OVERVIEW OF THE DEFENSE-WIDE O&M ACCOUNTS HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, READINESS SUBCOMMITTEE, Washington, DC, Tuesday, February 28, 1989. The subcommittee met, pursuant to notice, at 9:30 a.m., in room 2216, Rayburn House Office Building, Hon. Earl Hutto (chairman of the subcommittee) presiding. STATEMENT OF HON. EARL HUTTO, A REPRESENTATIVE FROM FLORIDA, CHAIRMAN, READINESS SUBCOMMITTEE Mr. HUTTO. The Subcommittee on Readiness will please come to order. Today the subcommittee will receive testimony presenting the overview of the defense-wide O&M accounts. Mr. John A. Flinn, Director of the Office of Operations, Office of the Department of Defense, will present the testimony. He is also accompanied by Lt. Gen. Charles McCausland, Director of the Defense Logistics Agency; Mr. Hector Nevarez, Director of Dependents Support Policy; and Dr. Bart Lagomarsino for the DOD Dependent Schools. This meeting today is particularly important because it puts the entire readiness or operations and maintenance account into perspective. For fiscal year 1990 the budget level is $91.8 billion and in fiscal year 1991 $95.5 billion. There are some increases and program growth. However, there are some serious concerns when you look at what happens to this account in terms of the 5-year plan. Serious reductions are projected, and we will begin to see shortfalls in the next budget year. Recently there have been articles appearing in newspapers which call for cutting readiness. This subcommittee must be alert to any efforts that reduce readiness-related funding. I hope that as you present your testimony today that you inform the subcommittee of the major or macro decisions which affected the formulation of the fiscal year 1990 and fiscal year 1991 budget. We want to know what the orders of priority are. You need to identify where program growth occurs and where reductions take place and explain why. The Defense Logistics Agency was invited because it experienced the largest decline in program growth of any defense agency. On the other hand, the DOD Dependent Schools experienced the largest increase. The subcommittee has a number of new members, Mr. Flinn, so I would ask that you spend a few minutes explaining how the budget process works and how the O&M portion is pulled together. (175) You should also explain your programs and define such terms as price growth and program growth so that all are understood. Because Mr. Kasich is not able to be with us at this moment, Mr. Machtley will present Mr. Kasich's his statement. STATEMENT OF HON. RONALD K. MACHTLEY, A Mr. MACHTLEY. Thank you, Mr. Chairman, for your remarks. I want to take this opportunity to welcome Mr. Flinn of the DOD Comptroller Office; Lieutenant General McCausland, and our new Director of DLA; Mr. Navarez, Director for the Dependent Support Policy; and Dr. Lagomarsino representing the Department of Defense Dependent Schools. Mr. Chairman, I hope this morning's hearing gives this subcommittee, and particularly its new members, an overview of why the readiness account is important. While I understand there are final figures pending the detailed budget submission of the new administration, it already appears that there are reductions in some areas of readiness. In particular, the training and operational tempos may be experiencing funding shortfalls. If the O&M account must take additional reductions in order to conform to the new administration's revised budget, we may see the beginning of a decline in the combat readiness of our Armed Services. In the past, the O&M account has taken some fairly substantial reductions even when there was general agreement that readiness was "sacrosanct". Recently, however, there have been statements in the press to the effect that readiness spending should be the first to be reduced. If this subcommittee is to make the case for readiness to Congress, our witnesses must give us a thorough understanding of why readiness matters. Thank you, Mr. Chairman. PREPARED STATEMENT OF HON. JOHN R. KASICH, A REPRESENTATIVE FROM OHIO, I would like to thank Chairman Hutto for his remarks, and I want Mr. Chairman, I hope this morning's hearing gives this Subcommittee, and particularly its new members, an overview of why the readiness account is important. While I understand there are no final figures pending the detailed budget submission of the new Administration, it already appears that there are reductions in some areas of readiness. In particular, training and operational tempos may be experiencing funding shortfalls. If the O & M account must take additional reductions in order to conform to the new Administration's revised budget, we may see the beginning of a decline in the combat readiness of our armed forces. In the past, the O&M account has taken some fairly substantial reductions even when there was general agreement that readiness was "sacrosanct." Recently, however, there have been statements in the press to the effect that readiness spending should be the Page 2 first to be reduced. If this Subcommittee is to make the case for readiness to Congress, our witnesses must give us a thorough understanding of why readiness matters. Thank you, Mr. Chairman. Mr. HUTTO. Thank you, Mr. Machtley. Now we will proceed, Mr. Flinn. STATEMENT OF JOHN A. FLINN, DIRECTOR OF OPERATIONS, OFFICE OF THE DEPARTMENT OF DEFENSE COMPTROLLER Mr. FLINN. Yes, sir. Mr. Chairman, I would just like to mention that we have a slight change in the witnesses. Dr. Navarez was not able to make it and we have Ms. Carolyn Duke here representing the Section 6 School Program. Mr. HUTTO. All right, we are glad to have Ms. Duke with us. Mr. FLINN. You indicated you wanted me to give a brief overview of how the budget is put together, and I will address that before I give a synopsis of my statement. Mr. HUTTO. If you would, please. Mr. FLINN. The Department enters into a very lengthy budget review program planning process which actually begins in the January timeframe when general program guidance goes out to the military departments and the agencies. The guidance is in terms of objectives and goals that the Department wishes to achieve over the 5-year defense program. The service and agencies' program requirements are provided to the Office of the Secretary of Defense in May. A joint review on the part of OSD, OMB, and the various assistant secretaries of the OSD is conducted. It is a very lengthy process, and out of that comes decisions in terms of program levels and the funding that will be provided for them. In the O&M area operating tempos training levels and flying hour rates are addressed. It is documented. There is a decision paper that goes back to the military departments advising of the Secretary's decisions. The service Secretaries and the military chiefs participate in that review process. We have, the Defense Resource Board, there are members of that Board that participate in the discussion, the dialogue and the appeal process in terms of alternatives to program levels. Out of that process funding levels are approved and objectives upon which the service then develops their budgets which are submitted in the mid-September timeframe, again to the Office of the Secretary of Defense. At that time we go through a very extensive review process in terms of the various appropriations: O&M; procurement; research and development; the military construction and personnel programs; and family housing. We are looking at the various major force programs and various line items that make up those major force programs as we present it to the Congress. Again, OMB is a participant in that review. That's a very lengthy process, and it takes from September through December time frame to develop those program budget decisions. The services again are participants in that review process. The Secretary and the Deputy Secretary make the decisions in terms of the programs that will be approved and funding levels. Out of that process then develops the congressional budget which we submit to the Congress in January. |