Winter AUSA

1. UNCLASSIFIED
Army Fiscal Update
AUSA Winter Symposium
20 February 2013
UNCLASSIFIED

2. Agenda
• FY 13 Fiscal Situation
• FY14 and beyond
• Way Ahead and Summary
• Questions/Answer
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3. The Uncertain Fiscal and Strategic Environment
Sequestration
Secretary of the Army Priorities Drawing Down the
Force During Debt
• Ensure a highly capable Army within
Conflict Ceiling
budgetary constraints
• Champion Soldiers, Civilians, and
Families
• Enhance Army activities in Asia- Continuing
Pacific region Resolution
• Ensure accountability
• Transform the Institutional Army
Decreasing Overseas
• Codify Army Total Force policy Contingency
• Adequately fund Reset and Operations (OCO)
modernization Funding
• Strengthen information assurance
and cybersecurity Conditions
• Develop effective energy solutions
• Finalize Arlington National Cemetery
on the
reforms Ground
Photo by:
Sgt. Richard Rzepka
3

4. Effects of FY13 Fiscal Uncertainty on Army OMA Accounts
Actions Impacts
• Transportation costs for the return of
equipment from Afghanistan •Significantly impacts equipment and subsequent readiness
~$5-7B •Forces additional tradeoffs between wartime priorities and FY14
• Increased demand for in-theater force protection
Emerging and intelligence systems maintenance readiness
OCO • Cost of feeding civilian and contractor workforce
in Afghanistan unrelated to the troop strength
~$18B •Reduces readiness of >78% of non-deploying •Erodes training and impacts ability to respond to
~$5.3B brigade combat teams contingencies and CONPLANs
•Defers post-combat equipment repair in Active and •Must furlough which negatively impacts each employee in
Sequestration Reserve units 3-4 years following redeployment our valued workforce
$65B •Potentially furloughs up to 251,000 Army civilians
(PB13) •Cancels 4 of 6 brigade combat team training center rotations •Sustains readiness only for OEF, next
•Reduces maintenance for non-deploying units deployers, Korea Rotational Force, and
~$6B •Reduces depot maintenance workload Division Ready Brigade
CR •5,000 employees released; economic impact exceeds $2B •Impacts readiness and degrades training
•Stops post war repair
Shortfall •Reduces unit flying hours; of 1,300 vehicles; 14,000 radios; andcrew proficiency
non-deployers will not maintain air
17,000 weapons into FY14 and beyond, causing readiness
shortfalls
$59B •Creates training backlog for aviation and intelligence occupational specialties
(CR)
Current Near-term Actions to Reduce Spending •Shock to valued Civilian
• Releases 1,300 temporary and term employees; implements hiring freeze
Project
~90% erosion
& • Reduces base operations up to 30%
workforce and local
communities
of Current &
Future
Future • Reduces facility sustainment from 90% to 37%; reduces restoration and •86% of civilian workforce
works and lives outside of
Readiness Readiness maintenance of facilities to 0% the Washington Metro area
Funds in • Cancels 3rd/4th quarter Air and Ground Depot Maintenance
4th quarter ($34B) • Reduces travel, conferences, and studies
Wartime • Direct War Effort ($21.4B)
• Next to deploy unit readiness ($2.7B)
Spending • Critical Family Programs ($1.3B)
Will not compromise
($25B) • Critical Soldier Programs ($0.08B)
OCT SEP
Mortgages future readiness in FY13, and enters FY14 “hollow” in Readiness.
FY: Fiscal Year
CR: Continuing Resolution
PB13: President’s Budget FY2013 as of 8 Feb 2013

5. Setting the Stage
Federal Spending
FY62: National Defense FY17: National Defense
~49% of Federal Budget ~12% of Federal Budget
(estimate in PB13 Request)
Net Interest Defense
Net Interest 6% Net Interest
7%
Discretionary
11%
12%
Defense
Discretionary
17%
Mandatory Non-Defense
Defense Non-Defense Discretionary
26% Discretionary 12%
Discretionary
49% Mandatory 14%
63% Mandatory
Non-Defense
65%
Discretionary
18%
FY62 FY13 est
FY13 Request FY17FY17 est
Estimate
• The percentage of federal spending devoted to Discretionary Spending has shrunk considerably over the
years, and may likely continue to shrink
• On a percentage basis, Defense Discretionary spending has shrunk faster than Non-Defense Discretionary
spending
• Given these trends, the Army’s trade space will likely become even more limited; the trade space will be
reduced much further if our budget remains highly concentrated in manpower costs
Defense spending as a portion of the Federal Budget continues to decline
Source: Fiscal Year 2013 Historical Tables, Budget of the
U.S. Government 5

6. The Defense Budget Over Time
• Discretionary spending is ~30% total federal budget…Defense budget is ~50% discretionary spending (PB2013 Request)
• Increasing emphasis on reducing spending/deficit
• Historically, funding levels have decreased as military demand decreases
DoD Military Manpower DoD Total Manpower DoD Total TOA (FY13 Constant $) FY01-17 Base (FY13 Constant $)
$800 B 8.0 M
Height of Height of 9/11 FY13 CR
Korean War
Armistice (1953) Vietnam War Cold War (2001)
$700 B (1968) (1985) 7.0 M
Gulf War OCO
Vietnam War Ends (1991) ?
$600 B Ends (1973) 6.0 M
Base?
$500 B 5.0 M
Sequestration?
$400 B 4.0 M
$300 B 3.0 M
$200 B 2.0 M
$100 B 1.0 M
$B .0 M
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7. Service Outlays as a Percentage of Defense Spending
Defense-Wide spending continues to consume greater portions of DoD’s funding and is projected to
consume on average 18% of DoD’s budget into the future (up from 1% in the 1950s)
Korean War Vietnam War Gulf War 9/11
Armistice (1953) Ends (1973) Ends (1991) (2001) Today
$750
$700
$650
$600 26%
$550
$500 27%
$450 31%
27%
$400
$350 29%
37% 29%
$300
$250 33%
$200 31%
33% 30% 32% 26%
$150
$100 31% 26% 25%
29%
$50 34% 15% 18%
1% 4% 9% 14%
$
FY 51
FY 54
FY 57
FY 60
FY 63
FY 66
FY 69
FY 72
FY 75
FY 78
FY 81
FY 84
FY 87
FY 90
FY 93
FY 96
FY 99
FY 02
FY 05
FY 08
FY 11
FY 14
FY 17
FY 48
DEFENSE-WIDE ARMY NAVY AIR FORCE
* Includes all enacted war and supplemental funding, as well as FY2013 requested OCO funding (in FY13 constant dollars)
Percentages reflect averages within the periods: (P-WWII: FY48-53, P-Korea: FY54-73, P-Vietnam: FY74-91, P-Gulf: FY92-01, P-9/11: FY01-12, Future: FY13-17)
Source : National Defense Budget Estimate for FY2013 , OUSD (Comptroller) , March 2012 (aka: OSD (C) Green Book)
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8. Army Funding FY48 to FY17 in Constant FY13 Dollars
$300B ‘08 $275B
OCO Funding ‘16 $129B
Base Funding -53% TOA
Today
Korean War Vietnam War Gulf War 9/11
$250B Armistice (1953) Ends (1973) Ends (1991) (2001)
‘52 $230B
‘60 $102B
$200B -56% TOA ‘68 $181B
‘75 $99B ‘91 $160B
-45% TOA ‘98 $95B
-41% TOA
$150B
$100B
$50B
$0B
FY50
FY54
FY60
FY64
FY68
FY74
FY78
FY82
FY88
FY92
FY96
FY02
FY06
FY10
FY16
FY48
FY52
FY56
FY58
FY62
FY66
FY70
FY72
FY76
FY80
FY84
FY86
FY90
FY94
FY98
FY00
FY04
FY08
FY12
FY14
These dollars include all enacted war and supplemental funding, as well as FY 2013 Source: OSD Comptroller Green book for FY13
requested OCO funding.
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9. Sequestration - Potential Impact to Army Funding
$170B
$156.5
$151.6 $152.6 $151.3 $153.2
$155B $144.9
$140B Initial Reductions of the BCA (PB13)
$134.7 $135.5 $138.0
$135.3 $134.6 $134.3
$125B FY21
$110B
Sequestration
$95B
$80B
$65B
$50B
FY12 FY13 FY14 FY15 FY16 FY17
PB13 PB12
• President’s FY13 Budget (PB13) introduced the first half of reductions directed in the
Budget Control Act (BCA) of 2011
• Reductions in PB13 led to Army’s decision to reduce to 490K AC, 350K ARNG, and 205K
USAR end strength
• Sequestration, if it occurs, would represent the second half of the BCA
• Reductions in FY13 are prescriptive-down to the plan, project, appropriation (PPA) level
• Reductions in FY14 and out are up to discretion of DoD
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10. Why this Downturn is so Hard
• This downturn largely follows the ~20 year defense spending cycle, but
this one is different because…
– Reductions are taking place while we are still engaged in conflict (OEF)
– No foreseeable “peace dividend” on the horizon, world remains dangerous
– Scope – we are already a smaller force than we have been at the end of
previous conflicts
– Not preceded by major modernization across the Services
– Today’s budget realities – unprecedented multiple pressures
• History teaches us that it is practically impossible to prevent a hollowing
of the force during the beginning of funding downturns (historically 2-6
years)
In the past, post-conflict reductions to the Force and budgets
have occurred after contingency operations have ended.
10

11. Why FY2000 Levels of Funding are Not Sufficient
Today’s Army is very different from the Army of 2000
$70 B Manpower
2000 • Manning – 502K vs. 482K
Accounts for
60.9% of - Base Pay has increased by over 50%**
2013 - Basic Allowance for Housing has increased by over 300%**
$60 B Growth
- Retired Pay Accrual increased by over 65%**
• Organization - Modular Brigade Combat Teams vs.
TOA Change: Division Based Force
$50 B
FY00: $98.8B • Training Focus – Decisive Action Operations vs.
FY13: $134.6B Combat Operations Only
$40 B Delta:+$35.8B • Equipment – Fully equipped with highly modernized
organizations vs. Insufficient Investment
Graph Values in constant FY13 dollars • Installations – Highly Modernized Facilities with
$30 B Sustainment Investment vs. Underfunded Base
Operations & Facility Sustainment
$20 B • Total Force – Reliance on the RC vs. Minimal Reliance
on the RC
$10 B
$B
Equipping
Equipping Installation
Installation Manning
Manning Organizing
Organizing Sustaining
Sustaining Training
Training
2000 $21.5 B $15.1 B $40.3 B $2.5 B $4.5 B $15.0 B
2013 $27.0 B $18.6 B $62.1 B $3.4 B $6.1 B $16.8 B
Delta $5.6 B $3.5 B $21.8 B $1.0 B $1.6 B $1.8 B
** Entitlement Comparisons between 2000 and 2012 in then year dollars (based on Specialist, E-4)
11

12. Army Resource Framework Box size shows relative
President’s FY13 Budget size of the program
Manning Equipping
Mission
Aviation Command
AC Manpower
(Network)
MM Basic &
Soldier Applied
Maneuver Fires
EE Research
(Combat Test
CSS
Vehicles) (Tactical Training &
Advanced & Wheeled Ammo Evalua
Vehicles)
Manufacturi tion
Recruiting & ng War &
Mobility & CSS
RC Full Time Support Retention Technology
Counter- (Sustai
Operat
RC Manpower Health Care Air &
Mobility nment)
ional
(FTS) Education and
Directed
Programs
Missile Chemical Ammo
Defense Demilitari Intellige
Electronic
Prote
Human Development
Warfare/Info
rmation
ction
Combat Acquisition Operations
Resource Programs Focused on
Individuals Develop
and
Production
zation nce
Experim
Management Training Support ment Support entation
Con
Support to AC
Operations Non - G8 FD
Commands Managed
Items ting
Man
enci
pow
es
er
Sustainment, Sustaining
Training Installations Restoration, Core Logistics
OPTEMPO Ground DEPOT
Installation Modernization SS Sustainment
Contingencies (SRM)
Maintenance
Services II
Sustainment
Strategic Second Systems Tech
Ammo
Demilitarizat
Wartime Destination Support (SSTS)
TT
ion
Equipment Transportatio
Ammunition Chemical
Army
n (SDT)
Enterprise IT Family (APS)
Readiness
Demilitarizat
ion
Installation
Transport Housing
Support
Programs
Training Enablers Flying Hour Program Facility Construction Army
Joint Operations
and Activities
Non-Discretionary
Obligations
Institutional Training Enterprise IT
Training
Installation
Services Operations Services
Construction
Tails OO
OrganizingEnterprise IT
Enterprise IT
Transport
Support Family & Community Base Support to Services
Support to Commands
Cyber - Network Joint Operations and
Cyber - Programs
Operations Activities Realignment Contingen
Non-Discretionary Network
Commands Focused on
Services
and Closure cies
Enterprise Operations
Programs Focused Functions
Operations
Civilian Training IT (BRAC)
Education and
Development
Sustainment,
Restoration,
Transport
Obligations Non - G8 FD Managed Items
Training Support
Operations
on Organizations Directed Programs
Modernization
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RC Manpower
(SRM)

13. Guiding Principles / Way Ahead
• Army buying power is going down
– Sequestration will very quickly reduce Army buying power
– Even without sequestration, the Army’s buying power will continue to diminish
• Fundamental changes, largely in non-discretionary accounts, preclude
returning a similarly sized Army to pre-war levels of funding
• Army Senior Leaders are “all-in” and actively engaging DoD and other
National Leaders
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