1. Department of Defense Priorities and Challenges John P. Roth Deputy Comptroller (Program/Budget) 7 March 2005

2. 1 DoD Priorities and Challenges Fiscal pressures and challenges DoD Program/Budget process USD (Comptroller) responsibilities and initiatives

3. 2 Fiscal Pressures and Federal Spending Federal budget deficit and escalating mandatory spending is putting heavy pressure on discretionary spending Projected outlays for FY 2006-10 National Defense discretionary:+$38 billion Non-defense discretionary:+$3 billion Mandatory spending:+$406 billion Net interest:+$136 billion ( Projections do not include costs for global war on terror)

4. 3 On-Budget Surplus/Deficit (FY 2006 Budget projections, excluding Social Security) Fiscal Years $ Billions Actual Billions of dollars Projected

5. 4 Trends in Federal Spending (Outlays in billions of dollars) Nondefense Defense Mandatory Discretionary Total Federal Outlays Net Interest

6. 5 Department of Defense Topline (Discretionary budget authority $ in billions) *FY 05FY 06FY 07FY 08FY 09FY10FY11 DoD (051)400.1419.3443.1462.4482.0492.1502.3 FY 2006 DoD budget:  Increase over FY 2005: 4.8 percent  Increase over FY 2001: 41.4 percent *Excludes supplemental appropriations

7. 6 DoD Topline Chronology (Discretionary budget authority $ in billions) FY01FY02FY03FY04FY05FY06 Baseline296.5327.5375.2377.1400.1419.3 Enacted Supplementals: 19.217.562.390.176.0 Program5.5 GWOT4.33.562.365.174.9 GWOT9.414.0 GWOT (Title IX)25.0 Hurricane1.1 Total Enacted w/ Supps315.7345.0437.5467.2476.1419.3 Total GWOT $ Enacted FY 2001-2005 = $258.5 Billion

8. 7 DoD Outlays as Percent of GDP Fiscal Years 8.9 8.2 4.6 FY 06 = 3.3% 6.7 6.0

9. 8 DoD Outlays as Percent of Federal Budget Fiscal Years 43.4 22.5 FY 06 = 16.5% 27.3 20.7

10. 9 DoD Budget Reflects Fiscal Realities President’s FY 06-11 DoD topline $25B lower than previously Programs curtailed to keep within topline Rigorous agenda planned for 2005 Quadrennial Defense Review Action continuing to get greater security from each budget dollar:  New generation of weapons with greater capabilities, less manpower  Changing how DoD does business across all functions: acquisition, human resources, infrastructure, financial management, and more.

11. 10 Action on Budget-Related Challenges Military Personnel and health care costs: Working with Congress and internally to moderate growth Defense requirements: Continuing rigorous assessment based on capabilities needed, looking forward – not clinging to the past Delivery of support services: Continuing to streamline and integrate Infrastructure: Advancing the restructuring of overseas basing and realigning of US bases through 2005 BRAC process Personnel: Moving military out of non-military billets, overhauling management of civilians with National Security Personnel System, and innovating on compensation, recruiting, and retention (These are challenges cited by Government Accountability Office in two March 2005 reports on high risk fiscal challenges.)

12. 11 DoD Program/Budget Process Goals Focus on capabilities – not prejudge how best to achieve them Balance near-term readiness and long-term modernization Emphasize joint requirements and joint operations Support the President’s and Secretary’s priorities Ensure that planning guidance is followed Assess program performance and effectiveness Use program assessment to inform budget decisions and improve program performance

13. 12 DoD Program/Budget Process – 1 st Year Budget Execution Develop National Security Plans Services Develop Programs Budgets OSD/OMB Program Budget Review Congressional Review Submit Budget to Congress Winter-Spring Spring-Summer Summer-Fall Winter Spring-Summer

14. 13 DoD Program/Budget Process – 2 nd Year Budget Execution Off-Year Defense Planning Guidance, as necessary Services Prepare Program Change Proposals/ Budget Change Proposals OSD/OMB Program/Budget Execution Review Congressional Review Submit Budget to Congress Winter-Spring Summer Fall-Winter Winter Spring-Summer

15. 14 Supporting SecDef Priorities in FY 06 Request Successfully pursue the Global War on Terror  FY 06 budget request complements FY 05 supplemental  Added funding for Army restructuring, chem-bio defenses, language skills Strengthen joint warfighting capabilities  Make hard choices to fund most pressing priorities  Accelerate to new generation of systems Transform the joint force  Restructure Army & Marines to gain more units, more deployable  Restructure US global posture and basing Improve manning/take care of our forces  Improve pay, allowances, health care, housing, and facilities  Mil-to-Civ conversions and rebalancing to increase high demand skills

16. 15 USD (Comptroller) Responsibilities Ensure DoD follows Secretary of Defense policies Serve as the DoD Chief Financial Officer Prepare annual DoD budget and financial statements Present/defend budget to Congress Implement/enforce congressional direction Formulate and enforce financial management policies Improve DoD business/financial management

17. 16 Transforming DoD Business Management Business Management Modernization Program (BMMP) - Overhaul DoD management processes - Consolidate and integrate information systems - Facilitate auditable financial statements Budget execution - Achieve greater ability to shift funding to address new requirements - O&M funds available for 2 years Defense Business Board Metrics: to measure and improve program performance Management Initiative Decisions (MIDs)

19. 18 FY 2005 Supplemental Request To be included in request, funding had to be:  Vital, urgent, and temporary in nature  Incremental costs related to Global War on Terror  For funding executable in FY 05 Issues on inclusion in supplemental appropriations  Army/USMC restructuring  Army end strength above baseline (both FY 05 and FY 06)  Military construction -- urgent and/or temporary?

20. 19 Department of Defense Within the Executive Branch PRESIDENT Office of Management & Budget Secretary of Defense National Security Council Office of the Secretary of Defense Policy Acquisition Intelligence Comptroller Personnel & Readiness Legal Public Affairs Congressional Affairs Combatant Commanders EuropeSpecial Operations Joint ForceSpace PacificTransportation SouthernStrategic Central Northern Military Departments Army Navy Marine Corps Air Force Chairman, Joint Chiefs of Staff -------- Joint Staff

21. 20 Office of the Secretary of Defense Secretary of Defense/Deputy Secretary of Defense Under Secretary of Defense Policy Under Secretary of Defense Policy Deputy Chief Financial Officer Deputy Chief Financial Officer Deputy Comptroller (Program Budget) Deputy Comptroller (Program Budget) Director Program, Analysis & Evaluation Director Program, Analysis & Evaluation Under Secretary of Defense Acquisition,Technology & Logistics Under Secretary of Defense Acquisition,Technology & Logistics Under Secretary of Defense Personnel & Readiness Under Secretary of Defense Personnel & Readiness Under Secretary of Defense Comptroller/Chief Financial Officer Under Secretary of Defense Comptroller/Chief Financial Officer Under Secretary of Defense Intelligence Under Secretary of Defense Intelligence

22. 21 Secretary of DefensePresidentCongress OSD CJCSStaffParty Leadership Army Navy USAFOMBAuthorization Combatant CdrsAppropriations External Influences Defense Budget Influences global events economy & fiscal conditions public attitudes media industry interest groups constituencies