded services and hours of operation to accommodate the most pressing needs. The services offered typically include emergency financial assistance, child care/foster care coordination, stress management, relocation assistance, family support groups, liaison with the family support programs of the Reserve components, and information and referral. When operating under ordinary business conditions, our 367 Family Centers respond to over 9 million requests for assistance annually. The number of requests increased substantially with force deployments. The Family Center has provided the infrastructure to mobilize a community effort and clearly is essential to mobilization of the force.

CONCLUSION

Despite the stresses of war, our volunteer force continues to perform well. I am convinced that with proper attention to and funding for recruiting, training, and compensation and quality of life incentives, it will-while smaller-be able to maintain the readiness necessary to defend our interests around the world in the coming years. We request your continued support in making sure this happens.

As I mentioned in the introduction to my statement, flexibility will be crucial to our success as we plan for the future in the aftermath of Desert Storm. We need to be given the necessary flexibility to reshape the forces in a manner that preserves our readiness and qualitative edge. Although this reshaping will include manpower cuts, decisions on the size of the reductions should be preceded by the identification and assignment of missions and the modification of force structure based on those prescribed missions.

With your help, we can guide the volunteer force successfully through the changes the next few years will bring. I hope we will be able to work together to accomplish this goal.

Senator GLENN. Good. General Reno.

STATEMENT OF LT. GEN. WILLIAM H. RENO, DEPUTY CHIEF OF

STAFF PERSONNEL, U.S. ARMY

General RENO. Thank you, Mr. Chairman. Good morning. It is a pleasure for me to appear before the committee and to share with you the pride that we in the Army justifiably feel for the dramatic and outstanding performance of our forces during Desert Shield and Desert Storm. I also appreciate the opportunity to discuss the challenging years ahead and the programs we see so critical to sustaining and shaping your Army.

Mr. Chairman, I became the DCSPER on the 1st of August 1990, and on the 2d of August the pace picked up quite a bit as you could

expect. Since that date, we have been working and managing the personnel posture of the Army along what our Chief of Staff and Secretary call three vectors. The first being to support the operation in the desert; the second being to maintain readiness worldwide in the U.S. Army, and finally, planning the detailed plans to reshape the Army as you mentioned in your opening comments.

Operation Desert Storm and the continued maintenance of worldwide readiness demanded, therefore, extraordinary personnel measures. At the height of the operation we had activated over 142,000 Reserve component personnel. Additionally, we called to active duty approximately 5,600 Reserves in 9 TTAD status and a little over 1,200 retiree recalls. Our active duty force, due mainly to stop loss, increased to 745,000.

We achieved this total force through the mechanism of the reserve force call-up, through stop loss in all components, and by exercising foreign service tour extensions overseas. Desert Shield and Desert Storm also saw the first use of Title 10, 673(b), with an initial call-up of reservists on August 23, and the eventual call-up of 118,000 as a part of the partial mobilization. The call-up was an overall success, and we gained invaluable experience for our future planning and policy determinations for both the guard and reserve and active, the individual ready reserve and the retired community.

I would like to take this opportunity to thank you personally, Mr. Chairman, and the Members of your committee, for your help in ensuring and expanding the protections and benefits afforded to our service men and women of Desert Shield and Desert Storm. The legislative history of the Persian Gulf benefit bill will reflect your personal involvement in caring for our soldiers. The Army knows full well how much the support of this committee, the Congress and American people across the nation contributed to our success in the operation.

As we speak this morning, the Army has reversed its policies that caused the build-up of the force for Desert Storm. Today the active Army end strength stands at a little under 740,000, with over 117,000 reserve soldiers on active duty. We have reversed our stop loss policy and expect all personnel to be released by September 30, 1991. We have released over 13,000 of the 17,000 Individual Ready Reservists called up, and we are demobilizing the Reserve component units expeditiously as they come from Saudi Arabia, Europe, and from within CONUS.

All of these forces did not see duty in Southwest Asia. While we supported Desert Storm, we maintained forces for other contingencies worldwide. Both active and reserve forces were a part of this readiness force.

Our task now is to finish redeployment and demobilization as we sustain readiness across the Army, and reduce our end strength simultaneously. As we do this, we are committed to continue to care for our soldiers and their families, to welcome them home with ceremony and dignity, and to transition them back into a serving force, into their armories and their civilian jobs, or into a new life as a civilian, whatever the case may be.

As a consequence of Desert Shield and Desert Storm, we will miss our fiscal year 1991 end-strength objective by a small amount,