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[H.A.S.C. No. 107–6]



FOR FISCAL YEAR 2002—H.R. 2586






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JULY 18, 2001


For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: (202) 512-1800 Fax: (202) 512-2250
Mail: Stop SSOP, Washington, DC 20402-0001



JOHN M. McHUGH, New York, Chairman
LINDSEY GRAHAM, South Carolina
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JIM RYUN, Kansas
ROB SIMMONS, Connecticut
JO ANN DAVIS, Virginia
ED SCHROCK, Virginia
W. TODD AKIN, Missouri

VIC SNYDER, Arkansas
BARON P. HILL, Indiana
SUSAN A. DAVIS, California

John D. Chapla, Professional Staff Member
Thomas E. Hawley, Professional Staff Member
Michael R. Higgins, Professional Staff Member
Edward P. Wyatt, Professional Staff Member
Debra S. Wada, Professional Staff Member
Nancy M. Warner, Staff Assistant

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    Wednesday, July 18, 2001, Fiscal Year 2002 National Defense Authorization Act—Overview of Military Personnel, Health Care and the Reserve Component Issues in the Fiscal Year 2002 Defense Budget Request


    Wednesday, July 18, 2001




    McHugh, Hon. John, a Representative from New York, Chairman, Military Personnel Subcommittee
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    Snyder, Hon. Vic, a Representative from Arkansas, Ranking Member, Military Personnel Subcommittee


    Carlton, Lt. Gen. Paul K., Jr., Surgeon General, Department of the Air Force

    Chu, Hon. David S. C., Under Secretary of Defense for Personnel and Readiness

    Clinton, Rear Adm. J. Jarrett, U.S. Public Health Service, Acting Assistant Secretary of Defense for Health Affairs

    Davis, Lt. Gen. Russell, USAF, Chief, National Guard Bureau; Lt. Gen. Thomas J. Plewes, Chief, U.S. Army Reserve; Vice Adm. John B. Totushek, Chief, U.S. Naval Reserve; Lt. Gen. James E. Sherrard, III, Chief of Air Force Reserve and Commander, Air Force Reserve Command; Lt. Gen. Dennis M. McCarthy, Commander, Marine Forces Reserve; Lt. Gen. Roger C. Schultz, Director, Army National Guard; and Maj. Gen. Paul A. Weaver, Jr., Director, Air National Guard

    Maude, Lt. Gen. Timothy J., Deputy Chief of Staff for Personnel, U.S. Army

    Nelson, Vice Adm. Richard A., Surgeon General, Department of the Navy

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    Parks, Lt. Gen. Garry L., Deputy Commandant for Manpower and Reserve Affairs, U.S. Marine Corps

    Peake, Lt. Gen. James B., Surgeon General, Department of the Army

    Peterson, Lt. Gen. Donald L., Deputy Chief of Staff, Personnel, U.S. Air Force

    Ryan, Vice Adm. Norbert R., Jr., Chief of Naval Personnel, U.S. Navy


Chu, Hon. David S. C.

Clinton, Rear Adm. J. Jarrett

Carlton, Lt. Gen. Paul K.

Davis, Lt. Gen. Russell C.

Maude, Lt. Gen. Timothy J.

McCarthy, Lt. Gen. Dennis M.

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McHugh, Hon. John

Nelson, Vice Adm. Richard A.

Parks, Lt. Gen. Garry L.

Peake, Lt. Gen. James B.

Peterson, Lt. Gen. Donald L.

Plewes, Lt. Gen. Thomas J.

Ryan, Vice Adm. Norbert R., Jr.

Schultz, Lt. Gen. Roger C.

Sherrard, Lt. Gen. James E. III

Snyder, Hon. Vic

Totushek, Vice Adm. John B.

Weaver, Maj. Gen. Paul A., Jr.

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[The Documents submitted for the Record can be viewed in the hard copy.]
Statement of The Military Coalition (TMC), Health Care and Personnel Issues Affecting the Uniformed Services Community

[The Questions and Answers can be viewed in the hard copy.]

Mrs. Davis of California
Dr. Snyder
Mr. Forbes
Mr. McHugh
Mr. Ryun
Mrs. Tauscher


House of Representatives,
Committee on Armed Services,
Military Personnel Subcommittee,
Washington, DC, Wednesday, July 18, 2001.

    The subcommittee met, pursuant to call, at 2:00 p.m. in room 2118, Rayburn House Office Building, Hon. John M. McHugh (chairman of the subcommittee) presiding.
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    Mr. MCHUGH. Good afternoon. I call the meeting to order. We have a very ambitious schedule today, so let me just, first of all, welcome all of the witnesses. And I would say especially the Honorable David Chu, the Under Secretary of Defense for Personnel and Readiness. It is his first opportunity to testify before the subcommittee, and I know we all look forward to his views today and in the future. Welcome, Doctor.

    I would also like to make special mention of Lieutenant General Donald Peterson, Deputy Chief of Personnel for the Air Force. This will likely be—and as I look at the smile on his face, I would say it definitely will be his last testimony before the subcommittee before his retirement on the 1st of September. And General, I and everyone who has had the pleasure and opportunity of dealing with you want to thank you for your 35 years of dedicated and distinguished service, first as a fighter pilot, a commander, a leader, and of course, as a highly effective chief of personnel. Thank you for your service.

    General PETERSON. Thank you, Mr. Chairman, it has been a pleasure serving.

    Mr. MCHUGH. To say that this hearing has some ambitious objectives is something of an understatement. With 3 panels of witnesses comprising 16 dedicated individuals, it is an effort to get an overview of the President's defense budget request in the 3 major areas over which this subcommittee has primary jurisdiction: military personnel, health care and the Reserve components. In a normal year, if there is such a—I didn't think in Washington, the subcommittee would gain insight into that budget request by holding perhaps four to six individual hearings for a variety of reasons, most of which are well-known to everyone in this room. However, this is not by our standards what we could consider a normal year, and we will be challenged to focus on the most critical and priority issues here today.
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    For that reason, I would particularly encourage our distinguished witnesses to attempt to focus their opening remarks on the budget issues that from their perspective are most critical for all of us on this subcommittee to understand.

    From my perspective, I would say the most pressing areas of interest relate to the proposed military pay raise, end strength, and recruiting and retention issues in both the active and the Reserve components as well as the adequacy of funding for the Defense Health Program. Each of those areas has emerged as a critical effort—critical factor in the effort by the military services to recruit and retain sufficient numbers of high quality people, and toward that end, I believe it is fair to say that much progress has been made. But before we spend too much time congratulating ourselves on that progress, I think we ought to reflect upon what Rear Admiral John Foley, the head of the Navy's Atlantic fleet surface ships, said recently ''We are in a war for people and we need to win all the battles.''

    So while we clearly have won some initial battles in the past several years, victory, in the true sense of the word, will require a sustained and long-term effort and the challenge for all of us and certainly our witnesses today and the military services that they represent is to determine how best sustain that effort. Ultimately for the members of the subcommittee as well as for our witnesses, sustaining the effort means choosing among alternatives, and, of course, setting priorities.

    By any measure, the Administration's fiscal year 2002 budget request for military personnel and health care is amongst the strongest, most robust proposal in years, some $6-1/2 billion more for the military personnel accounts than was authorized in fiscal year 2001 and some $6 billion more for the defense health operations accounts than was authorized in the past—current fiscal year. Despite this, I fully expect members will be required to decide on proposals to increase military pay, accelerate the reduction of housing out-of-pocket costs and other measures that address a range of continuing challenges in the military personnel area, and for that reason I look forward to our testimony today and all the witnesses' comments to help us gain a better insight and perspective on those very important matters and before we do get to our distinguished witnesses, I would certainly be pleased to yield to the ranking member, the gentleman from Arkansas, Mr. Snyder, for any comments he might have.
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    [The prepared statement of Mr. McHugh can be found in the Appendix.]


    Dr. SNYDER. Thank you, Mr. Chairman. We have 16 distinguished witnesses and I would say let's go. Thank you for all being here.

    [The prepared statement of Dr. Snyder can be found in the Appendix.]

    Mr. MCHUGH. You done good. We will proceed.

    Gentlemen, as in the order in which I introduce you, if that is agreeable. As I mentioned before, we have all of your statements, all of your statements will be entered into the record in their entirety and we would encourage you to try to, as much as you can, limit your remarks to those issues that you think are particularly important.

    As I mentioned before, we are honored to be joined by the Honorable David S. C. Chu, Under Secretary of Defense for Personnel and Readiness; Lieutenant General Timothy Maude, Deputy Chief of Staff for Personnel, U.S. Army; Vice Admiral Norbert Ryan, Chief of Naval Personnel, U.S. Navy; Lieutenant General Donald L. Peterson, Deputy Chief of Staff, Personnel, U.S. Air Force; and Lieutenant General Garry L. Parks, Deputy Commandant for Manpower and Reserve Affairs, U.S. Marine Corps.

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    Mr. MCHUGH. Welcome again, gentlemen and with that, Secretary Chu we would be pleased to hear from you, sir.


    Secretary CHU. Thank you, Mr. Chairman. Thank you for your warm words of welcome. Thank you all for the opportunity to appear before this committee in support of the President's budget request.

    Let me begin by thanking the committee and the Congress as a whole for all it has done over the years, especially last few years for military personnel and their families. It is deeply appreciated.

    Consistent with the President's and the Secretary's direction, this is a budget request that puts people first. It contains, as you know, one of the largest pay and benefits package increases in a generation, certainly the largest increase in base pay since the early 1980s, and similar to some of the pay table revisions undertaken in that period, it does propose to target some of the available pay funds against the areas identified as most needing an increase. This targeting is based on the results of the Quadrennial Defense Review (QDR) of military compensation that the Congress some years directed into law, and the ninth such review is nearing completion and is the basis for much of our decisions on this issue.

    On recruiting and retention, I think a word of congratulation is in order to the military services. As you know, all four services in fiscal year 2000 for the first time in 3 years met their recruiting goals, and they are at this point on target to do that again in fiscal year 2001. Retention is generally good, not perhaps as good as we would like in the Air Force case, and the Reserve picture is generally pretty good, although not quite as good as the active situation.
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    Civilians constitute the second leg of our total force. They provide the continuity and the technical skills that are so important to our success. The Department is beginning to shape consistent with the direction from the Congress a strategic plan for a civilian workforce in which continuing education will be an important part of what we hope to do for that force, very similar to what has been done so successfully over decades for our military personnel.

    Reserves are the third component of that total force, and I think the emphasis on the contribution of the Reserves and the important role they play can be seen in the very significant increase in military construction funds requested in this budget, up almost 300 percent to a total of just over $600 million in fiscal year 2002. We are sensitive to the fact that the process of moving from Reserve to active status and back again is not as smooth as it should be, and we are exploring in particular what can be done to ameliorate the situation many Reserve personnel face in terms of how their health benefits are handed from this transition to the private sector and to the public and back.

    You mentioned health care, Mr. Chairman. We look forward to the challenge of implementing the full TRICARE For Life (TFL) program on the 1st of October. You noted the very robust increase in funding requested. That increase is based upon estimates of what care cost increases are going to look like when—for the United States economy as a whole. I would, if I might, enter one particular plea, and that is, to seek your assistance in persuading the Congress to avoid fencing the individual parts of the health budget so that we can treat it as a single fund, and in this year of new challenges and new activities, be able to move the money to where we most need it as execution proceeds.

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    The people in the Department, as others have observed before me, are its greatest strength and we very much have that as the centerpiece of how this budget had been constructed and look forward to working with you and this committee in its adoption and eventual execution.

    Thank you, sir.

    Mr. MCHUGH. Thank you, Mr. Secretary.

    [The prepared statement of Secretary Chu can be found in the Appendix.]

    Mr. MCHUGH. I should also mention although this subcommittee is peopled with very distinguished Members of Congress, we do have a new member here, the gentleman from Virginia, Mr. Forbes, who has joined the Armed Services Committee obviously, and has chosen to be on this subcommittee, and we are honored to have him with us, and Randy, welcome, looking forward to your participation.

    General Maude.


    General MAUDE. Good afternoon, sir, thank you for the opportunity to address the committee and answer your questions. The number one issue for the United States Army is readiness, and personnel readiness in particular. I am happy to report today that we will make our end strength. As a matter of fact, we will exceed it. We will make our recruiting mission across all three components: active Army, National Guard, and Army Reserve, and that will be the second consecutive year that we have done that, and the first time that we have done that in nearly 20 years that we've done consecutive years.
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    We have a fully executed man-year program, which has enabled us to keep an average of 6,000 more people in units during the course of this past fiscal year, and we expect by the end of this year for nearly 67 percent of the operating force to be at 100 percent, doing that without compromising the operational capability of the sustaining portion of the Army.

    Our biggest concern in terms of force shaping remains in the area of our officer strength. We continue to be on a ramp to rebuild the losses that we sustained just following the drawdown in our cap and grade plate, and would ask for your support in granting temporary relief to the requirement for 42 months time and grade or time and service for promotion from first lieutenant to captain, to give us the tool necessary to shape that grade plate and return our officer corps to a more healthy perspective from a readiness standpoint.

    Finally, we are engaging in a very robust transformation in our personnel systems as well. Today we are operating over 350 legacy systems and have an extremely ambitious program in place, coupled with the Department of Defense effort on the defense integrated human resource system to move those legacy systems out and replace them with a Web-capable secure system to operate on a battlefield. We are trying to do that over the next 24 months, and we will be asking for your support as those requirements become more solidified to make sure that our personnel transformation keeps pace with the rest of the force.

    Thank you for the opportunity to be here, sir.

    Mr. MCHUGH. Thank you very much, General.

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    [The prepared statement of General Maude can be found in the Appendix.]

    Mr. MCHUGH. Admiral Ryan.


    Admiral RYAN. Good afternoon, Mr. Chairman, Congressman Snyder, distinguished members. I am honored to be here to represent the Navy, our wonderful men and women and their families. In the interest of time, I would like to just focus on three key areas. First, just briefly update you on our personnel status. Our retention is up seven percent this year. Our attrition is down 1-1/2 percent. We have made a recruiting goal for the last two years, and the quality of our recruits is up again this year. The bottom line of all this progress is that we have reduced our gaps at sea in our battle groups from about 12,000 in 1999 to just under 5,000 today. That is a 60 percent improvement, so readiness is up as a result of the leadership of our Chief of Naval Operations (CNO), Vern Clark, and our new Secretary, Mr. England. They have placed their emphasis on combat capability and they know that people are the direct number one reason for that improvement.

    Three requests that I would make of the committee for your support, first, as you mentioned Mr. Chairman, for our end strength. Our end strength requirements grew by over 3,300 people this year, primarily for three reasons. One, in the antiterrorism force protection areas as a result of the U.S.S. Cole we have added about 1,000 personnel in the antiterrorism force protection area to reduce our risks of another event. We have also increased our ship and squadron manning in the maintenance areas, particularly for our old ships and our old squadrons where the maintenance per flight hour and for steaming hour has gone up considerably. That has already had an impact on our maintenance and on our retention. And then finally, to help training we have several hundred people that we have added in the training area to improve our battle group training.
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    So for end strength for next year, we would like to start out the year like we believe we are going to end at 376,000 because of the successes we have had in recruiting and in reenlistment we fully expect we will be able to meet the 376,000 mark and your help on the supplemental has helped us to fund those additional people and lower our risk and improve our readiness.

    The second area is the targeted pay raise. We believe in the Navy that because of the technical nature of our ships and our aircraft and our weapons systems we need to move to a more experienced senior force. It will be a smaller personnel force but it needs to be more senior and it needs to be more experienced. And so we are hoping to increase the number of people in our top six enlisted categories, E–4 through E–9. We have funding in our budget to support a gradual growth in that area, but one of the areas we are hoping for support from the Administration and the Congress is in legislation, allowing us to have an additional half percent more in our E–8 end strength. As you know that is regulated right now by Title X to E–8, E–9 to three percent. We are asking for an exception much like the Army has in that area so we can grow our top six to meet the more technical requirements that we have coming in our Navy.

    The additional item that I would like to talk about is simply targeted pay. I think the Administration has been clear on that. That would be another thing that would help us migrate our force to a more senior experienced force to have the different pay scales, particularly for E–5 through E–9. We think that would help us migrate to this more senior force. So those are the three things we would like your support for. The one area of concern that we have in the Navy, our Secretary and our CNO are working with the Administration, hope to get your support for this as well; you know that the Navy and Marine Corps expeditionary forces deploy for six months.
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    We have always kept track of our deployments and our PERSTEMPO by the unit in making sure that our personnel are home for 12 months after they go away for 6 months. The Congress wisely enacted legislation last year that directed all the services to also look at the individual PERSTEMPO of each of our members. We have aggressively implemented that procedure as much as the other services have. Unfortunately, we have only been able to accumulate nine months of data so far. We have some concerns as we try and improve the quality of service, it is a top priority for our Secretary and CNO that there may be some unintended consequences if we rush into full implementation of this.

    We would like to have more time to work the employment schedule of our carrier battle groups. As you know, this involves decisions by the National Command Authority. We would like to rework our maintenance schedules for our ships when they may be called to do their maintenance work out of the home port of the individual ship. These things will take some time. We are well on our way to improving those things, but we would ask for your consideration on the implementation, the speed of the implementation of that regulation, and with that, I would just thank you all for your support and the opportunity today.

    [The prepared statement of Admiral Ryan can be found in the Appendix.]

    Mr. MCHUGH. Thank you very much, Admiral.

    General Peterson.

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    General PETERSON. Mr. Chairman, members of the committee, it is a pleasure to be before you today and speak on behalf of the men and women of our Air Force. We are very proud of our folks as we visit the field, and especially our forward deployed members. We realize how important the initiatives and recruiting and retention are to them and to our Nation.

    We are making progress in our strategy. Recruiting is on the upward slope. We, in fact, have our recruiting goal metaphor this year. We are restoring our delayed enlistment program and we are improving our quality as well. We will see an increase in our recruiting goal next year of a couple thousand, from 34,000 to 36,000. That will help us with our end strength.

    Retention is stabilizing. We have gotten our first term retention up back above goal for the first time in two years, and yet we still have trouble in establishing our goals and midterm and career, those are the ones that are most hireable in the outside economy, and as a result, we are working hard on that, but I would describe that as being stabilized at this time, fortunately, because of the initiatives and support we have had from your committee as well as the Department of Defense in giving us tools to work the problems.

    We appreciate that support that you have given us, not only the tools, but the flexibility and the legislation that allows us to be a little more agile and responsive in working these dynamic problems that we face as we try to maintain and sustain the force of quality of people.

    Some of the areas that we would like to focus on is to continue to work forward in funding our ability to buy down the gap, buy down the pay gap in our military. Focus our pay raises as we are today, and target, I think we all agree, toward our Non-Commissioned Officers (NCO), corps in particular, to balance them more closely to what their peers in the civilian world are experiencing. And to reduce the out-of-pocket expenses, as you mentioned earlier in your statement.
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    We appreciate the legislative authority and compensation that you have given us to work these programs and encourage our recruiting and retention in particular, that of our enlisted officers as well as our civilian workforce, which is about 160,000 members of our Air Force. Programs like accession bonus and general military course incentives for our Reserve Officers Training Corps (ROTC), gives us more flexibility.

    One of the very important areas for us is major grade relief, which we think improves our force management flexibility. It compensates our people who are actually doing major jobs as captains, and it helps our retention as well. In the long run, we think this is an important piece of legislation for us. Your support in TRICARE and continued support of quality of life initiatives through funding remain important to all of our force. And finally, legislation that we have received last year and continue asking for this year to help shape our civilian force, which I mentioned earlier, is a very large portion of our Air Force.

    Forty two percent of our civilians in the officer grades are eligible for retirement over the next five years, and so having the ability to shape that force and sustain it with the tools that are necessary is very important to us. We have a three-pronged approach. The first is in the sessions where we want to increase the sessions that we will have a shortfall there, and quality of people which will require again an opportunity to have flexibility in our hiring practices as well as being able to fund at a competitive environment that we face in competition for talented people in that workforce and special skills such as acquisitions, scientists, information technology and the stability of our force in that area.

    The second area is the development of the force that we have. We have a very talented force in the middle of that structure, but we want to be able to upgrade their skills and keep them current and qualified in the changing technologies that we operate with.
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    And finally, separation as we work that large bubble of eligible retirees. We don't have a crisis yet, but we would like to lead turn that, being able to operate with some incentives in the drawdown there. We have had authority from you for veritable volunteer separation incentive pay. We would like to extend that into fiscal year 2002 and 2003 so that we can shape that force to provide us the right skills and talents we need, and also begin to bring in that front end and mentor it, grow it to be the force of the future for our Air Force and the military and civilian side.

    And finally, I too would like to express our appreciation for the great support that this committee has given us and the staff in helping us by providing us that flexibility and supporting the initiatives that we have asked for and moving our force back to where we want it to be.

    Thank you, sir.

    Mr. MCHUGH. Thank you, General.

    [The prepared statement of General Peterson can be found in the Appendix.]

    Mr. MCHUGH. General Parks.

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    General PARKS. Mr. Chairman, distinguished members of the subcommittee, it is a privilege to be here with you this afternoon and to address a personnel status and the future manpower picture of the Marine Corps and to thank you for your continued support.

    As my colleagues have mentioned, with their service, today's Marine Corps is made up of dynamic young men and women who have a strong work ethic, solid moral fiber and a desire to be challenged, and because of that, they have multiple options in front of them and ability to be hired by multiple different avenues. Because of that, we are indeed, as the Chairman has alluded to, in a battle for—a war for talent. We have been extremely successful in this difficult environment, and due to the hard work of our recruiters, and the Marine leaders across the Corps we will, once again this year, exceed our retention and our recruiting requirements categorically.

    The President's budget appropriately addresses our basic pay needs and reduce out-of-pocket expenses. It has also been addressed. We continue to desire to minimize that comparability gap and look at other ways we can minimize the out-of-pocket expenses for our men and women.

    From a standpoint of our most pressing needs in the area of manpower unfunded needs, they are the shaping tools. We have our enlistment bonus program, our selected reenlist bonus program, and our Marine Corps college fund, and like my Navy colleague, we are a bit concerned about the challenges we face with the first tempo legislation as was addressed, and I look forward to commenting on that if given the opportunity and I look forward to answering your questions, sir.
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    Mr. MCHUGH. Thank you very much General, I appreciate all of your testimony.

    [The prepared statement of General Parks can be found in the Appendix.]

    Mr. MCHUGH. Mr. Secretary, let me start with you. Let me start with one of the last comments you made and from our prior conversations, I understand and recognize your concern about the fencing issue as you described it. That direction, in your view, overdirection of funds that takes away necessary administrative flexibility. As I am sure you are aware, there are those who feel somewhat differently, I suspect, in a later panel that the Surgeons General might have a different view, and that the concern they may have is that without a way of directing funds, particularly to the direct care system and the military treatment facilities (MTFs), they don't always get adequate resourcing.

    What, if anything, can you tell us here today to assure you that you and the Administration recognizes that responsibility and would act in a way to meet it?

    Secretary CHU. That, indeed, is the very source of my request. I have met with the Surgeons General, we have discussed the fiscal, as well as with the service secretaries, and we have discussed the fiscal year 2002 budget. And they have, they, the Surgeons General, have asked could we consider taking steps that will allow the military treatment facilities, perhaps, to recapture some of the care that has gone off to the purchase-care sector, particularly as we open the door more on the over-65 generation, and I have said absolutely; but in order to do that, we will need some ability to use the total budget to support that kind of change.
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    Now we don't yet have the specific plans as to how we are going to take it. I don't pretend that we have this all worked out, but it is that very reason we, in fact, would like this kind of flexibility in this mark by the Congress.

    Mr. MCHUGH. And your suggestion was received fairly well, very well, not so well?

    Secretary CHU. I think the Surgeons General feel their budgets are very tight for fiscal year 2002, and that is the other source of my reason for seeking the kind of flexibility I have requested because we do want to be sure that the in-house system is properly resourced. I think they, as you point out, sir, are concerned that because purchase care is as a practical matter an entitlement and we have to pay those bills, they are worried that we will reserve too much money for that and not enough money for them, and I am eager to take all the steps necessary to ensure that we do fund the military treatment facilities appropriately and that is why we would like the flexibility to use this total in a flexible manner going into 2002.

    Mr. MCHUGH. Thank you for your response. Now, to one of the first comments you made, pay raise. I mentioned in my opening comments that obviously as each budget is, this is going to have to come down to priorities and decisions, not all of which are happy or certainly easy. Pay is an area of grave concern to us all. We have some competing pay proposals. Of course, we have the Administration pay proposal that five percent for officers, six percent for enlistment and then targeting in various pay grades. Our colleagues, two men who I hold in the highest regard, have made somewhat different, but in many ways, very similar proposals that in terms of our decision-making process, certainly seek to spend a lot more money over the 10-year cycle, anywhere from $9- to $16 billion. I can't imagine there is a member on this subcommittee, and I would venture on the full committee, who does not believe that more pay is better. We recognize that challenge, but in the context of this budget proposal, could you tell us why you believe the Administration's request is, at this time, the proper, should I say, the better, more effective way to go?
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    Secretary CHU. Delighted to do so, sir. As my testimony and testimony my colleagues suggested, the Department is beginning to form a new, and we think, particularly given Admiral Ryan's comments, more appropriate stand for thinking about military compensation and that is that while there should be some basic pay raise for all, that at any given point in time, we need to be sure that the moneys we have available are, in fact, directed to our areas of greatest need. And what the ninth Quadrennial Defense Review of military compensation has identified is that the E–5 to E–7 especially, and as we thought this through, we concluded E–5 to E–9 grades. That arises from the fact that the standard comparison in the past tended to be, what someone with a high school diploma might enjoy as earnings in the civil sector.

    Increasingly, as the aspirations for American youth have pointed toward college education, we really need to be thinking about the group of individuals who have some college education as a point of comparison. If you look at our pay scale against that standard, we need to do more for the grades I indicated. And so in terms of its structure, in terms of both philosophy and structure, we think is a much better approach, both this year and over the longer term, and I think the difficulty, while we deeply respect the Members who have put forward these alternative plans and who have been great friends of the military and military personnel over the decades, we think this is a better way to go in terms of both velocity and the structure in the future.

    The other difficulty that the alternative pay rates have presented, as you noted, sir, is they are much more expensive, and so out of a fixed top line, the question obviously is where, what can you do less of, and this Secretary, this President have emphasized, as you know, in this budget request, people across the board, and so my fear is this is going to come out of the housing improvements the Secretary would like, or the improvements in the infrastructure, the places where people work, which means so much in the total environment in which they function, not just what they take home in their paycheck.
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    I think our view is this is an appropriate balance among these competing interests, it is not the last pay raise we will ever have in the Department of Defense; we will have another go at this probably in a few months.

    Mr. MCHUGH. Thank you, sir. One quick question to Admiral Ryan, and then I will yield to my colleagues. I was going to ask what the breakdown was as to the distribution of your increase end strength request, but you did that very adequately. The follow up I would have, the way you describe, and I get the impression that this is perhaps a one-year initiative to meet identified needs arising out of certain events and challenges, the U.S.S. Cole and others, but is that the case or is this what you think will be the first year of a series of efforts to increase Navy end strength.

    Admiral RYAN. Mr. Chairman, our CNO, when he came in, felt that we were undermanned, and needed to improve our combat capability. He came from the same kind of fleet. He felt very strongly that we should do everything we could to increase our manning, to reduce the risks to our battle groups, and as a result, our areas of antiterrorism force protection.

    Secretary (of the Navy) England has also come in and said the combat capability is his top priority and manpower is a key to that.

    What we have originally constructed in our 2003 budget would have continuity in that end strength to support whatever force level QDR has. So our CNO has planned to keep the end strength up at that level, at the 376,000. Of course, we are all awaiting the results of the QDR and what our force levels will be, but we intend to continue to man at a higher level. During the 1990s, we got into the habit of manning at 90 percent of our requirements.
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    And our budget, our plan is to move up a higher percentage, in the 90s, of our requirements, and what the CNO has done to minimize risk and improve battle group efficiency, while we are working the budget, he has done this because of the success we have had this year and with the help of the supplemental, we have done it.

    But our budget for 2002 is funded that way, and that is the plan if we are to maintain a higher end strength in our units and end strength that we used to maintain prior to our drawdown where we lost 225,000 people.

    So we think we have kind of been on a personnel diet, as far as the actual required manning of each of our units, and we are trying to get off of that diet and get our end strength up so that we don't put such a burden on each of our sailors to do the work of more than one individual. We think that impacted on their quality of service and it is something that the CNO is very much focused on as one of his top priorities to improve the quality of service, and he thinks undermanning, we have put too much of the shock absorbency on our sailors and their families that is impacted on our retention.

    We see visible results already this year in our morale by being able to carry these additional personnel. We think that is one of the reasons for our pretty positive increase in retention this year, seven percent is a very, very positive sign for us.

    Mr. MCHUGH. So what you are telling me is you may have further requests in the future? I am not disagreeing with your objectives, I am just trying to understand them.
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    Admiral RYAN. We would like to better man each of our units in the future. So we think this is about the number of people we need to meet the requirement for the force level we have now and we intend to sustain that force level and that number of personnel. We think we are at the right level right now.

    Mr. MCHUGH. Thank you, sir. Dr. Snyder.

    Dr. SNYDER. Thank you, Mr. Chairman. Dr. Chu, the establishment has been trying to pull together numbers from the budget on the special compensation for severely disabled retirees, and there seems to be quite a lot of variation between the different services on that number. Is that something you can comment on now?

    Secretary CHU. No, sir. I would take that for the record.

    Dr. SNYDER. If you could get it for me please.

    Secretary CHU. I will look into it.

    [The information referred to can be found in the Appendix.]

    Dr. SNYDER. I wanted to ask about the issue of the deployments. The Commandant the other day made a comment that the $100 per day after, was it 400 days and 2 years, just was not at all helpful to the Marine Corps, I guess.

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    General Parks, I would like your comment, but Dr. Chu and anyone else, is that a policy that you all have budgeted for? Is it difficult to budget for? Is it difficult to record-keep for? Is it a policy that we need to look at changing? And anyone that wants to comment.

    Secretary CHU. Let me lead off, if I may. The Administration is not prepared to ask Congress for change at this juncture. An important reason, of course, is that we have just received this direction from the Congress as Admiral Ryan testified, we are just now starting to understand who might be affected and what the incentives might be that will create.

    Further, and the important reason, I think, as you know, the Secretary is engaged in a broad review, and you have talked with him about U.S. military strategy, what the force structure might be of that response strategy, and how it might be deployed, and I think one would want to come back to this issue in the context of those answers, not with just one change, but perhaps a number of changes in terms of how competition works to support the new military strategy and the way the forces might be used, and so I am very reluctant to endorse a one-at-a-time approach.

    It is the case that as Admiral Ryan testified, and General Parks indicated, both the Navy and the Marine Corps are concerned with the effects for them of this new law, but we have not yet had, as a mathematical matter, the first person who could be theoretically eligible would not be eligible until November of this year. The bill in 2002 for this will likely be modest.

    General PARKS. I think I can start out by saying that we clearly understand in the Marine Corps the intent of the Congress, and we are obviously complying with that guidance in tracking and managing the personnel tempo. Until this legislation came out, we did not previously have a mechanism to track it. We now do. And as a result of that, we are now compiling the data that we think will address what the ultimate per diem impact is going to be for this high deployment tempo.
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    Fundamentally, what our Commandant addressed and what our concerns are is that we are an expeditionary force by our very nature, we are forward deployed and based rotational requirements that we alluded to earlier, particularly on our Marine expeditionary units, especially the command elements, the service support groups and also as well, fleet antiterrorism security platoons, all are directly affected by the pace of their operations and will max out the window much quicker.

    The impacts that we see at that juncture are that that will leave us with fewer experienced and trained Marines available for deployment. Because of the number, because of the size of our force, we don't have the latitude to be able to pull one unit, insert another, or even pull people necessarily that readily make this fluid and able to comply with the threshold.

    What that will force us to do is transfer an individual who has a high accrual rate under this legislation. As I said, the inventory is small and we are concerned that it will have an impact on our unit cohesion where Marines join up and train together and deploy as a unit as well as the fact that much, like all the services our folks who are deploying are doing, what they want to do in many cases, and they join to do that. They are excited about that, and as a result, on the retention side, we have our highest retention rates when they are out doing what they want to do, and are concerned that we are going to be putting something in here that is running counter to that direction.

    Perhaps one way to describe it is we are not convinced that one size will fit all.

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    As we are assessing the impact of it, we are concerned that in, perhaps what we can do is look at a way to delay the impact of this by delaying the threshold date when this will or the suspense date when we have to start paying the benefits. I recognize that that is a challenge in today's environment, and in conjunction with this legislation. We are not trying to fight the legislation. We simply are trying to give us time to assess truly who needs to be paid the benefit.

    Dr. SNYDER. Thank you. The only comment I might make, Dr. Chu, is sometimes the best time to change the policy is before it has been implemented, it can be easier to change then rather than later.

    General Peterson, I was desperately trying—frantically trying to learn to country dance the other night at a tavern in Little Rock, and was out with a pilot and spouse on the D.C. Little Rock Air Force Base learning to fly C–130s. The pilot was a woman, five-year Air Force, loves the Air Force, very impressive young woman. Give me your thoughts, if you might, on the difference between retention and recruitment between men and women, if any, what thoughts you all have had as far as looking ahead to the future in the mix of men and women in the Air Force at the pilot level.

    General PETERSON. First of all, we have been very fortunate in that. We, as you know, started recruitment of women pilots a couple of decades ago, and I would say it is pretty normalized in our Air Force. The retention patterns are close. As we look at them, there may be a little bit of fallout toward the end career point, and I think this is understandable as families come into the equation, but as far as carrying out the mission and operationally transparent to our force today, not only the officers, but the enlisted as well in aviation.
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    We have, as you know, almost a 100 percent of our skills available to women in the Air Force, and only those that are restricted by law, ground combat, do we not have serving. So I don't know if it is the answer to the question or not. But we have very few problems. We don't see women serving in aviation as being a problem for us as far as strength of the force and retention.

    Mr. MCHUGH. I thank the gentleman. Gentleman from Kansas, Mr. Ryun.

    Mr. RYUN. Thank you, Mr. Chairman, and if I may, just for a moment, I would like to say thank you to the panel, but also the personnel that are just behind the panel and for all who are out there serving our country. I think it is easy for us, especially in times of peace, to take for granted what you all do, and I know there are sacrifices you make now, even preparing to defend us and being in harm's way, if it is necessary.

    I would like to address my questions to General Maude. In your statement, you said that it is possible the Army will need to increase its personnel authorization to meet all of the unit manning requirements, depending on the reviews that come out of Quadrennial Defense Review, and right now, you are currently at 480,000. The armed forces structure may successfully endure that review. In other words, you may stay at 480,000, it may go up or may go down. I think it is imperative that the Army keep its end strength at the level or increase it if possible, but certainly not drop lower than what it has right now.

    What are you doing, or what are your concerns after the year 2002 when we look beyond that time frame, right now we are at 480,000 in the outyear, what are your concerns as we look at the transformation that is going to take place with regard to end strength?
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    General MAUDE. Sir, I think our emphasis, as we look through the transformation is, as we work on the development of future force structure to leverage the technology of the future weapons systems will give us, for example, if we can make the force lighter, and at the same time, more lethal, you can certainly impact on the number of trucks you need to move ammunition and basic load.

    And so our expectation is to be more efficient in utilization of people as we work towards that transformation and modernization. In the near term, our challenge is to do all that we have on our plate with the resources we have. We are convinced that we need more people to do the missions that we have now. I am convinced, as the personnel chief, that in order to retain the units at 100 percent, which we believe is vital in being able to do the job right, and I think contributes tremendously to retention, if you are in an organization that is robustly manned, that is equipped to do the job, you feel good about what you are doing, and you tend to stay, and currently, we probably have about a five percent delta against our current force structure, and our end strength, in terms of our ability to man all the formations at 100 percent, so they can do the job the right way. But as we look to the future, I think we have the capability and the ability to recruit what we need against the mission set. However, that turns out in a QDR.

    Mr. RYUN. One of my concerns is that you have a wonderful attitude, and that is the attitude of ''can do,'' but I think we have taken advantage of that with overdeployment to the extent we have worn a lot of personnel out and worn a lot of equipment out; one of my concerns too is the talk about the possibility of reducing potentially two divisions in the future. Is that a concern for you at this point?

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    General MAUDE. Sir, that is a tremendous concern for us. As we work through, of course, if it becomes a function in the QDR debate of the National Security Strategy, and that should drive the force structure. But as I look as the personnel chief against current National Security Strategy and current missions, sir, you are exactly right in term of our force structure is overextended at our current 10 division force structure that we have in place.

    Mr. RYUN. Thank you very much, Mr. Chairman, thank you.

    Mr. MCHUGH. Thank you. Gentlelady from California, Mrs. Tauscher.

    Mrs. TAUSCHER. Thank you, Mr. Chairman. Mr. Secretary, welcome. General Peterson, thank you for your service. Gentlemen, I don't really have any other questions except for Vice Admiral Ryan. I am very concerned and interested in the issues of spousal employment. I think that the issue of spousal satisfaction, you know about quality of life, pay, education, all of the myriad of issues that are important for us to retain families in the military are real 21st century issues for us as we try to compete with the private sector, and the Navy has a spousal employment program. And I need to know some more about it, Admiral.

    So whether you want to tell me now or write back to me, I would appreciate knowing more about the services that it provides. I understand that it is really actually used a lot. There are supposedly 55,000 spouses that used the program in 2000. I would like to know what kind of data you keep, what kind of metrics you have got, and even more importantly, what are the retention rates for service members whose spouses have received the benefits of this kind of program?
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    If you want to chat a little bit about it now, I am happy to hear about it, but if you would like to just write to me I am happy to hear that, too.

    Admiral RYAN. We are proud of what we are trying to do in the spousal employment area. One of the things that we recognized in the 1990s when we downsized, we took our eye off the ball as far as the family and the spouse in several areas, and so spousal employment is absolutely critical for us, particularly with, like, the other services, much as we move around and as many spouses as we have overseas. So we have four different pilot programs ongoing in the spousal employment area, many of them partnered with the Office of the Secretary of Defense (OSD).

    We also have tried to get our eye back on the ball of understanding that you may recruit a member, but you retain a family, so our Center for Career Development, which we stood up last year, has about 40 personnel in it, and what we do is we go around to each of the bases and we ask the member to bring their spouse with them and we give them presentations on the benefits of service.

    We get input from them as to what their satisfiers or dissastisfiers are and what their needs are, and out of those we have gotten a rich amount of data as to things we need to work on in a policy area. So this has been a real step back in the right direction for us. It has, we think, been part of our improvement in retention that we are back paying attention to the spouses, and we know that they make at least 50 percent of the decision when their member decides to come in.

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    So I can provide you detailed status on our pilot programs, some of them are embryonic, some have been going on longer, and we have three major conferences on spousal employment coming up in the next fiscal year, again, some of them partnered with OSD.

    [The information referred to can be found in the Appendix.]

    Mrs. TAUSCHER. I really appreciate that, and if any of the other service members would like to provide that information too, and Dr. Chu, perhaps I can give you a call and we can work on this issue together. I think it is a very important nexus for how we plan out the future of this retention goal that is tougher and tougher to meet.

    Secretary CHU. Well, I would be delighted to, ma'am. I should note that I have the privilege tomorrow of meeting with the Secretary of Labor at the Secretary of Defense's instigation on, among other issues, exactly this one.

    Mrs. TAUSCHER. I look forward to talking to you, thank you, Mr. Chairman.

    Mr. MCHUGH. Thank you. Gentlelady from Virginia, Ms. Davis.

    Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Chairman and Secretary Chu. Welcome, and thank you gentlemen for being here to testify.

    Secretary Chu, I would like to ask you if you had to rank them, could you tell us what you believe to be the top personnel priority and also what you think needs the most attention?
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    Secretary CHU. My top priority would be securing the pay raise with the structure that we have recommended this year. I think this is the foundation on which everything else rests. I think of also great importance are the improvements to the housing and other quality of life programs that have been requested by the President and in parallel, the improvement to the work environment that is embedded in the Secretary's decision to try to bring defense buildings and facilities to a standard that is at least equal to that in the commercial sector, to get our replacement cycles, as people like to call it, on to the commercial standard, which is once every 67 years. We are currently up there someplace, as you know, close to 200 years. So that is not satisfactory.

    Mrs. DAVIS OF VIRGINIA. So that is the area that needs the most attention?

    Secretary CHU. The most attention in my judgment is a pay raise proposal that I think that is the foundation we build, but I think below that is, I am very eager to try to ensure we get the housing and quality of life improves we have asked for, and in parallel, improvement to our work environment that is so important to our people's morale.

    Mrs. DAVIS OF VIRGINIA. One more question. Earlier today General Shinseki testified in our full hearing that he felt there needed to be more personnel, not less, and I was just curious if you had that same feeling, if you could expand on it.

    Secretary CHU. I think all the services coming back to this issue Mr. Snyder raised about the Congress' direction to the Department to, through essentially a penalty, pay a penalty if we deploy people too much. We are very much focused on the burden on our people. We are looking hard at that as part of this Quadrennial Defense Review process. We don't pretend to have all the answers yet to that. One of the answers is, in fact, to have more people, but that is not necessarily the only way that we can cope with this and improve the situation as far as our men and women in uniform are concerned.
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    Mrs. DAVIS OF VIRGINIA. So am I to take from that, you would not be in favor of downsizing the Army?

    Secretary CHU. In fiscal 2002, we have our recommendation as to what the Army's end strength ought to be. For fiscal 2003 and beyond, as I have hinted in answer to an earlier question, this is very much a function of what the National Strategy Review produces, and since that is still ongoing and a distance from being finished, it would be rash for me to predict what a number would be.

    Mrs. DAVIS OF VIRGINIA. I didn't mean to put you on the spot, but I think we are all curious as to what that strategy review is going to show.

    As always, thank you, Mr. Secretary. And thank you, Mr. Chairman.

    Mr. MCHUGH. Yes. From Virginia, Mr. Forbes.

    Mr. FORBES. Thank you, Mr. Chairman. And, gentlemen, thank you for being with us. I just had a couple of questions. We all hear when we talk about recruitment and retention that that is a package of different components that we need to use. But if you had to target in on the number one tool that you felt that you needed for reaching our recruitment goals, what would that tool be of that whole package of things?

    Secretary CHU. In my judgment, sir, it is aligning our compensation system so we recognize that our main competition for young Americans today in the enlisted force is the attraction of going on to college and acquiring some college education and the kind of career earnings that that now implies in our society. And that is why we targeted the pay raise that we did.
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    That is why we believe in that approach, and it is—and establishing that philosophy and pursuing it, not just this year, but in the years ahead is the most important thing that we can do to sustain the recruiting success of the last couple of years and sustain our retention picture, which is generally quite good, in the period in front of us.

    Mr. FORBES. And I noticed on your statement that the number of reenlistment bonuses have grown from 1991 to 2000. What is the breakdown in the percentage of the reenlistment bonuses that are paid to individuals that are in deployment situations where they are tax free, when they are getting them versus when they are not? Do we have—.

    Secretary CHU. I have to turn to my colleagues and see if anyone knows that answer.

    General MAUDE. Sir, I don't have it for the Army, but I can get it for you. But as an a general rule, I can tell you that a soldier who knows that their formation is going to deploy to a tax-free zone and can delay their reenlistment until they get there, they certainly will for the economic advantage.

    [The information referred to can be found in the Appendix.]

    But we have exceeded our reenlistment goals around the world, and the reenlistments for soldiers in Korea, where there is no tax advantage, or central Europe or the United States is equally as robust as for those units that aren't in Bosnia and Kosovo. So while it does affect timing, we don't think it affects the ultimate decision whether to stay or leave.
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    Mr. FORBES. Okay. Last question on housing: have you had any situations where we have done any partnering with our housing with the private sector, and if so, how does that seem to be working in comparison with the housing that we are funding completely ourselves?

    Secretary CHU. Absolutely. I would like to turn particularly to General Maude, because the Army has some very interesting things going on.

    What it does give us is a way to move forward much more quickly than we could if we were dependent entirely on full government funding. It also brings into partnership with us all of the skills of the private sector in delivering a quality product, and one that is up-to-date and the kinds of amenities and characteristics that it has.

    General Maude, you might like to say something about the Army's—.

    General MAUDE. Yes, sir. We are very excited because of the issue of acceleration and because of the ''whole community'' concept that we are able to bring when we do housing planning in a contractual agreement with a civilian corporation. So our initial take is, we are very excited about the opportunity to do it, and our initial results are very positive.

    What I would like to do is send you some specifics for the record to give you the locations where we have the program, and the specific advantages that we have seen at those locations already.
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    [The information referred to can be found in the Appendix.]

    Mr. FORBES. Thank you, Mr. Chairman.

    Mr. MCHUGH. Thank you. The gentleman from Texas, Mr. Thornberry.

    Mr. THORNBERRY. Thank you, Mr. Chairman.

    Dr. Chu, as you know, Admiral Jeremiah recently directed one of the review studies for the Secretary (Rumsfeld) on personnel. They made a number of recommendations, including things like revising the up-or-out policy, let the people stay in their position even if they don't get promoted, longer tour lengths, particularly for some key positions.

    They talked about partnerships with industry, some pay equities, particularly in the 10-to-13-year deal. Where are those recommendations? How are—are they fitting into what you do? Is it all just going to be rolled into the QDR and come out in the 2003 budget request, or where is all that?

    Secretary CHU. I think that you will see most of it appear as the 2003 presentation in January or February of next year. We are making these our priority issues in the QDR as far as personnel questions are concerned, and we have committed to the Secretary to produce for him a strategic human resource plan, which is also part of Admiral Jeremiah's recommendation here, the capstone recommendation here, that covers both—that covers all three, active, Reserve and civilian, personnel and is very much on the front burner.
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    People are working on this issue, as we speak, on what it would mean to think about longer careers, what it would mean to consider some relaxation of the up-or-out policies, what it would mean to have longer tenure in particular jobs, which is another of the Secretary's concerns.

    Those could produce a very different, much more responsive force for us. So we are very excited by the prospect of looking at those issues.

    Mr. THORNBERRY. So I take it your general approach is, these are recommendations certainly worthy of more study and they are actively being considered?

    Secretary CHU. Absolutely, and going on to study to look at how, if when we are to do it, would you implement it, and what would be the implications of that implementation.

    Mr. THORNBERRY. I think it has been probably a couple of years at least—and this subcommittee has held hearings with witnesses who were demographers, pollsters, trying to get a sense for how the population is changing and why people may make the decisions that they make to get into the military or stay. And one thing that is—that certainly came to me from that is, it is a very complicated decision with a lot of factors.

    A lot of people have asked about recruiting and retention, how the pay and benefits may affect that as well as morale, but also, how OPTEMPO plays into that; also, how the—how they feel about the equipment that they are working with how operation plays into it.
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    I mean, we have all had these anecdotal stories about how people get tired of scrubbing around for spare parts for something, they decide that they are going to get out and not go through the hassle.

    I guess what I am wondering is, how do you sort through all of that? As you work through the recommendations that Admiral Jeremiah came out with, as you try to figure out what sorts of people—how we are going to attract in a tight job market different kinds of skills for the future from in the past? How do you—I mean is—I don't know, are there enough smart people you can get into a room that are going to sort all of this out about why people make decisions or how we can best structure our compensation system and other personnel policies to get and keep people, or is it more complicated than that?

    Secretary CHU. Well, it is certainly complicated enough. And I think consistent with what you are hinting at, we do see it as a whole, not just as a set of individual pieces.

    Indeed, I think one of the most interesting elements of Admiral Jeremiah's report was his emphasis that this is noble work, and that, as this committee has done over the years, we should celebrate that work, and we should be sensitive in terms of our personnel policies to that fundamental principle. And that is why we are equally concerned with pay as we are with working conditions.

    Back to your point about lack of spare parts. I think the sort of old—the old principle here still applies; people want to be part of a quality outfit, and a quality outfit is not one that gives them poor tools to work with or does not give them wherewithal with which to accomplish their mission. So our challenge is to put these different parts together.
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    To the specific question of what—and I should turn to my colleagues here, because they are the ones on the front lines, so to speak—but, I think that one of the things that we are paying attention to in terms of decision to join and stay in the military is, what is the influence of other people in the individual's life? Whether that is parents or siblings or spouses or children, who are saying this is either something we do want to do, we do want to see you doing; or unfortunately, as sometimes has been true in the past, something that people denigrate and say, that is not something that you should be doing.

    And I think we want to be at the first point where the influencers, as I think the recruitment community likes to call them, are saying, ''You ought to be doing this, this is a great career choice, we are proud of you for doing this, you made the right decision.''

    General PETERSON. I just echo the point that Dr. Chu just brought up. I think we find that one of the things that we are short on in our Nation today is an appreciation for national service, be it military or other voluntary service. I think we in the military, in particular because we are smaller, we have less role models out there, we have less people to talk about that, and so we don't hear it very often.

    And I usually say this: I think it is very important. The most important thing, I think, in our service is the sense of doing something worthwhile and meaningful.

    Now compensation can be an issue when it gets—when the gap gets to be too large. But it is not money. It shouldn't be a penalty to serve with families and other responsibilities that we have today.
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    But the thing that really keeps our people going is being proud of what they are and what they do. And that is the strength—and the people that they serve with. It affects both our recruiting and our retention, the way that the leadership of the Nation describes the importance of this or fails to describe it. And I don't mean our political leadership, I mean our corporate leadership, I mean our educators, I mean those that influence our people. When they make it important for people who serve, in whatever capacity, military or other national service, then our young people begin to think it is important, and they are reinforced by that.

    We have seen this in the military as public opinion has ebbed and flowed in support of those people, that is a big factor in what they do. Certainly people that they consider to be good role models and peers.

    And so this is something that I think that we can do with no cost, but with great benefit; that is, to commit ourselves as leaders in every part of our Nation to talk about the importance of national service.

    Mr. THORNBERRY. Thank you.

    Mr. MCHUGH. We thank the gentleman. For the information of both the panel members and the subcommittee members, we have been informed that there is likely to be a series of four votes at about 3:30.

    And wouldn't it be serendipitous if we were able to end this panel by 3:30? Just a thought. We will see how that works out. In the meantime, I am happy to yield to the gentlelady from California, Ms. Davis.
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    Mrs. DAVIS OF CALIFORNIA. Thank you, Mr. Chairman. I will try and be brief.

    Thank you, all of you, for being here. I happen to believe that taking care of our military personnel is the most important thing that we can do, so I appreciate the fact that you are as engaged in this as you are.

    I wonder if we can switch for just a second. I believe that recruiting and retention are somewhat important, but I also hear that we could do better in the transition phase between the decision that our men and woman make to stay or to go back into the community.

    And in many cases, of course, they are part of the community, but that transition can be difficult, and I think we are not only—we are not only trying to create people who can defend our country, but also who can contribute their skills, their talents to the community overall, and sometimes perhaps we fall short in that.

    I wonder if you could quickly characterize or grade your services on how well you think we do in that area and what you need to do a better job. How can we help more in that area? What needs to be done?

    Admiral RYAN. One of the things from the Navy point of view is that we think that we did about a C grade until we started the Center for Career Development. With the Center for Career Development what we have been able to do is give presentations to people who are considering getting out of the Navy, to let them know what they should be looking for and what the benefits are that they are giving up, so that they make a more informed decision when they do select an opportunity on the outside.
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    Another thing that we have been able to do with very little funding is do a much better job of working with our Naval Reserve, 90,000 personnel, and giving people an opportunity to go back into the civilian community but still take advantage of their service. And we have established fleet concentration areas where we work with our Reserves to make sure that there is a one-to-one handoff between the member leaving and making sure that he or she is exposed to the opportunity to continue to serve part-time in the Reserves. So those have been two things that have helped us a great deal in addition to the Federal program, the transition program that we already have in place.

    General MAUDE. Ma'am, we have a program that we began in the 1990s associated with the drawdown, when we moved from 720,000 to 480,000 personnel, called the Army Career and Alumni Program. And we have continued that program since—after we completed the drawdown.

    In effect, it takes everyone that decides to leave and their family members and assists them in resume writing, job searching, marketing themselves in their community, helping them identify how the skills that they have learned over the last 3 to 20 years translates into marketable skills in whatever part of the country.

    We have international-wide or national-wide contracts with large corporations where we post jobs, their jobs on our Web site to assist people. The Troops-to-Teacher Program is a part of that. And so we probably rate ourselves right now a B-plus. We have the core of the program and it remains vibrant.

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    But in recent years, we have had, because of budget constraints, to move to less hands-on one-on-one with counselors and individuals, and a lot of distance learning, self-based kind of instruction to do that. We are not as happy doing it that way, but we have had to do that because of budget constraints. But I think we are probably still a B-plus. We have got a great program.

    General PARKS. Ma'am, to pick up on your question from the standpoint of recruiting and retention, as you said, not that, but from the transition, I think that we would have to look at it holistically, that this is just a piece in that process.

    I believe in that regard, we have recognized—in fact our Commandant recognized the astute point that you raised—because a few years ago we had a slogan, ''Enlist in the Marine Corps and Win Battles.'' When General Jones came aboard, he changed it to ''Win Battles and Create Quality Citizens.'' The people we have, we try to bring quality individuals into the Marine Corps and then, whether they serve 3 years, 4 years, 20 years or 30 years, eventually they are going back to the hometowns of America. And if we have created a quality citizen, they are going to carry that back to hometowns and coffee shops and businesses and represent the institution from which they came.

    As an extension of that, we are now working on a program called Marine for Life, and that would truly be an expression that we believe is true; and that is, once a Marine always a Marine. But we would carry that on to help the individual transition back to their society, back to society wherever they are going to go, and continue to perpetuate. I believe that is just what you are talking about.

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    General PETERSON. We have similar programs. Our Crossroad Web site has a very powerful capability. It is linked, much like the Army's, with employers across the Nation, and especially in helping our spouses as they make transitions.

    The other is, as General Parks says, we try to educate our people while they are in the service and make education an important part, which gives them opportunities as they go out—not only members, but their families as well.

    Our aid society actually provides scholarships for family members as well as our members, our tuition assistance and the Montgomery GI Bill are helpful for members in the service themselves. And in our family support centers, we have transition programs for all of our members.

    Mrs. DAVIS OF CALIFORNIA. Thank you. I appreciate that. Do we have any statistics on the number of men or women who have served who are homeless in communities? Are you able to track that? I know certainly in terms—in terms of Vietnam veterans who are homeless, San Diego has had a very important program called Stand Down. But I wonder whether—are those statistics tracked, do you know? Does anybody have a way of finding that out?

    General MAUDE. We do not.

    Secretary CHU. We can find out for the record, ma'am.

    [The information referred to can be found in the Appendix.]
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    Mrs. DAVIS OF CALIFORNIA. Thank you. I appreciate that. And just a comment on the distance learning program. Particularly, I think, the Army has been the most aggressive on that perhaps, and I would be very interested in knowing how we can further that, and how we can make it accessible, certainly, to the greatest number of individuals who want to take advantage of it and to do it in a way that enhances what other—whatever skills they bring to bear; but really, again part of the preparation of the community, but also to make them more able to bring the technologies to the services that we need.

    And just one follow-up quickly: I know that we talked a lot about salaries across the board. But I would also be interested, and perhaps you can just share that with me, with communication, how you feel the progress is going to give particular credits or retention incentives to Information Technology (IT), personnel serving in the military? Thank you.

    Mr. MCHUGH. I thank the gentlelady. The gentleman from Connecticut, Mr. Simmons.

    Mr. SIMMONS. Thank you, Mr. Chairman. Thank you, gentlemen, for coming today to testify on these important issues.

    I recall when I enlisted in 1965 I was paid $65 a month, which was a lot, but my first sergeant thought it was too much because the food, the housing, the clothing, it is all provided. Why do you even need the money?

    Secretary CHU. First sergeants tend to feel that way.
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    Mr. SIMMONS. That's right. I went on to Officer Candidate School (OCS), graduating the same year that Lieutenant General Maude graduated from Infantry OCS. At the time, we were told there were about 40 percent casualty rates for second lieutenants. In fact, my Tactical Access Controller (TAC), officer was killed about six weeks after we completed the cycle. But—I don't remember what I was paid then, but I guess my feeling was, there wasn't enough money to pay me to go overseas under those circumstances, it had to be something other than money.

    And this gets to General Peterson's comment that there are other issues than money, there is pride of service. I think that we have to honor that, and I assume that you all honor that in training your troops. But the debate today is on money, it is on pay and it is on benefits. It is a different world, it is a different circumstance, and we have to adjust to that.

    And I guess my concern is this: I agree that better pay is going to help with recruiting. Is it going to help with retention? It is my hope also that better pay will help with issues like those service families who are on the Women, Infants and Children (WIC), program or food stamps. I would like to see better pay targeted so that we don't have anybody eligible for that program anymore, if possible.

    And so my first question is, do we conceive that this pay raise, which is substantial and healthy, is going to reduce or eliminate those service families who are currently eligible for food stamps?

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    And then, second, by creating a bifurcated pay raise, one that is based on a basic raise for everybody and then a second level of targeted increases, do we run the risk that as we move through the budget process, the target raises will be lost and we will be left only with the basic raises? And if so, is it appropriate to have a single percentage basic raise for all enlisted and all officers? Or aren't we losing the whole point of the pay raise in that regard, which is to target those specific individuals that we want to capture and keep over and above those others who have served and served well, but aren't targeted?

    Secretary CHU. Let me answer both—let me start with your second question.

    We certainly don't want the result in which it is all spread across the force as a whole. We do want to target the pay, as we have testified particularly to those E–5 to E–9 grades.

    On your first question on food stamps, the pay raise will help in that regard. Probably the larger effect is the Family Support Assistance Program that Congress passed last year. I do have to be honest and acknowledge that for those military members living with large families, that we will still have a residual number, even with those new programs, on food stamps; and that the gap in terms of their income level relative to what is necessary to get off food stamps is so large that there is no pay raise in sight that is going to eliminate the last 2,000 or so personnel involved.

    Mr. SIMMONS. For purposes of the question, would that number be statistically insignificant at this point?
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    Secretary CHU. Well, it is never insignificant to the family involved. I don't want to demean it in any way. But I think with the programs, with this pay raise, with the kind of pay raises likely in the future, certainly with the family support program that has been enacted, we have made a substantial reduction. But it is—I have to acknowledge we—these steps are not quite enough to get it to zero.

    Mr. SIMMONS. Thank you, Dr. Chu. Thank you very much.

    Mr. MCHUGH. I thank the gentleman. The gentleman from Illinois, Mr. Kirk.

    Mr. KIRK. Thank you, Mr. Chairman. Just a brief question on the effect of H.R. 2310, the legislation by Mr. Murtha. Would it be possible for you to advise us as to not just the budgetary impact which we have here, but the potential retention impact that it would have if we go to these pay raise increases? Do we know from experience how much of the problem that we solved in the absence of captains, the—the key senior enlisteds that we need, is that within the capability of the Department, of the services?

    Secretary CHU. General Maude may want to answer that question from the Army's perspective.

    We can furnish you our best estimates of what we think the retention effects will be, but I can't quote them off the top of my head.

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    [The information referred to can be found in the Appendix.]

    General MAUDE. In terms of return on investment, I would have to speculate, sir, and take it from this standpoint.

    We know from a lot of exit surveys of captains who separated between 1997 and 1999; if you ask them what the reason they left was, the priorities that they based it on has to do with their job satisfaction, their family's satisfaction. And when these things aren't right, then pay grows exponentially in terms of its importance. And so what we are seeking on the pay base is to get that at a reasonable level, and then we can deal with the other two issues which we have been discussing—family satisfaction, job satisfaction.

    This pay raise will go a long way, our officers tell us, and our senior noncommissioned officers, in showing the will of Congress and the will of the Department, in having fought for the pay raise, that their service really does matter, that we are trying to compete for their continued service on multi dimensions, one of them being economic.

    But I can't give you a figure that says an X percent pay raise for the grade of captain will get this kind of yield in terms of retention.

    Similarly, in the last six months or so, sir, I have been to Europe, the Pacific and Southwest Asia; and I asked our people out in the field. In talking to them, I described where we had planned on the target pay raises, what we had planned on doing.

    And I found it very encouraging. I was interested to see what their attitude was when I told them that we were going to target our NCO force. That is where—and our junior officers—I saw heads nod in the audience. And they were—the heads were lieutenant colonels, they were captains, they were majors, they were senior NCOs and senior civilians.
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    So I think that they think that that is the right way to do things, that—the interview of the F–15 pilot at Incirlik, getting ready to taxi out on a mission, when asked about his pilot bonus, told a reporter, ''That young staff sergeant down there loading the AIM–7 on my airplane right now is the one who needs the bonus.'' So I think our forces got it pretty close to right on this.

    To expand on it just a little bit, we would like to get—we would like to minimize bonuses, because while we need them for critical skills and we will always need them, I think that we have too many now, and it reflects basically a de facto pay raise for a large portion of our force.

    So I think this concept that Dr. Chu talked about, raising the level of our pay to get closer to what we see on the outside, is important, and that when we do that, I think that we will see less bonuses—we will always have them, but less of those.

    The number one reason for leaving the United States Air Force today from both officers and the enlisted is the availability of jobs in the civilian world.

    Mr. KIRK. Certainly. I was working the Incirlik flight line last year, and boy, I would have paid—as an intel officer, I would have paid my Communications Technicians (CTs), any amount of money to keep them in—those were my top people—to do that.

    But I—on General Maude's point, is there anything that we can describe as an administrative BS reduction effort for officers? The best job in the Navy is command at sea. It is what everybody fights for, and it—you are out there all alone and you are in charge.
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    But how many O–3s or O–4s have that just—are overwhelmed in paperwork, and while you wear an officer's uniform, there is actually very little authority that you have. Is there anything that we can describe as a—a BS reduction effort so that officers really do command?

    Secretary CHU. Well, the Secretary hasn't called it quite that, but he has asked that we all begin thinking about those things within our control, apart from those things in your control, that inhibit our ability to manage. And I think included in that are the kinds of things that you are talking about, some of which are there for old, historical reasons and no longer apply, and are well worth getting rid of.

    Admiral RYAN. For the Navy, for the last year, we have, in conjunction with the effort to improve the quality of service, tried to improve the interdeployment training circle where much of that bureaucratic stuff takes place with the idea of giving the individual commanding officer power back over their unit to run their unit and lead their unit the way that they want to.

    We are about 50 percent of the way there in reducing unneeded exercises, canceling regulations, instructions, those types of things. We have heard that message loud and clear from both our enlisted and officer personnel and have a real effort ongoing there.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    Mr. MCHUGH. Thank you. The gentleman from Rhode Island, Mr. Langevin.
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    Mr. LANGEVIN. Thank you, Mr. Chairman. I would also like to thank the panel for being here this afternoon.

    I guess I would like to focus just for a minute on the recruitment aspect of your work—it concerns me that you have a decreased ability to recruit—and just to focus for a minute on the comment General Peterson made, that you see a lack of support for national service.

    At the time—and I am wondering if—the pay issue aside, to what degree is that a function of just a good economy where jobs are plentiful? To what degree is it a lack of patriotism? Or to what degree do you think it is a lack of support for the military?

    Secretary CHU. Well, if I may start the answer, on the pay issue itself, I think what the Department has realized, as a result of the ninth Quadrennial Review of military compensation's work, that we need be aiming at a different standard in terms of how we think about the pay for enlisted personnel, reflecting the changes in society, specifically the ambition of the vast majority of young Americans today who graduate from high school that they want to go on to college.

    Now, not everybody is aiming at a four-year degree, not everyone, of course, finishes his program. But that is the standard against which we have to start thinking about the adequacy of military compensation.

    Certainly some of the recruiting difficulties of the last few years can be ascribed to the hot economy, but that is by no means the only source of the problem. And I think the kind of restructure and pay tempo that is being described here is the first step in the right direction in getting ourselves in the right place for the long term.
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    That is no way to lose sight of what General Peterson talked about, which is ultimately people serve because this is what they believe is appropriate for them, and their responsibility to their country and their fellow citizens; and it is, as Admiral Jeremiah said, noble work and that they are delighted to do it.

    But we can't put them in a position where there is some significant financial penalty associated with that response on their part.

    General PARKS. I would pick up on Dr. Chu's point of college being the gold standard today. It has clearly changed our entire recruiting market and the direction that we have to go to in order to motivate people and entice people to join the United States military.

    Access to high schools has been another competing factor that—obviously, the vibrant job market has been significant, perhaps right up there as the most significant challenge that we have.

    It is also interesting that over the past few years where the Harris Poll has rated the United States military as the number one most respected institution in the country, yet we have all been challenged—some would say struggling, but certainly challenged—to recruit people, a tremendous dichotomy in the situation that we are all presented with.

    A lot of that is simply that when we went to the all-volunteer force, we lost the visibility in our Nation of national service and the need for that; and any way that elected or other appointed officials can discuss that to highlight military service, to highlight national service in that way will support the other things that we have discussed already.
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    Admiral RYAN. Congressman, one other thing that I would add. There was some talk about demographers. What we understand about the millennial generation gives us hope for real optimism with this coming generation. They seem to be much like the greatest generation that we had that won World War II with us.

    They are very interested in service. They are very interested in Dr. Chu's concern about balance between career and family. And if we can compete and show them that they can have the balance between career and family and an opportunity to serve and do something noble, this generation appears to want to do that.

    I think our number one challenge is the awareness issue, making them aware of the opportunity in the service, not just to get a skill and an education, but to get those intrinsic values that they can take with them in life. As Ms. Davis says, whether they transition to be a citizen or not, we think that the armed services do that better than anyone else as an employer, the technical skills with the intrinsic values. So we are optimistic about this upcoming generation, if we can build the awareness out there.

    General PETERSON. I would agree with Admiral Ryan, and I think that all of us would. We are not worried about this generation of young people that are coming in, that they are not good enough. They are well up to the standard. And they are enthusiastic when they finish their training. All of our basic training programs, I think we would agree, are truly a transformational period in a very short period of time for those young people. They come out very proud and changed. And they like those standards and they like being challenged. And our goal and our responsibility is to sustain that challenge and opportunity for them, and that is what keeps them in.
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    Mr. LANGEVIN. Thank you, Mr. Chairman.

    Mr. MCHUGH. Thank you. Mr. Schrock, the gentleman from Virginia.

    Mr. SCHROCK. Thank you, Mr. Chairman.

    Mr. Secretary, Admiral and Generals, I am sorry I wasn't here the whole time, because I can assure you this issue is incredibly important to the district I represent. But I do want to ask one question. It is one of the questions I asked the Secretary of the Navy and the Chief of Naval Operations when he was here recently.

    There is some talk about members who are deployed, what, 401 days out of 703 days would be paid an additional $100 a day for that extra time. I am not sure that is such a hot idea.

    I guess we need to cut down on deployment time. But I would be curious to know what your spin is on a proposal like that.

    Secretary CHU. As you know, sir, this was the Congress' proposal, not something the executive branch asked for.

    Mr. SCHROCK. That is why it is not such a good idea.

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    Secretary CHU. I am not denouncing it, and I think there is some division of opinion in our ranks about this issue. But for the Administration, we are not, at this juncture, seeking to change it.

    It has—we haven't even reached the first person who is owed the funds yet. It may well be as we take—as I indicated earlier, as we take into account all of the changes in U.S. force structure, force deployments, the Secretary's review may produce, that we will want a somewhat different packet of ingredients; and at that juncture, we may want to come back to you on this issue.

    But I know my naval service colleagues feel different about this.

    Admiral RYAN. Not really. I think Dr. Chu has a good point there.

    I think that we are looking at the speed of implementation. We do need more time to understand where the Administration wants to go and the unintended consequences that may arise with only nine months of data.

    So we think the thrust is very right to track the individual tempo and understand what it does to the quality of service and the individual, and ultimately recognize them if they are serving greater than the mean.

    But we just don't know what all of those consequences are yet, so we can't disagree with what Dr. Chu has said about further study.
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    Secretary CHU. Let me pick up on that point. We all agreed, and it has been a hallmark of the President and Secretary's comments that we need to reduce the deployment burden on our personnel, and the Congress' instruction in law to us has certainly brought everyone's attention forcefully onto this subject.

     General PARKS. And just to add, sir, I think we are all in agreement on the intent of Congress on this one. I think the question is the implementation period, until we have a chance to rigorously scope it and determine exactly the cost that we are talking about.

    Mr. SCHROCK. It seems to me that that is not going to solve the problem, you need to cut the deployment times down, and when they are not deployed, keep them home with their families. Because we are paying them $100 to keep them at sea all of their lives, isn't going to solve the problem, I don't think. Thank you, Mr. Chairman.

    Mr. MCHUGH. Ladies and gentlemen, well, serendipity prevails, I guess. To all of you, thank you so much. Again, General Peterson, in particular, best wishes to you, sir. We do have a number of other questions—and I am sure that may be true for several of the members—that we would appreciate your response to, as we submit them in writing for the record.

    And we appreciate your being here and look forward to our continued joint concerns on these very, very important matters. Thank you so much.

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    [The information referred to can be found in the Appendix.]

    Mr. MCHUGH. Seeing as how the vote has not been called—in fact, we have just been informed that—they tell us that it is another 30 minutes to the vote —so sit back down, you guys.

    The second panel will be comprised of Rear Admiral Clinton, Acting Assistant Secretary of Defense for Health Affairs; Lieutenant General James Peake, Surgeon General, Department of the Army; Vice Admiral Richard Nelson, Surgeon General, Department of the Navy; and Lieutenant General Paul K. Carlton, Jr., Surgeon General, Department of the Air Force.

    I would also note that, as with General Peterson, Admiral Richard Nelson is also retiring in August.

    And, sir, we wish you all of the best in your future endeavors, whatever those may be, and express our appreciation to you for your service both to the men and women in uniform in the Navy and to the people of this country. We thank you.

    As with the previous panel, I would note that we do have all of your statements that will be entered in their entirety in the record. And as I thought the first panel did relatively effectively, very effectively; we would ask you to try to concentrate your comments on those areas where you are particularly interested in having us be aware of your views, your positions and your thoughts.

    Mr. MCHUGH. And also, as with the last panel, why don't we hear the testimony in the same order in which you all were introduced, which brings us to Dr. Clinton. Doctor, welcome.
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    Admiral CLINTON. Good afternoon, Mr. Chairman, distinguished members of the subcommittee. I am pleased to appear before you today to review the military health system and discuss our budget requests for the fiscal year 2002. I will summarize the details of our submission to you.

    The budget does support the direct care system, and you heard Under Secretary Chu describe our recent conversation with the services in trying to reconcile any differences that we may have with regard to the relative requirements of the direct care system and the managed care system.

    I think that we have had a very frank discussion about that and have in place measures to work through our requirements, both in the distribution of the 2001 supplemental and the 2002, and the planning for 2003.

    We do indeed have an integrated health system; one is not just a supplement of the other. And I think to accomplish what we are all trying to do, we need greater visibility across the budget so we can address these issues. I again emphasize Dr. Chu's comment that we ask that you not fence the funds, so that we can demonstrate and operate the system in the integrated fashion that it will be in.

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    The budget also substantially increases things such as pharmacy by 15 percent, reflecting our experience and that of the private sector. It increases the private sector managed care contract by 12 percent, again reflecting the experience that we have seen in the private sector.

    Sufficient funds are also provided to implement the fiscal year requirements, indeed extensive, of the National Defense Authorization Act of 2001, including the TRICARE For Life benefits.

    We are very pleased with the expanded and simplified pharmacy benefit which began April the 1st, which has been provided with no significant problems.

    Further, we have worked extensively with our managed care contractors, the military departments, the beneficiary associations, and the Department of Health and Human Services to ensure a smooth transition for the benefits which begin in October of this year.

    By the way, all of the beneficiaries will soon be receiving a letter from the TRICARE Management Activity (TMA), again emphasizing the range of benefits and the various materials they need to understand that benefit, which begins October 1.

    We have also issued a new policy that will allow our beneficiaries to maintain existing primary care provider relationships with military providers under a newly established program called TRICARE Plus. I am optimistic that this program will be particularly attractive to our Medicare-eligible beneficiaries who are not eligible for enrolling in TRICARE Prime.
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    You will notice in our budget a savings of about $300 million for fiscal year 2002. This can be accomplished with your help in allowing the Department to use predetermined rates for skilled nursing facility care and specified hospital-based services.

    With the inclusion of our senior beneficiary population in the TRICARE program, we anticipate greater use of these specific services, and good business practices require that we look at the Medicare approach for payment for their senior populations and adopt a similar prospective payment for those specific issues.

    We do not expect barriers to access to the care of our beneficiaries as a result of this proposed legislation, nor will patients be threatened by the possibility of balanced billing, but we do seek your support for our proposal to accomplish the savings already built into our budget on an accelerated basis.

    In addition to several activities to improve our management and performance, that we have discussed with you in the past, these continue; and we reenergize our sharing efforts with the Department of Veterans Affairs through our DOD-VA Executive Council, examining various ways in which the two systems can indeed work together for mutual benefit.

    We recently chartered five additional work groups to identify further opportunities for sharing and collaboration. We have initiated the process of designing a new template for our managed care support contracts that incorporate the advice that we received from the Department, from our line leadership, and from industry and consultants. We want to simplify these contracts. We want to facilitate financial predictability, encourage competition and reduce the administrative costs. I am confident that we can do that. We will be discussing these activities with the Congress in greater detail as we proceed with our contract design.
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    In each of those challenges, we have committed to good stewardship, finding a prudent course that takes care of—that affords us opportunities to make sound decisions based on quality health care principles and good business practices.

    Mr. Chairman and members of the committee, we have made enormous progress, I think, this year in responding to the direction of the Congress with regard to the TRICARE For Life plan. It has been an extraordinary year in working together and focusing that new program.

    We have made considerable progress in other areas for the active duty and the active duty family members. And we believe that we have improved the health and the fitness of the armed forces. We look forward to the forthcoming year, and I would be happy to respond to your questions.

    Mr. MCHUGH. Thank you very much, Admiral.

    [The prepared statement of Admiral Clinton can be found in the Appendix.]

    Mr. MCHUGH. Lieutenant General James Peake, Department of the Army. Again, welcome.


    General PEAKE. Mr. Chairman, Congressmen Snyder, distinguished members. I really am pleased to be here representing the United States Army Medical Department today. I recognize the focus of this committee, that it has on people of our military, their centrality to the readiness of the force, and to their quality of life.
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    What my chief is talking about in his transformation campaign is their well-being; and I appreciate this committee's support for the support of their health care.

    Certainly, with the National Defense Authorization Act (NDAA), of this last year, Congress provided one of the most comprehensive benefit packages in the country. It did a number of things for active duty soldiers, a lot of whom live away from military facilities, recruiters, ROTC folks, even food inspectors.

    And they will have—and their families will have in TRICARE For Life under the TRICARE Prime Remote for active duty—health care nearly the same as if they were living near a military treatment facility.

    A generation—Tom Brokaw's ''Greatest Generation'' is particularly appreciative of the TRICARE For Life provisions of the NDAA, and frankly, my own 89-year-old retired dad is appreciative of them.

    I believe the positive response of retirees is already positively affecting recruiting and retention in our Army, and I personally applaud Dr. Clinton and the TMA for getting the pharmacy benefit off on the 1st of April so successfully. I think that has made a big difference in that confidence.

    But it sounds like we are talking about a Health Maintenance Organization (HMO). We are really talking about military medicine, something much more than an HMO. It is the platform that ensures, sir, your 10th Mountain Division that it has high quality medical coverage when it deploys three hospitals that went to Somalia; the 28th Combat Hospital that went to Haiti with the 10th Mountain, came directly from our direct care base, the medical force projection platform of our military.
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    It is a base from which we get ''double-duty'' readiness with instant deployability across the spectrum of conflict, the spectrum conflict. The 28th also went with the 10th Mountain to Hurricane Andrew, supporting the citizens in that case. ''Double duty'' because the skilled men and woman who populate those deploying units, are, for the most part, spending their time providing care to soldiers, family members and retirees, and now retirees of all ages in our direct care system.

    These missions, some would try to separate; I think that is wrong thinking. This full spectrum of patient care keeps our provider skills sharp, it keeps our providers satisfied with the quality of their practice, and it keeps us in touch with that extended Army family that—those retirees that do so much for us when they speak positively about us in terms of retention and readiness. So it is readiness at multiple levels that we contribute to.

    Maintaining this direct care system does require investment in facilities, in people, in technological advances that are part of a world-class health care system. And it is an investment that I believe has been underfunded for some time.

    The Defense Health Program is a large number of this 2002 budget, and it covers new benefits that are really not very easily modeled. Dr. Chu has had maximum flexibility in its execution, and it is only with that kind of flexibility that I can see that the critical requirements of the direct care system can be funded, requirements that will allow us to keep the expectation that the TRICARE Senior Prime folks have for a continued level of service under our replacement program of TRICARE Plus that Dr. Clinton mentioned, requirements that hire the ancillary personnel and make the facility modernizations needed to optimize the productivity of our providers in the direct care system, and requirements that cover mandated expenses, like civilian personnel raises and utility costs, and even IT professional raises that have been mandated, things that not only mean quality of care for our military families, your constituents, but medical readiness.
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    I have been the Army Surgeon General since September. I have testified twice, and each time I have tried to grab an incident that talks about what military medicine is really all about. It has been pretty easy. The U.S.S. COLE was one, the errant bomb at the Udari Range; the medical response to both of those kind of incidents.

    Well, about three weeks ago a land mine caused a traumatic amputation of the lower leg of a young sergeant on the side of the hill in the rugged terrain of Kosovo. The combat medic sergeant was inserted from the UH–60 Blackhawk medivac helicopter on a jungle penetrator down through the trees, probed for land mines to get to the patient, secured the bleeding, amputated stump with a tourniquet, and extracted the patient who, in 10 minutes was in the United States Army Reserve Hospital that is there serving in Kosovo.

    That combat flight medic was Sergeant Christine Roberts, mother of three, Emergency Medical Technician (EMT–B) qualified, who was, by the way, black and blue from bouncing against the trees going down on that jungle penetrator, went back that same day because she knew where stuff was to help the Explosive Ordnance Disposal (EOD) team bring out the sensitive items. Once that place was cleared, 14 land mines were found in that area.

    When I spoke to her, what she wanted to talk to me about was her crew and how great they did pulling her patient up through the trees without hurting him, how they—this gal has spent two years at Walter Reed, worked the wards, worked the emergency rooms—and what she said about that is, that gave her the skills and the confidence in her skills. She has had tours in Korea. Now she is with the 101st Airborne Division. I am proud of her, particularly proud of her—101st—and I am proud of the Army medical department that she exemplifies.
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    We are more than an HMO. If you want to quantify the value, you can go out and see that young sergeant with his amputated leg embraced, and a world-class orthopedic team taking care of him now at Walter Reed. You will see more of those Christine Roberts there, practicing those skills that will make them the heroes and heroines of the next mission.

    So, again, my thanks for your support to their solders, to our soldiers, their families, and I look forward to answering your questions.

    Mr. MCHUGH. Thank you, General. Very poignant story and illustration, and I think we all share in the pride that you understandably feel for those kinds of great men and women in service to our country.

    [The prepared statement of General Peake can be found in the Appendix.]

    Mr. MCHUGH. Vice Admiral Nelson.


    Admiral NELSON. Thank you, Mr. Chairman, distinguished members. Thank you for letting us come before you today. I have submitted a statement and in that I tell you the good things that are going on in Navy medicine.

    Today I would like to briefly just mention two issues I guess to you, and not in great detail, but bring them up. This is the fourth time that I have come before this committee since being the Surgeon General of the Navy; there has been one dominant theme through those four. And that has been the resourcing of the direct care system in military medicine. I think that is an issue still of concern to us as the Surgeons General.
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    We need an adequate, flexible and predictable funding for the direct care system. These past several years—and I can speak specifically to the three years I have been Surgeon General—the underfunding of our direct care system and the late supplementals have broken the system worse than most anybody recognizes. We have serious problems that cannot be easily fixed.

    The second piece that I would like to speak briefly about is my concern over provider satisfaction and retention. These are the people—the men and women, physicians, nurses, and other health care providers who take care of our sailors, Marines, and the rest of our beneficiary population.

    I got concerned about this in my time as Surgeon General, as I traveled around the system; and last year I asked the Center for Naval Analysis to do an evaluation of provider satisfaction. They have done that. They have now expanded that at Congress' request to all of the services, and I think we will have a report on that in August. That is my recollection.

    But what I—some of what I learned was that the breakage in the rest of the system has greatly affected their morale and their feeling about the value, how much we value the direct health care system.

    We are understaffed. We have not given our practitioners the support staff that they require. We have not been economically able to do that. We have not replaced equipment when we should have. And we have generally underfunded direct care. That has affected their morale and it is now affecting our ability to retain some of them.
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    One of the things that the Center for Naval Analysis identified, and their number one issue—the last panel talked about pay issues. We have not addressed pay for our physician practitioners for 10 years, and we have fallen way behind the mark of the private sector. We have got to review that. In fact, we have a group doing that, but we are going to need help to address that more quickly than I anticipated occurring normally.

    But I am concerned that I am losing the wartime critical specialists, general surgeons, orthopedists, anesthesiologists, radiologists, and other surgical specialities. I am concerned that we will not be able to meet our readiness requirements if we don't stop that flow. So I ask your consideration of that. I thank you for the time. I look forward to your questions.

    Mr. MCHUGH. Thank you, Admiral.

    [The prepared statement of Admiral Nelson can be found in the Appendix.]

    Mr. MCHUGH. Lieutenant General Carlton.


    General CARLTON. Mr. Chairman, Congressmen, Dr. Snyder, distinguished members of the community. It is an honor to appear before you again. This is my second year representing the Air Force medical family.
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    First, I must congratulate and thank the Congress for accomplishing such a daunting task as making TRICARE For Life a reality. Our older retirees have certainly earned the right to this health care. They are our great American patriots.

    I will be frank in stating that we are challenged by many of our competing fiscal requirements to include the new benefit. However, we are encouraged that the President's 2002 budget appears to address these new 20O1 NDAA requirements.

    If we are to be competitive today and into the future, we must also recapitalize our direct care system. We must invest in our facilities and infrastructure if we are to provide the health care benefit that our beneficiaries have so richly earned.

    We are grateful for the inroads of the 2001 supplemental, whenever it comes out, and hope that that will allow us to continue this recapitalization effort. Now, our most important asset are people, we must also address.

    The Air Force medical service faces a personnel crisis. We are more than 300 providers short this year, and we are having difficulty recruiting and retaining in every core, including our enlisted force. When we lose an Air Force provider, we lose more than just the costs of that asset when we go downtown. We are forced to buy the whole service that supports the downtown provider. Thus, the price for replacing the contributions of our 300 personnel providers short may range from $800 million on up.

    We are trying to address those shortfalls in many ways, but most will require precious seed money that we are anxiously seeking to identify.
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    As we plan this recapitalization, we are also recognizing our part is to effectively optimize our facilities and our systems. I am happy to report that our political leadership has addressed this with the Surgeons last week. They have recognized that our medical system is fundamentally broken in the direct care system and have asked us to work with them, identify what we need, and allow them to work with us.

    Hence, I believe we can fix these problems within the top line, perhaps not within the lines that are divided now, but as Dr. Chu indicated, if we take away those lines and regard it as a total program, I believe we can fix this direct care system.

    In the same way, we continue to expand our initiatives with the Department of Veterans Affairs to offer better services to our patients while being responsible stewards of the taxpayer's dollar. The keys to success for the VA are twofold. First, the arrangement must be win-win for all concerned, the patients, and make good business sense for the VA and the Department of Defense.

    Second, we must partner while still maintaining the focus on our unique mission; that is the primary mission of DOD medicine, the readiness mission.

    We understand the pressure on the benefit mission, but our business is fundamentally different. That business was shown perfectly last month when the city of Houston collapsed in their medical infrastructure from a flood that took away 75 percent of their Intensive Care Unit (ICU), capacity. We had the opportunity to fly one of our Expeditionary Medical Support Units, or EMEDS, into this overwhelmed emergency medical service, the state of Texas and the Federal Emergency Management Agency (FEMA), following the flood there.
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    The EMEDS-plus-25 package, or 25 package, was deployed and operational within 12 hours of the tasking. We saw more than 1,000 patients including intensive care and surgical patients, and many lives were saved as we were able to drive the waiting time down in Houston from 24 hours to 12 hours. The efforts of the EMEDS dramatically decompressed that busy Houston emergency department and improved the standards of care throughout the city, thus saving additional lives.

    Both the Governor of Texas and the Director of the Federal Emergency Management Agency were enthusiastic about our contributions and the medical capability that we bring to the environment.

    I am concerned that this growing homeland defense requirement has not been recognized nor acknowledged financially in our country. I have no doubt that the military will get the call in the early hours of any mass casualty situation, and I believe we must be ready for that call.

    I would like to say again that we could not accomplish what we have accomplished without the enthusiastic and generous support of the Congress. We are excited to expand this benefit and to welcome our great American patriots home. Thank you very much.

    [The prepared statement of General Carlton can be found in the Appendix.]

    Mr. MCHUGH. Thank you, General, and thank you all. I am sensing a new direction with respect to fencing. In the past, without putting words in any of your particular mouths or ascribing certain issues toward you, there have been concerns about the financing of the direct care system and interest in, if not fencing, allocating direct amounts to that care system.
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    You, I am sure, all heard Secretary Chu's comments on this. They were echoed here today by Dr. Clinton. And as I have listened to at least two out of the three of you, I heard the words ''maximum flexibility,'' et cetera, et cetera.

    Can we assume that you have had the opportunity to discuss this issue and that whatever concerns you or someone else may have had in the past, those are somewhat, if not totally, eliminated, diminished, and you support the initiative to not fence this allocation? Whoever wants to answer first.

    Admiral CLINTON. I will begin with that conversation, sir. I think what we really learned and expressed very clearly to each other the other day, the other week, is that our Department now recognizes at the top leadership level, that they have systematically underfunded health for a great number of years. That was probably the greatest accomplishment that I saw last year in terms of, where do we stand relative to the rest of the Department?

    You know that the traditional budget process is to take last year's appropriated amount and increase it by some increment. But by underfunding—underfunding real property maintenance, underfunding the direct care system, underfunding pharmacy—so that everyone had to scurry around and make ends meet as best they could, we have ended up with a grossly distorted base number.

    None of us at the table know everything that is in the base. What Dr. Chu, with his leadership, has offered is, let's reexamine the base. But to do so, we all have to open up the books and say, this is how we spent that black box base. This is where it is so terribly distorted because of the systematic underfunding.
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    That is where we came out, I think, the other day. And we began this week—and next week—in sort of sorting through.

    That being said, how do we get it back on track? We will begin by rethinking through the Supplemental. We will begin by looking at what we can do in 2002. We will set in new processes so that we come from a zero-based activity budget development for 2003. That is the plan. I am sure that we will have some lively discussion about what we thought was in the base and the various accounts that we are primarily responsible for, recognizing that health care is indeed responsible for the whole.

    Admiral CLINTON. But I think we have not fully understood the particular constraints of each of the services. I think at that point I ought to let the Surgeons General provide their commentary on what happened and what we have said we would do.

    General PEAKE. Mr. Chairman, I will lead off. I think you have heard from all of us that we think the direct care system has been underfunded in the past. The $3.9 billion that is coming for TRICARE For life, that adds a big amount of money there. So the question is within that, is that some of the flexibility we are hoping that can be used to allow us to be able to be revitalized a little bit and therefore optimize our functions?

    If Dr. Chu has that flexibility, he indicates that is a possible course of action within that pot. Without that flexibility, then we still have issues, each of us, in terms of being able to accomplish our missions, which are multiple. They are the readiness base, as I talked about. They are the provision of care base. It is making sure that we can meet the requirements for those folks that have depended upon us, those over-65 folks as well, and so forth. So with no top-line increase in the defense budget and so forth, that flexibility with a large number of dollars hopefully will give us the opportunity to do the things we want to do.
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    Now, I mentioned that that is not an easily modeled new benefit. There are varieties of estimates across the board of whether that is high end or low end or somewhere in the middle. So we will have to watch that very, very closely and manage internally, but it is a bit of an unknown, I think, at this point of what that real benefit package is going to cost.

    Mr. MCHUGH. Thank you. Admiral Nelson.

    Admiral NELSON. Mr. Chairman, I don't know if the 2002 top line for medical is adequate or not. As Dr. Clinton said, none of us knows exactly what is in it, but what I do know, from a very practical standpoint, why I support Dr. Chu's recommendation for flexibility and why you heard me say flexible, is because with the initial allocations of the 2002 budget, the Navy could not make it to the end of the fiscal year coming up. We would be broke well before the end of the fiscal year.

    I am encouraged that Dr. Chu was willing to go back and relook at that allocation and see if we can't do better by the direct care system. I think he is beginning to understand what the issues are with the direct care system, but we have got to also look at the distribution on the supplemental that we expect to get. With the initial distributions expected on those by Navy, it would be in severe problems.

    Mr. MCHUGH. Thank you.

    General CARLTON. Yes, sir. We work on the margins in military medicine because of our readiness requirement. That is a fixed cost that we must have to fulfill our readiness. An example of that is we lack the $300 to open a surgical pack for an appendectomy to live within our budget, and we buy it downtown for $6,000. That leads to horrible consequences if you underfund the direct care system, which now everyone agrees we have done so.
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    When we discussed this with Dr. Chu last week, the Air Force's title was, ''Fix It Now or Start Multiplying the Costs,'' and he recognized that. He recognized that the direct care system, because we operate on the margins, is a very good investment, and if we give him the flexibility, I am comfortable that he will fix that.

    Mr. MCHUGH. Thank you, General. Well, obviously, first of all, you defused the only argument we had going here today, and I am disappointed, but congratulations. And seriously aside, I am thrilled that all of you have taken the time, Dr. Clinton and Dr. Chu, to sit down and discuss it, because that is what it takes. So the change in your attitudes, I think, is not just refreshing, it shows positive, positive results.

    We know a couple of things. We don't know a lot of things, as you said, and we all need to be very vigilant, but this year's budget request is about a 34 percent increase, and that is a tremendous step forward in the right direction, and certainly we all hope that perhaps we are finally moving beyond the days of executable budgets that you have cited as so frustrating. But a lot of work remains to be done, as Dr. Clinton just said, and certainly we would ask that you please keep us informed as those developments unfold.

    I have got a follow-up question on this issue, but I want to yield to the Ranking Member for his time.

    Dr. SNYDER. Thank you, Mr. Chairman.

    Dr. Clinton, you and I participated in a hearing a few weeks ago on the VA–DOD sharing issues. Are there any specific legislative obstacles to—that we need to look at in terms of making that easier, better for you?
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    Admiral CLINTON. You know, we have had extensive meetings in different places, the Department of Veterans Affairs, our place. Executive Council has met twice since Dr. Garthwaite and I have revitalized that group. I must say, Dr. Snyder, that never once has somebody said we can't do that for some legislative reason. I don't think that is the fundamental challenge. If it is, I am sure he would certainly raise it with you.

    I think we have identified the things that need to be done. It is hard work. It is reconciling common work with two different missions, as Dr. Carlton was outlining in his presentation. So the answer briefly, I don't think that is a significant issue. It is certainly in the back of my mind all the time, and we will call it to your attention should we see something that needs collective attention.

    Dr. SNYDER. Dr. Clinton, you and I have also had some discussions about the TRICARE contract negotiations with private physicians. I was struck by, I guess it was Admiral Nelson, I guess you made the comment that our pay levels for physicians has fallen behind the private folks. Well, of course, I have had a discussion with the private folks that are threatening to bail out on seeing their TRICARE patients because they don't think they can make a living anymore, and these are physicians who have supported the military and our base communities, and I just want to ask you, do you think—or what are your current thoughts on that? Have there been any changes since the last time you and I talked?

    Admiral CLINTON. Well, I think we are always in a somewhat of a financial bind in that we have a great deal to provide, and yet we are expected to provide it at the lowest cost that we can possibly find, given good quality, and that is the role of our managed care contractor is to find physicians who can do precisely that.
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    There are places throughout the country where we have communities—I know a community in Virginia that has expressed that concern, I know one in Alaska, I know one in Idaho, and all I can say is we just stay after them because it is our obligation to find a provider network that is adequate.

    We have established a dialogue, as I indicated to you, with the American Medical Association. So they understand what we are trying to accomplish and understand that indeed we are required and expected to stay in some kind of Federal limit with regard to pricing, but we have the flexibility you have provided when we need to make that intervention.

    One of the new developments, Dr. Snyder, I was very pleased to learn is the expanding primary care capacity at the Little Rock Air Force Base. Dr. Carlton might provide some comments there about in the event we have more restrictions in that community, I think the Air Force can help us with some primary care. Can you expand on that, Dr. Carlton?

    General CARLTON. Yes, sir. We have been undergoing a revolution that we call primary care optimization where we actually staff the physicians with enough people to do the things that they need to do. We teach the ancillary team members to make phone calls, to do lab work, and we call that primary care optimization.

    We have four teams up and running at Little Rock. They are close to their maximum achievable enrollment right now, but they are lobbying for more teams, and so we would hope to be able to expand our efforts in Little Rock. That has yielded huge dividends for us. Our customers love it, and our providers love it.
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    Admiral CLINTON. What we obviously need is some balance between the primary care providers on the outside and through the Air Force, as well as the specialty care, which would not be as robust in the Air Force facility as it is in downtown Jacksonville. So we will stay after that and pledge that we will just stay after that. It is a tough one.

    Dr. SNYDER. Thank you, Mr. Chairman.

    Mr. MCHUGH. Thank you. On that note of cutting-edge approach to medicine, given enough people to do the job, we do have three 5-minute votes and one 15-minute vote, which, I apologize, will probably take about a half an hour. So if you have some business within that time frame you care to attend to, please feel free. We apologize for this interruption, but we do have other members who I know would greatly appreciate the opportunity to address some questions to you, so if we could stand in recess until that time. Thank you.


    Mr. MCHUGH. We will reconvene the hearing. And to all, thank you for your patience. And we now go to, as fate would have it, Mrs. Davis.

    Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Chairman. And thank you, distinguished panel.

    Dr. Clinton, we just were discussing something, and I am going to ask you. You know, you alluded to it earlier, and Congressman Snyder was talking about it, our low provider rates and reimbursement rates and the higher cost of administration burden that is on our private providers.
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    It is causing some to potentially terminate participation in TRICARE. And you alluded a minute ago that you knew of the one area in Virginia, but I guess my concern is, is this going to be a problem throughout the states; if it is a problem in Virginia, in particular in Fredericksburg, which is what we were discussing?

    We are about to lose 25 percent of your providers for our retirees, and my concern is, what options are going to be available if we see this problem happening in other areas? I don't want to put you on the spot, but I just did.

    Admiral CLINTON. It frankly doesn't happen a great deal, but it does happen, and it happens with some regularity. Obviously, they come to your attention and our attention when that occurs.

    Historically, there have been states—Alaska and Idaho are two states. It is a little bit more understandable in an area which is frontier America, where there are only a few providers. It is a little harder with the numbers in a community like Fredericksburg, which is—I think of it almost as Northern Virginia. It is really part of the metro area.

    Mrs. DAVIS OF VIRGINIA. Don't say that. They don't like that.

    Admiral CLINTON. Sorry. But it is not remote, and it is not small numbers. That is where—those are usually the determinants of that in other areas.

    You are aware that there is authority for us to raise that Federal rate to 115 percent, or rather 15 percent higher than the current rate. And we do that with great care, because if we flaunt that too easily then everyone would want 115 percent.
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    If all American physicians who are fantastic physicians in providing care to people whose care is provided by the Federal Government, whether that is Medicare or Medicaid or whatever, I really am helping America accomplish a great deal. Why that doesn't work in that community, I don't know; and I think we will pursue it more surgically.

    I talked with our director of direct care management today. My understanding—as I indicated to you earlier today, we are gathering data, probably with the help of the provider network down there, understanding what their rates and their costs are and whether it justifies an increase in that community, which has not been experienced, to my knowledge, in other communities around Fredricksburg, either south in Richmond or north up here.

    Mrs. DAVIS OF VIRGINIA. I guess the concern is that if this were to happen in other areas, you know, would our retirees have the problem that now we are going to be facing in that part of my district in that if—if the provider cancels August 31st, they have nowhere else—you know, they have got a very limited number, because we don't have this worked out by then. I guess that is my concern.

    I understand that TRICARE is—we are finally correcting the problem with TRICARE for our retirees, but if we aren't correcting it, if we end up with the problem, with the providers dropping out, I am not sure there is a quick answer to that.

    But I guess I bring it to your attention, that we could possibly see more of a problem as TRICARE is expanded.

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    Admiral CLINTON. Well, eventually it is the same problem the Medicare population faces already. There is different leverage power. And most physicians are reluctant not to take Medicare patients. Although TRICARE and military medicine is big, we are not as big as Medicare. Therefore, there are all kinds of leverages, some by statute and some more by just the power of the purse, in which providers would not say, ''I am not going to take any more Medicare patients.'' Somehow that just doesn't happen.

    But they can do that with TRICARE, because they are talking about—they have seven, twelve, twenty. They are small numbers. We are disadvantaged in not having an appropriate level.

    So ours is basically a discussion saying, those folks are part of a group of people who deserve your attention, your care, and we will provide you as much as the Federal Government can.

    Mrs. DAVIS OF VIRGINIA. I appreciate your attention to the matter. Thank you so much, Mr. Chairman.

    Mr. MCHUGH. I thank the gentlelady. Her question brings up another point. Part of the budget submission from the President would be a requirement that those veterans who are eligible for care, either under the VA or the military health system, have to pick and choose. I certainly understand the benefits of that from a Departmental perspective, but I—I question the benefits of it to the individual.

    And I was wondering if any of you gentlemen have a thought on how you would view that proposal versus what many of the Veterans Service Organizations (VSOs) are expressing interest in, that is, obviously, the option to exercise on a case basis access to either one of the benefits, both of which they feel understandably they have earned.
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     Admiral CLINTON. I think this is an example of a very good idea that implementation of is very complicated. It is the Administration's proposal. We recognize that and are trying to think through the intended consequences and the unintended consequences.

    Prior to that occurring, Dr. Garthwaite and I were talking about the need for better coordination among VA and DOD and Medicare, raising quality-of-care concerns, that people may indeed be improperly shopping around for medical care—tried at the VA hospital, got a prescription at the MTF, let us just work through Medicare—and we knew that that wasn't good quality care.

    Independent of that discussion, we decided then that we probably would pursue it with this Administration rather than last fall.

    And then the proposal was introduced by the Administration which does exactly that, it makes choice. But now that we look at those choices, we recognize that they are going to be very difficult decisions to make. An individual who has veterans—let's say has a disability that can be cared for by the Veterans, with their specialized care, may decide that it is more important for him to have the primary care over which DOD systems provides more robustly, so he comes to us, and then we will have to arrange for the care at the VA.

    So indeed they will expect full reimbursement for that referral, for the regular management of that particular problem, and the DOD budget will go up.

    Now, that wasn't an intended consequence. It was all going to be sort of there, all costs will be equal. I don't know that it will be, and I now think that—my sense is, a number of people are going to select the Department of Defense because of our more complete coverage in primary care as well as specialty care.
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    I think it is a very tough one. I think it is going to make individual choices that are quite difficult. We recognize the sort of economic advantages at the top of the line, but I think we have to think through all of it to help people make the right choice.

    And it is probably going to split some families because we can provide care to the family members, and the VA system is limited in their capacity to do any of that.

    Mr. MCHUGH. Exactly. Do any of the Surgeons General have a point?

    Admiral NELSON. Yes, sir. It makes an assumption that the two are comparable. They are not. They are designed to be complementary. If we then start competing for patients between us, we will lose the specific specialty parts of the VA. And we in the direct care DOD system can't do the things that the VA can do. And so I think it starts with a premise that is flawed.

    General PEAKE. Well, sir, my view is that we have some real opportunities for integration of our services. It is different than picking one or the other and then being excluded.

    And the issue for us, I think, is figuring out the business processes that allow us to integrate our services for the—with the patient in the center instead of our respective services in the center, if you will, in places like—it has to do with sharing data, sharing the—be able to share the patient record to be able to pick up, as General Carlton talks about, this specific best capability—spinal cord, as an example, or prosthetics, as an example, that the VA might really have the expertise in. Yet you don't want to split up the family, as Dr. Clinton talked about, to allow that service member or that veteran to be able to access that care.
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    Admiral RYAN. What I think is one of the big safety issues in health is continuity of care and the need for an individual to have a source of health care that knows them, understands them, takes care of them individually, and is aware of all of the medications that they are taking, that sort of thing. And we don't get that if we, you know, if we doctor-shop. That is a problem.

    So I share that concern that Dr. Clinton mentioned. But there is nothing that keeps us and the VA from doing more research, sharing together, and more coordination of the care that we give to this dual-eligible population.

    So I would tend to agree with General Peake's assessment that we need to put the patient in the middle of this and then figure out how we best take care of that individual, rather than fight over where they go, you know.

    Mr. MCHUGH. I certainly agree that the objective of sharing resources wisely is a very, very desirable one. I am looking forward to some work through this subcommittee, the VA committee, and others to help that along.

    But I am not certain that this particular proposal actually doesn't work against that in some ways. And certainly as several of you have mentioned, where you have a veteran who has a specific need, that is clearly attended to in more of a FICA, Social Security way, by one versus the other, you are really asking that person to make an inordinately difficult, and some would argue unfair, choice. But I appreciate your comments.

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    Well, we have kept you all here for quite a time. And we do have a number of other questions that, as with the first panel, we would ask your indulgence to respond to in writing for inclusion in the record.

    Again, we thank you for all for your service.

    And, Admiral Nelson, I wish you all the best as you come up on your leaving the service. We apreciate your contribution, sir. And to you all, we appreciate it. Thank you.

    Mr. MCHUGH. While the third set of panelists are finding their way to the table, I will take this opportunity to introduce them for the record: Lieutenant General Russell Davis, United States Air Force, Chief of the National Guard Bureau; Lieutenant General Thomas Plewes, Chief of the U.S. Army Reserve; Vice Admiral John Totuschek, Chief of the U.S. Naval Reserve; Lieutenant General James Sherrard, III, Chief of Air Force Reserve and Commander Air Force Reserve; Lieutenant General Dennis McCarthy, Commander of Marine Forces Reserve; Lieutenant General Roger Schultz, Director of the Army National Guard; and Major General Paul Weaver, Director of the Air National Guard. And I am glad that is all there are, because we don't have enough table left.

    Gentlemen, thank you not just for being here, although we certainly appreciate that, but for your extreme patience. It has been a long day for you already, and we are very grateful for your indulgence. I would particularly encourage you, as we have entered all of your statements in their entirety for the record and have reviewed and will continue to review them, to try to, as best you can, focus your comments on those areas that you feel are particularly important to me and to all of the members of this subcommittee, so that we can best utilize the time that we have remaining to us.
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    Mr. MCHUGH. And with that, as we have in the past, although they are seated somewhat differently than how they were introduced, why don't we just start as with the introductions with General Davis.

    General DAVIS. Mr. Chairman, distinguished members of the committee. Thank you very much for the opportunity to come before you and represent the 458,000 members of the Army and the Air National Guard.

    I would like to start by thanking you for the support you have given us over the years. Our readiness has improved significantly. We have been able to take care of our soldiers and airmen as a direct result of the commitment that you have made to and the follow-through of that commitment with the resources to provide for our soldiers and our airmen, the resources necessary to keep them on board and to keep our retention as well as our recruiting going on at a high-par level.

    For the last 364 years, the National Guard has served our country in a number of ways. I have some posters which are really indicative of the kind of advertising that we have been able to do, thanks to the support we have gotten from this committee. And I won't use the posters, but I want to mention that in this high tech environment we have moved a long ways from where we were with the trading in of our plows for our muskets.
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    The truly top-notch, full-hand professionals that we have on board are the real source of our readiness. These are our full-time manning personnel. That is one of the key issues we have and are bringing before you as one of the things that is critical to your readiness and critical to the way that we do our business.

    You are aware that we have two roles, one where we serve our states and certainly what we see going on in West Virginia, with the flooding, is a significant part of that, as we have had with some other issues throughout the country. Part of our Constitutional mandate is to do that.

    The other part is to serve on a national basis. And we have a global ad, which you have before you. It is kind of a two-pager which we have done which shows the Guard supporting the natural security interests of the United States both at home and abroad.

    Such programs as the retention bonuses and the recruiting boneses which your committee has very graciously provided to us have assisted us enormously in maintaining our end-strength. They have provided these young men and women with the opportunity to take that funding and do a number of things. The—the educational benefits under the Montgomery GI Bill certainly have been significant, and have been a major factor in our ability to maintain our strength. The funeral honors detail, which we must do to honor those great Americans as part of the ''Greatest Generation'' and other generations who very admirably served our country. We owe a deep debt of gratitude to them and we must make certain that we take care of them.

    I mentioned paid advertising, which is something kind of new for us in the National Guard, and it has been a very, very positive element in recruiting and making people know who we are as a National Guard; and we would like to make certain that we can continue that program, and with your help we will.
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    The commitment our young men and women have made since the Desert Shield/Desert Storm era of the early 1990s has been just enormous, in many cases, two, three, four times the amount of participation that they have had in the past. This has an interesting impact, and we will talk about it a little bit more as General Schultz from the Army Guard and General Weaver from the Air Guard talk about the impacts.

    But they literally are statistically insignificant to those folks who have been mobilized and who have been called to additional duty for the increased level of training which we have had in the National Guard, as well as in the other Reserve components.

    In the Army, the combat assets of the Army are significantly employed in the Army National Guard. And I just returned this aft—as a matter of fact, late this morning from being out in California, watching some of the soldiers train out there in the high intensity environment at the National Training Center.

    The same is true in the Air National Guard with the resources that they have and the percentage that they represent of the various missions throughout the Guard.

    But the unparalleled incentives that we have had have enabled us to provide benefits. I was with a number of soldiers yesterday, and there were nine young soldiers. Eight of the nine have or are using the educational benefits which we provide and which you have given us the funding and the resourcing to do.

    It is not just the incentives, it is also the dedication and the commitment these young men and women have to serve their country. We heard a little bit about that during Dr. Chu's testimony in one of the earlier panels. It is about a noble cause, and service to our country is important.
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    We are having some difficulty, as you are aware, in retaining pilots and air traffic controllers in the National Guard, both Army and Air, and we are working some programs to assist us in that arena.

    As far as medical and dental benefits go for our soldiers and our airmen, we have go to do some work in that arena also. We expect our young people to maintain top-notch medical conditions and dental conditions, and for which we provide literally no funding. So we do have some programs we are looking at in that arena.

    In the area of military construction and real property maintenance, we feel that most of what we have for quality of life to offer our young men and women is when they show up at drill at the armory or in their work facilities throughout the Guard. That is a significant part of quality of life for them; we feel we must maintain that quality of life. And you have heard some of the statistics earlier on the quality of life as well as the replacement rate of your facilities. In the Guard, we suffer equally as poorly, and in many cases, much worse than the active component.

    Employers are a significant part of our business also, and we have been working with a number of them to—including the U.S. Chamber, to look at incentives that we may be able to provide to them, and work that through the building, to make sure we get what we need for our soldiers and our airmen so that we can retain them.

    The net of it is, thanks to your committee, we have been able to recruit and retain young men and women who allow us to maintain the high standards that we are requiring of our young people who serve in the military, the standards that the active military has. We need to train and transform our National Guard in conjunction with the transformation that is taking place in the Army and in the Air Force.
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    And we need to have our people set, trained and ready to support our national security interests when they are called upon.

    I thank you for the opportunity to appear before your committee, and I stand prepared to answer any questions.

    Mr. MCHUGH. Thank you, General Davis.

    [The prepared statement of General Davis can be found in the Appendix.]

    Mr. MCHUGH. General Plewes.

    General PLEWES. Mr. Chairman, members of the committee, thank you for the opportunity to testify today on behalf of the Army Reserve. In the interests of time, I will summarize my statement.

    We are very busy these days. We are proving every day that we can mobilize quickly and deploy swiftly. In fact, wherever the Army has gone recently, so has the Army Reserve. Close to 16,000 of us have been to Bosnia and Kosovo now over the last 5 years.

    As we speak, about 2,500 of us deploy for long periods of time around the world. We are taking care and offsetting the operational tempo, OPTEMPO of an overextended active Army.

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    Despite this high OPTEMPO, or maybe even because of it, our measured readiness levels today are the highest in our history. They are up eight percent over just the last two years alone. After several years of difficult recruiting, we have met our recruiting and retention goals for fiscal year 2000. And through the third quarter of this year, we are exceeding our goals. We will meet our strength objective for this year.

    We are decisively engaged as a full partner with Army's transformation, turning ourselves also into a deployable, more lethal force. We are taking on new missions in consequence management and information operations, missions based on the civilian-acquired skills of our Reserve soldiers. In fact, we are inventorying those skills and making them available to the Army in new ways.

    Our challenge is to provide our Army Reservists with the tools and support they need. One way is to increase full-time support, which is a crucial readiness factor. Last year, this committee and the Congress added 300 active—excuse me, active Guard and Reserve soldiers and 650 military technicians to our force. We are still short of what we need to make our validated requirements for full-time support.

    Resourcing is essential to keeping us the relevant force that we are today. To this end, the Administration's fiscal year 2000 budget represents progress, and we deeply appreciate it. However, I must be candid and tell you that the budget does not fully address all of our most pressing needs, most importantly areas of pay for inactive duty training and full-time support, which I have mentioned.

    I look forward to working with the subcommittee to address these remaining issues and look forward to answering any questions you may have.
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    Mr. MCHUGH. Thank you, General.

    [The prepared statement of General Plewes can be found in the Appendix.]

    Mr. MCHUGH. Admiral Totushek.

    Admiral TOTUSHEK. Thank you, Mr. Chairman, and thank you, members of the committee, for allowing us the opportunity to come and talk to you again today.

    I am happy to report that we too are meeting our recruiting goals and exceeding our retention goals, and that we will come, if we do not make exact end-strength, we will be within the two percent limit.

    I would like to summarize my comments, as well, and just talk for a couple of minutes about the issues that support our manpower issues. And those are the quality of work that our young sailors face when they go to drill.

    The priorities are not only manpower, because in manpower we are doing fairly well, as I said. We still do need more recruiting dollars. We are the least well funded of the Reserve components, at about 50 percent of what some of my brethren spend on recruiting. I think this goes, as I think I said in March, beyond just recruiting for the Naval Reserve, but making a general awareness to the American young public that the military is a good place to serve and a good place to start life's adventure.

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    We also have to focus, though, on training, to give people meaningful training, especially in the middle of the country, when they are away from ships and air bases, give them the meaningful training that will get them to come back again to drill with us. This is beyond just sitting in a classroom and talking about something. We need to get them hardware and get them the computer programs that they need to be able to be successful in training for today's environment.

    We also need to increase our acquisition of some of our aging equipment—in particular, in our aircraft needs, the C–40. I think I have made it pretty well known that this is not only a morale increaser for our young people, but it also allows us to operate much more efficiently in our support of the Navy.

    The same is true of our F–18s. We have got two-thirds of our squadrons now improved, and we need to have additional funding to make sure that our 3rd Fighter Squadron has the upgrades that allow it to perform with the Navy.

    In IT, I have got some fairly aged systems that I am trying to keep on life support, and at the same time, trying to invest in new IT systems that will allow us to get out of the old ones. This again is a morale factor, where we can provide much better and more effective support for our people if we are allowed to invest in the proper IT systems.

    Finally, I would say that we are working very hard with the Navy to make sure that we meet our recruiting goals. I think Admiral Ryan alluded to that this morning when he talked about the partnership that we have, about making sure that people that leave active duty are aware of it and have the opportunity to sign up for the Naval Reserve.
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    And I want to stress the fact that we appreciate the committee's support, and I too look forward to your questions.

    Mr. MCHUGH. Thank you very much, Admiral.

    [The prepared statement of Admiral Totushek can be found in the Appendix.]

    Mr. MCHUGH. General Sherrard.

    General SHERRARD. Mr. Chairman, distinguished members of the committee, I too sit here today very proud to have the chance to speak with you in representing the 74,000 men and women of our great Air Force Reserve Command. It is a strong command and continues to grow stronger with your help.

    I would particularly like to thank you for funding the pay rises about the Economic Consumer Index (ECI), and for us specifically, for the 50 additional recruiters that we got a year early. I can tell you with great pride that having that authority and those recruiters coming on board that we are, in fact, ahead of our recruiting goals and we will make our accession numbers at the end of the year; and I am very, very proud of that, and as—more proud of that in terms of what the men and women that we have brought on board are doing for us.

    Our people are actively engaged, as my colleagues have said, very involved in the expeditionary Air Force. Cycle 2, we will have almost 13,000 Air Force Reserve members involved. And currently we have about 5,000 people deployed, either within the Continental United States (CONUS) or Outside (O)-CONUS; about 1,000 of those are O-CONUS.
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    As we look to the future, I will tell you that I think it is a bright future, but it is one that we have got to be very careful that we have got our force properly postured and able to meet the challenges that we all know we must face.

    Our Air Force Reserve relies very heavily on prior service members. As you look at that pool of eligible members that are available for us to reach out and try to access into our force, we are down this particular year to just over 13,000. Next year, it will rise to about 17,000, and it appears in the outyears level, about 15,000 prior service active Air Force members for us to recruit.

    So it is critical that we get that prior service member, or else we start to drive up our training costs, and in doing so, as we bring those nonprior service members in, we also then will delay that capability and that combat capability that our units so critically have to provide for our Air Force to do the things that we are being asked to do.

    I would tell you that it is important, as General Davis has made mention earlier, that we in the Air Force are blessed in the fact that there is only one tier of readiness. We, in fact, train to the standard that the Air Force has established as a combat ready standard. I can tell you without reservation that our men and women are capable and do that and perform that on a daily basis.

    Our challenges remain, again as my colleagues have mentioned earlier, recruiting and retention. We certainly have those needs. While we are very pleased with the dollar figures that are in this year's budget that you are deliberating, there are also, obviously, still some shortfalls and some needs, that—the priorities to cover the dollars available we still have out there that we have, additional needs.
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    In particular, I would tell you the advertising side of the business is one that we certainly have some needs for, as well as incentives to retain our members. Our retention numbers are high, but the key point that I would like to make, that I think is a key to success for all of us in the Reserve forces, is that we need to be able to retain those members to the max extent possible until they reach their high-year tenure or in the officers' case until they reach their mandatory separation date.

    Those members that leave us at the 20-year point, prior to reaching the maximum time that they could have served with us, are a great loss to our Nation; and to replace those members is virtually impossible—you have to take note of what I said earlier—from that very small pool of prior-service members eligible to join.

    So your option—so the only option that you have is to bring in nonpriors. They are very capable men and women who will serve our country well, but they also take time to accrue that 8 years', 9 years', 10 years' experience that is so critical for them to be a vital and successful member of our force. So it is important that we do our very best to recruit those prior service members, to look at our advertising initiatives so that we, in fact, can tell our story and capture those members that have separated.

    I also would echo again what General Davis says and my other colleagues have said in terms of quality of life initiatives. Quality of life for Reserve members is, in fact, having a safe, affordable place to come to do their job.

    We have got to make certain that we have the right facility, the right real property maintenance fundings and things of that type, so that we are not asking them to come to work in less than suitable or acceptable facilities and something that, in fact, makes them want to come back to be part of a great force for which they have raised and taken the first step—they have raised their hand and taken that first step by joining.
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    It is our obligation and it is our responsibility to make sure that we, in fact, provide them the requisite resources and facilities in order for them to do their jobs.

    I thank the committee again very much for all of the great support you have given to us in the past, and I stand ready for any questions that you may have.

    Mr. MCHUGH. Thank you very much.

    [The prepared statement of General Sherrard can be found in the Appendix.]

    Mr. MCHUGH. General McCarthy.

    General MCCARTHY. Mr. Chairman, Representative Snyder, members of the committee, it is my privilege to report to you on the status and the future of your Marine Corps Reserve. And on behalf of the Marines and sailors, of Marine Forces Reserve, I thank this committee and the Congress as a whole for its continued support.

    The essential premise under which we operate is ''one corps, one standard,'' one standard that applies to all Marines whether active or Reserve. And our Commandant has made it clear that having a truly integrated total force is one of the six essential or core competencies that we as a Marine Corps must attain.

    The challenge I set for Marine Forces Reserve when I assumed command a couple of months ago was that we need to be ready, willing and able, and I would say that we are those things today. But we have deferred a number of expenditures in order to achieve that status.
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    The measures of our capability are several. We are continuing to meet our recruiting and retention goals both as to quality and quantity. We have been successfully executing real-world missions in support of the active component, for example, sending Marines in a security force to Guantanamo, or sending Marines to Kosovo and a number of places.

    We are continuing to participate with the active component every day of the year on exercises and operations, and we are doing so successfully. But we do face some challenges. I would like to address three specific areas.

    First, in equipment modernization, we do need to upgrade and to continue the process of upgrading our F–18 aircraft with Engineering Change Proposal, or ECP–583. We are about halfway through that, but with—after—with current funding, we will still have 32 aircraft to upgrade.

    We have KC–130 night vision issues, which are also important to us. With regard to people, robust funding of our ADSW, Active Duty Special Work accounts, both in the active component and the Reserve component appropriation are critical to enable us to continue to deploy Marine Reserves as we have.

    On the operations and maintenance (O&M), side, base operating support, maintenance of real property and operating forces support are all essential if we are to continue at the level that we are today.

    And from a policy standpoint, I would just pile on what the aspect of recalling, that this PERSTEMPO deployment regulation, the tracking and the $100-a-day payment, applies to the Reserve components as well. And as the Commandant has said in his statement, really one size does not fit all. And we are going to start feeling the pinch of that in the Marine Corps Reserve next year.
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    And the other thing I would ask the committee to consider would be to take another look at the Montgomery GI Bill program, a tremendous incentive and retention program, but one that we would like to see extended to Marines who enlist for four years, or drilling Reserve duty followed by four years of individual ready Reserve duty, as well as the Marines who enlist for six years. We are not asking for an extension of the dollars, but the ability to offer a scaled-down benefit to four-year enlistments we believe would be of great benefit.

    There are a number of things in the specifics in my statement. But I—I submit that for the record and stand ready to answer any questions that the committee may have. Thank you.

    Mrs. DAVIS OF VIRGINIA [presiding]. Thank you, General McCarthy.

    [The prepared statement of General McCarthy can be found in the Appendix.]

    Mrs. DAVIS OF VIRGINIA. General Schultz.

    General SCHULTZ. Thanks, Congresswoman Davis, Mr. Snyder. To this committee, on behalf of 350,000 soldiers, I say thanks. The Army National Guard will meet its end-strength targets this year. We fall short on our prior service objectives, but we are exceeding our objectives in our nonprior service missions. So, on balance, we will arrive at the end-state that we had outlined for this year.

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    We have a critical shortage of officers in the Army National Guard. Currently, we are 855 officers short of our current projections, which means we will miss our in-strength targets for lieutenants and captains in our units. On the one hand, we have not accessed enough lieutenants, and on the other, we have lost more than we planned; so that creates the outcome I have outlined.

    Things are different in the Guard today. Just a few weeks ago, for example, we had 19,000 soldiers deployed, training around the world. As an example, we have now been to 87 countries this year. That is radically different; even just last year we had 64 countries. Some said we would not repeat that experience. Well, we have. We have exceeded that.

    As you know, that puts pressure on our families, that puts pressure on our employees and, as well, it puts pressure on our full-time staff. So we have asked our units today to accept 100 percent of the mission with about 50 percent of the resourcing; that is, our priority for this year is just simply to address the shortage of our full-time staffing levels.

    So today I say to you, integration is alive and well in the Army, and the Guard is being tasked accordingly. Thank you.

    Mrs. DAVIS OF VIRGINIA. Thank you, General Schultz.

    [The prepared statement of General Schultz can be found in the Appendix.]

    Mrs. DAVIS OF VIRGINIA. General Weaver.

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    General WEAVER. Madam Chairman, Mr. Snyder, in the interests of time, I would like to submit both my verbal and written comments for the record.

    But as I prepare for retirement in the next few months, I would like to thank you, Madam Chairman, and this great committee for allowing the Air National Guard to do what it has been doing so great in the last few years.

    We are the busiest Reserve component force in our Nation with the best retention rate of any DOD military component, and we are very proud of that and you have helped make that happen, and I thank you personally.

    Mr. MCHUGH [presiding]. Thank you, General Weaver.

    [The prepared statement of General Weaver can be found in the Appendix.]

    Mr. MCHUGH. I am going to defer now to the ranking member, Mr. Snyder. Actually, I may defer to the chairman. McHugh saying this? I apologize about that, gentlemen.

    This is a far different Guard and Reserve force than most people grew up with, and I think, at least in my mind, there is no question but it is a far better one and one that obviously is an absolutely irreplacable part of the Nation's defense system. And if I didn't believe that, I think certainly Desert Storm helped us understand it.

    I had the real pleasure of going with General Shinseki, my good friend from Texas, Mr. Thornberry, and General Schultz, over to watch the 10th Mountain Division hand over the division command responsibilities to the first Guard unit, I believe it is 25th, from Texas.
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    General SCHULTZ. 49th.

    Mr. MCHUGH. It is almost half. 49th. It was a memorable experience as was hearing the Turkish band play the ''Yellow Rose of Texas''—name that tune.

    But one of the greatest concerns of my predecessor in this chair, Mr. Buyer, who had a little firsthand experience in these kinds of matters, was the discrepancy of resourcing that exists between the active and Guard and Reserve components, and I am not sure that was ever acceptable. But I certainly firmly believe it is not now. And we have got to work harder to help you people do the great job that you do. As I look at perhaps the major challenge you face, among many, it is that of recruiting. We all recognize the challenges in this economy and in this country of getting qualified good men and women to fill your ranks.

    I have complained to those who have more direct responsibility for how these funds are allocated and how they are distributed, that perhaps one of the more disturbing aspects of it is the up-and-down nature. We seem to identify a problem, react to it, take good steps towards solving it; and the next funding cycle, the bottom falls out again.

    It seems to me that to help you people do your job, resourcing for recruiting and retention has to be more consistent. And we look at the budget requests across the board—active, Guard, Reserve for this year—we see $64 million in unfunded recruiting requirements across the board; the Marine Corps Reserve investment, per accession, doesn't keep up with inflation, the Army National Guard's reduced funding for recruiting operations from $111 million to $93 million.
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    And as Yogi Berra supposedly said, ''Deja vu all over again.''

    I would like to in—you people understand that that was more of an editorial statement than anything else. But the—the comments of a couple of you, particularly dealing with the Air Force and the Navy, suggest that some of the early indications that we had, that you were going to fall below that two percent—below end-strength, may not be the case. I think in the Navy's case the estimate we had was in excess of three percent below. And, Admiral, you suggested you feel that you are going make the two percent?

    Admiral TOTUSHEK. Yes.

    Mr. MCHUGH. Can you help us understand how that happy development might occur?

    Admiral TOTUSHEK. Sure can. One of the first things we did when we found out where we sat with your recruiting a couple of years ago was to say that we don't have enough recruiters, and we got them. The Navy helped us with that.

    Second, just the additions to our advertising budget that the committee helped us with have gone a long way to making our story a little bit more widespread.

    But the big thing is that we have driven down attrition. That is the thing that is going to allow us—we really had thought that three percent was about as good as we can do, and we basically funded everything for three percent below. But by driving down attrition this year by a fairly significant amount, we will come in, we think, above the two percent, or very close it to anyway.
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    Mr. MCHUGH. General.

    General SHERRARD. I agree along the same lines. We too have worked very, very hard to make sure that we get the word out.

    As you look at our advertising budget, it is very small in comparison to some of my colleagues. But trying to make sure that we tell the story, we have done some things as to the max extent possible in terms of enhancing some promotion opportunities for the members within the force to help on the retention side.

    As I mentioned earlier, the real key to success is us being able to get out and trying to tell the communities what our people can do and what they are doing, and show the value of them being part of our members. And that is—we are very proud of that.

    As I said, our recruiters are going—they are ahead of their goal today. In fact, we are about 106 percent of our accession goal as we sit and speak right now. And I have absolute confidence that we will meet or exceed that accession goal by the end of the year.

    In terms of full manning, I certainly believe that we will be within the two percent, trying to get higher. Our dilemma has been, and one of the big reasons that we have a little bit of a problem in terms of mission follow-on for some of our organizations, our C–141 units are programmed to start leaving in 2003 and be gone by 2006. That is a real recruiting debacle for those organizations, because it is very difficult to go convince someone that they should go to school for 270-plus days, and in fact may come home and find out that their unit is being possibly removed off the rolls within the coming year. So those are real challenges that we have to face. We are confident that our men and women are working very hard, and we will do well in the end-strength game in the end.
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    Mr. MCHUGH. Well, I wish you well in that. I hope it holds true. I am not sure it obviates the comments that I spoke to earlier about the need to resource this at a more consistent level.

    General McCarthy, I mentioned the per-accession funding for your Marines is going to be below the rate of inflation. Certainly the Marines, amongst the services, have done extraordinarily well at both ends, recruiting and retention. How do you view that inflation shortfall, though?

    General MCCARTHY. Sir, I am not concerned about the funding that is available to us this year for recruiting. We have exceeded our goal by a measured amount over the last couple of years on both the prior service and nonprior service side.

    As you may know, the Marine Corps Reserve demographics are different than the other services in that we are 65 percent nonprior service in the Marine Corps Reserve and about 35 percent prior service. That is our ideal mix. We are maintaining that. So we are recruiting—we run two different recruiting programs.

    The only change we are making this year is that we are essentially giving operational control of our prior-service recruiting force over to the Marine Corps recruiting command, which has always handled our nonprior-service recruiting. This is creating some efficiencies.

    I am very confident that this is a good move for us, and I guess the proof is in the pudding. But if we keep recruiting at 103 or 104 percent, I guess we got it funded about right.
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    Mr. MCHUGH. Thank you.

    General Schultz, I mentioned earlier the National Guard has had its funding for recruiting operations cut from $111 million to $93 million. And we have received data that says that you have a declared fiscal year 2002 unfunded requirement in that account of $48 million. How does that make you feel?

    General SCHULTZ. Well, Mr. Chairman, we get rather creative as we deal with the realities of underfunding; and one of the things that we are clearly focusing on today is to reduce our attrition, which means to reduce the numbers of soldiers that are just lost across our formations.

    So we have a documented requirement for more recruiters today than we had resourced. So that means we under-resource our units with the appropriate recruiting and retention staff. That is another way we apply the pressure on the unit leadership to make up that difference. And so we have given the unit commander a mission for which we have not resourced them.

    Mr. MCHUGH. Do any of you have a suggestion as to how the subcommittee, or committee, short of physical violence, might be helpful in addressing some of these funding problems?

    Just physical violence? Okay. That wouldn't be much help. Well, that is—think on that and we will talk.
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    I would be happy to yield to the ranking member, Mr. Snyder.

    Dr. SNYDER. Thank you, Mr. Chairman.

    General Weaver, Dr. Chu in his written statement stated he is predicting that this year everyone is going to hit their recruiting goals except the Air Guard.

    Is that—do you have any comment on that?

    General WEAVER. Yes. I would like to know where he got that.

    Dr. SNYDER. Is that inaccurate?

    General WEAVER. Totally inaccurate.

    Mr. MCHUGH. If the gentleman would yield, I would be helpful.

    That was derived out of an indication in Dr. Chu's statement which we may have misinterpreted, or may not have been stated quite as clearly. But that is where we got it, for whatever that is worth.

    Dr. SNYDER. I am reading from Dr. Chu's statement. It seems—.

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    Mr. MCHUGH. That is where we got it.

    Dr. SNYDER. ''This year we anticipate that all components with the exception of the Air National Guard will achieve their recruiting missions.''

    General WEAVER. I was getting ready to come in and ask you for permission to exceed our end-strength by 500 this year because our recruiting is going so well. So I would like to go back and question Mr. Chu. I will ask Mr. Chu, respectfully, where that information has been gathered.

    Our retention rate in the Air National Guard, as I said in my earlier statement, is the best in the entire DOD, it is 92 percent. And if you look at our units, when—of our 108,000, every 30 months, 50,000 of our people are deployed overseas in real-world events.

    Our best recruiting and retention are in the units that are the busiest. Now, there is some talk I have heard that we might be hurting the morale of the active duty force because we are involved in all of these areas, because we only get to spend 15 days over there and we get to come home. My contention is, for every Guardsman and Reservist who is participating in the Air Expeditionary Force (AEF), there is an active duty person at home with his or her family.

    I look at our Reserve components and I—particularly the Air National Guard, and see the recruiting and retention in those units that are the busiest are the best recruiting and retention units that we have.

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    So we will truly meet our recruiting goals, and I will be asking permission to exceed our end-strength by about 500 as it looks right now.

    Dr. SNYDER. Are there any other inaccuracies in the statement?

    General WEAVER. I will look closely at that tonight. Yes, sir.

    General DAVIS. If I might piggyback on that in terms of a reply. From last year, from 2000 to 2001, we increased by almost 1,600 the total end-strength of the Guard. We went from about 106,000 to 108,000. So it was an additional challenge to the normal sustaining of the bottom line, because we increased the end-strength.

    So that was an additional challenge that the Air Guard faced, and that is why it is so critically important that we continue to provide such things as additional recruiters and additional recruiting funding and advertising funding, because that is how you are able to get those kinds of—those highly motivated people, certainly, that we have in all of the services.

    Our recruiters come from really a rare breed of people that deal with the rejection and all of those sales issues. But it is a very aggressive program, both Army and Air. And we monitor it very closely at the National Guard, both Army and Air; we have a committee where they share ideas between the Army Guard and the Air Guard. And those that work, we try to work them on both the blue and the green suit side.

    We are very comfortable with where we are going. We still need continued resources there, I think, in significant amounts, and we think we may need additional recruiters. As we recruit, as some of the other folks have said, nonprior service, there just aren't that many people coming off active duty.
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    One of the good things about the country is the active component is retaining a lot of their people. The downside is, they are not available to join the Guard and Reserve. I am not knocking that. The way to work the program on both ends, we feel, is to continue to resource the Guard and the Reserve and give us that ability that we can go out and recruit those nonprior-service personnel. Thank you, sir.

    Dr. SNYDER. Just one last question, maybe if each of you could just very briefly comment.

    This is a bit of a stretch of segue, but since there seems to be poor integration of information between Dr. Chu and here, if you can each give—if you could change something with the Guard with regard to the integration of you-all's force with the active, what would be some very concrete—one or two concrete things that you might do?

    Let's start with General Weaver.

    General WEAVER. Sir, I thought that we had had a very good relationship with our active component. I have watched it evolve over eight years now, being in the building; and it is something that we both have worked extremely hard to do, to complement each other's strength. And the AEF was truly a godsend to us and the Guard and Reserve with our active Air Force counterpart.

    I am concerned about some things that are being said about the future, about the Reserve component maybe should not be in combat. I think that would be a tremendous step backwards, big step backwards.
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    I believe that what we have been able to prove and show in the Air Force through the years, and more recently with the AEF, is that we are trained to the same standard. There is only one standard and we need to keep doing that; and we need to be involved in everything that our active duty counterpart is involved in as well.

    And anything less, to me, would be a major step backward and going in the wrong direction.

    General SCHULTZ. The first for us would be to resource us for the mission we have been asked to perform. And the second category, clearly a strength of this committee is to keep focused on the soldiers because they are ones doing the work. Is it really them we owe the most.

    General MCCARTHY. Sir, I would offer that—as the chairman said, this is a different Guard and Reserve today than it was when many of us started or first were associated with it.

    The difference is, in my view, that we have changed the—the force as a whole has changed from being just an emergency force to an emergency force and a force of contingent manpower, and yet our policies sometimes have been focused strictly on the emergency part of our mission, and the one that comes most clearly to me is health care.

    We have Marines, in my case, but servicemen and women from all of the services flowing back and forth onto active duty for relatively short periods of time and off of active duty, changing their status from being a part of the emergency force to being part of the contingent manpower force; and yet our health care policies aren't capable of keeping up with them. So they may be covered fine when they are on active duty, but their families may not be covered, and they may run into big problems when they leave active duty and go back to the civilian side.
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    So when I hear all of the talk about, we have done a lot of good things with TRICARE for the active component and the retired component, what I don't hear anything about is looking at health care policy for the Reserve component. And if we want to continue to have a blended force and a contingent work force, I think that is something that all of us are going to have to tackle.

    General DAVIS. On the medical side, I agree with General McCarthy. We had a bill, or there has been a bill at least introduced in the House, to provide TRICARE to the Reservists. There have been some other thought processes and a study done by the Adjutant General in Ohio to look at providing something on the order of a national employee benefit health insurance kind of the thing that the individual would pay a given amount, and a certain amount would be paid by the individual Guardsman or Reservist. I think that is an important part of it, because we are asking these young people to be ready to go and walk out the door reasonably well, and the health and dental benefits are just not there.

    One of the other things that I see as a major difficulty with integration of the Guard and the Reserve into the active component is the ability to cross-role people. I am on my fourth time of being on extended active duty. I would suggest I am a rarity, because most people get one or two shots at it. I am not sure why I did, but just luck and timing, I would suggest.

    But we don't have the ability to take advantage of the civilian skills that people have when we don't allow them to come on active duty and serve and then go back into the Guard or the Reserve and then come back on active duty again; and then go back and forth one or two or three times during the course of their career. And I think there are a lot of tremendous benefits in that because they bring back the civilian skills.
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    I was Vice President and General Counsel of an insurance company in my civilian job before I came back on active duty. As a senior executive, I know how to do that; I know a lot about that. You bring those skills back and forth. So I think I would like to see a policy where we can do that and cross-flow those. I know that as part of the transforming of the personnel business that Dr. Chu was talking about earlier, they are looking at some options in that arena. But I think that is a major impediment.

    Full-time support is the other one. We have —if you had asked me five years ago about getting our readiness improved and what we needed to do, I would say that we need spare parts to put on our aircraft, to put on—radios to put on tanks and all. And today I would tell you we have the parts, but we don't have the people to put them on; and General Schultz alluded to that.

    So I think full-time manning is probably our single key issue. I know that if you ask General Shinseki, he would tell you that is his key issue for the Army Guard, because we really made it very, very clear that we cannot improve our readiness very much without additional full-time personnel, sir. Thank you.

    General SHERRARD. I would tell you that the key to success is our business, and I think it ties right back in with what my other colleagues have said.

    But it gets to the point of the actual weapons systems that we are trying to utilize and exercise, and we have got to make certain that modernizations and compatibility and capabilities are equal terms—not necessarily the same, but equal—because you have got to be able to do that, one, to have the protection for your force; and then the other phase of that is to make sure that you, in fact, can incorporate all the skills of those members of the active force that have—in conjunction with your force and utilize them , or else you will have a force that won't be capable to provide the support that is necessary.
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    Admiral TOTUSHEK. I am just piling on here, but basically I would say the two things are policies that would allow us not to have so much inflexibility on, when you are utilizing a Reservist, having him count against active end-strength, especially if it is a short duration kind of thing, maybe up to three years.

    I think we have got some work that we could do there, so we can take better advantage of some of our Reservists who are willing and able to give a little more than two weeks a year.

    Second, the adequate funding, of course, to make sure that we are compatible with the our active component is the biggest barrier, I think, right now to integration.

    General PLEWES. We have done a number of things, the Army Reserve, over the last couple of years to force this integration function, if you will. Multicomponent units where we integrate active and Guard and Reserve in one unit, battalion commander changes, and the list goes on.

    Last year, we provided about 3-1/2 million man-days of support to a very overextended Army, and that equates to about a division's worth of work on top of just the training that we do.

    But we are kind of hitting up against a wall now. And I think that wall is the inability to continue that because of our lack of full-time support. We have a very small full-time support cadre. We can get the folks on duty and the drilling Reservists to do this work if we have the kind of support we need to allow us to continue to organize and train and sustain that force. So full-time support is our number one, if you will.
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    Mr. MCHUGH. Before I yield to the gentlewoman from Virginia, I would say particularly—all of you addressed it in one way or another, but General Davis particularly did—we are going to submit a question to the record for Dr. Chu that addresses some of the proposals that we had with respect to making TRICARE available in some fashion to the Reservists and Guards in the very circumstances that you mentioned so that we can begin to focus on that problem. I think we all agree it is a real challenge, but it is also a disturbing inequity.

    General MCCARTHY. Mr. Chairman, if I could make one comment, the Reserve chiefs had a meeting a week ago with Dr. Chu and that was one of the points that was on his list as he came into the room, and we discussed it. So I would suspect that they will be geared up to respond to a question from the committee.

    Mr. MCHUGH. Great. Well, they will get one. Let's hope they are. Ms. Davis.

    Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Chairman. General Plewes and General Schultz, you referred to the Army as being currently overextended with the high rate of OPTEMPO. If the Army were to cut two active duty divisions, how easily would the Army Reserve and Guard be able to fill that gap? Either one of you?

    General SCHULTZ. Well, today we have eight divisions in the Guard. What we are really saying, if two active divisions were lost in the process of the current review, what that really would do for us is increase the pressure on our rotations that is already stretched fairly well, as you know full well. So we are talking now about units of rotation for 180 days. In the case of the 49th Armored Division from Texas, already mentioned earlier, now back from their rotation, if we send that unit back into the theater in the next couple of years, that planning will not work in the long term because employers and families just simply will not put up with it.
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    General PLEWES. As I mentioned before, we are now very busy in taking care of what we consider to be an overextended Army. And I think that given the fact that if the missions do not come down but the size of the Army comes down, the pressures on us to do even more will increase, and therefore the shortfalls we have in full-time manning to support that kind of activity, and funds to pay our soldiers so they can continue to do that work, and in training and support and equipment will really become a real issue for us. How much more can we do? We can do some more, but we are pretty extended right now given the current resources that we have.

    Mrs. DAVIS OF VIRGINIA. Do you have any idea what it would cost, the dollar figure, to provide the capabilities of the loss of the two active duty divisions if you all have to take up the slack?

    General PLEWES. I couldn't approach replacing the capabilities of an active division. I am talking about with the OPTEMPO we now have, and it is pretty high in the Army Reserve, we are given essentially a division's worth of work right now. Going another division would be very difficult.

    General SCHULTZ. I do not have any numbers on that either.

    Mrs. DAVIS OF VIRGINIA. General Davis, I heard General Weaver say that the retention is good, and better actually, on those that are being deployed. Yet I heard from several of you on the fact that one of your problems is retention.

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    I hear from the active duty men and women, more than not, that one of the reasons for the getting out is because of the OPTEMPO and it being so frequent. Do you find that in the Guard and Reserve?

    General DAVIS. Ma'am, in the Guard, I think we have, as General Weaver said, the best retention in the Air Guard than in any of the components, active, Guard, or Reserve. And that is going very well for us. The young people are pretty busy and all.

    We have allowed them in the Air Guard to participate essentially two weeks in theater. Two weeks at Saudi Arabia, two weeks in Kuwait, and two weeks in a lot of other theaters, Bosnia and all, and we bring them in and take them out in two weeks, Curacao and Turkey. That has really helped. People volunteer for that. We have 30,000 cycle through. The difficulty that some would suggest is that is demoralizing to the active component. And I think that they do not understand if it is demoralizing, because that means they do not have to go as often. So I don't think so.

    So I think retention is not statistically significantly different between the units that have high OPTEMPO, those that are deploying, and we actually deploy a fighter unit. The 122nd fighter wing out of Ft. Wayne, Indiana, just returned from a month and they had two week rotations in Saudi Arabia at Prince Sultan.

    Mrs. DAVIS OF VIRGINIA. I believe the 49th was there—.

    General SCHULTZ. They are a six-month rotation.

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    Mrs. DAVIS OF VIRGINIA. And the 29th of Virginia.

    General DAVIS. We have not had enough experience with that, but we monitor Company C out of Leesburg. Your military legislative assistant (MLA), was part of that rotation that we did to secure the bridge at Slavonski Brod between Bosnia and Hungary, and that unit did not experience significant decrease in the number of people who hung around. Their retention was better than most of the units or as good as most of the units were. They were excited about the opportunity to go and serve their country.

    I think one of the reasons might be as I talk to soldiers and airmen, they join the Guard or the Reserve to do the Nation's mission, the Army's mission, the Air Force, Marine Corps, Coast Guard. And they join it and they do that and when they are sitting around in the Army, training, they are not doing it. When they are out in the field or overseas they enjoy what they are doing and they stay and hang around.

    One of the things we were talking to the unit that I visited, the 256th Infantry Brigade Main Evaluation Center (MEC), out of Louisiana just yesterday—and I got home early this morning from a redeye—but talking to them, and their retention was better in that brigade than it is in the rest of the Guard in Louisiana. And one of the reasons they think it is is because they talked to the soldiers, the soldiers know what they are going to do. They are going to go to the National Training Center, the premier training in the world for soldiers, and they are there and they are excited about being there, and they are going to stay in because of that as I talked to them.

    So we see retention not being that severely impacted. It has some impact and it is slightly lower in those units that have high OPTEMPO, and some of the people cannot go and some folks will get out because of that. But it is a different Guard today, ma'am, than it was 35 years ago when I joined. And because it has changed, some people are not willing to accept that level of change and they said I do not want to do that. I would rather go to Camp Swampy and do my two weeks.
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    That is not today's Guard. That two weeks that you do may be in some other country on some other continent, and that is why I think it has changed. The young people who join today see a different Guard, and they are joining because of that.

    Mrs. DAVIS OF VIRGINIA. Well, I am curious, I believe it was you, Admiral, and you, General Plewes, who said retention was a problem. I believe it might have been you?

    General DAVIS. Always a challenge. I did not say it was easy, even for us in the Guard. Yes, ma'am.

    Mrs. DAVIS OF VIRGINIA. But you think the reason for the challenge for retention in the Guard is more that they are not active? They are not doing—.

    General SCHULTZ. Could I follow up on that? A recent survey of 30,000 soldiers said to us about 9 percent leave the Guard because of the pace, because of the tempo. Soldiers leave the Guard today because we do not lead them as they expect or we do not train them as they expect. So I think it is incumbent upon us, those in uniform and others, to look after their interests. It is not just a dollar-and-cents issue. It is leading and caring for them on a day-to-day basis. Some of our soldiers leave because we do not train them as they expect to be trained.

    Mrs. DAVIS OF VIRGINIA. Is that because of funding?

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    General SCHULTZ. In part, it is, yes.

    Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Chairman.

    Mr. MCHUGH. I thank the gentlewoman.

    I would certainly agree with General Davis and the others that people who join today expect different things. And excitement may not be the best word, but the challenge and the excitement of a deployment is amongst them.

    But as has been mentioned, and we have the employer side of the equation, and General Plewes and others have commented, that the OPTEMPO can be the destructive factor in this. And we have got to make some very important decisions. Part, of course, of Secretary Rumsfeld's strategic analysis is to look at that.

    I do not happen to believe that the United States military should be at beck and call of every little brush fire across the world. This is a precious resource that should be used wisely.

    But to find ourselves in a position where we are unable to call—to answer every viable call—means we lose our position as the world's leader. And the folks that you represent and so many others work too hard, in my judgment, to have that happen. So it all comes back to money and resources. And I guess that is where we come in.

    And on that little speech, I will as we have others, ask you good gentlemen to please indulge us in responding to the number of questions we have of a more technical nature for the record.
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    [The information referred to can be found in the Appendix.]

    Mr. MCHUGH. And thank you for your incredible patience over four hours. Probably you would rather be deployed somewhere. So we appreciate that, as we did, obviously, the participation of the previous panels. As always, your leadership is so invaluable and your input and cooperation with this subcommittee and the full committee on behalf of the amazing men and women that you represent is deeply appreciated. Please keep up the good work. Because none of you are retiring in the near future as I understand it. You are close?

    General WEAVER. Yes, sir.

    Mr. MCHUGH. Well, General, if I do not see you, give Dr. Chu hell.

    General WEAVER. I will do that, sir.

    Mr. MCHUGH. I understood you were coming up, but it was a bit away. But if it is closer than I was informed and Dr. Chu did not tell me when it was, so I can't fault him.

    General WEAVER. It could be earlier, sir.

    Mr. MCHUGH. Well, whatever it is, thank you, sir, for your service and best wishes to you. Gentlemen, thank you all.
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    For the record, without objection, we do have a statement of The Military Coalition that they have asked to be submitted to the record. Without objection, so ordered.

    [The statement of The Military Coalition can be found in the Appendix.]

    Mr. MCHUGH. And now we will adjourn the meeting. Thank you gentlemen.

    [Whereupon, at 6:23 p.m., the subcommittee was adjourned.]