Order Code RL31305
Report for Congress
Received through the CRS Web
Authorization and Appropriations
for FY2003: Defense
Updated August 16, 2002
Stephen Daggett and Amy Belasco
Foreign Affairs and National Defense Division
Congressional Research Service ˜ The Library of Congress

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Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions,
and budget reconciliation bills. The process begins with the President’s budget
request and is bounded by the rules of the House and Senate, the Congressional
Budget and Impoundment Control Act of 1974 (as amended), the Budget
Enforcement Act of 1990, and current program authorizations.
This report is a guide to one of the 13 regular appropriations bills that Congress
passes each year. It is designed to supplement the information provided by the House
and Senate Appropriations Subcommittees on Energy and Water. It summarizes the
current legislative status of the bill, its scope, major issues, funding levels, and
related legislative activity. The report lists the key CRS staff relevant to the issues
covered and related CRS products.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.shtml].

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Authorization and Appropriations for FY2003: Defense
Summary
Both the defense authorization bill (H.R. 4546, S. 2514) and the defense
appropriations bill (H.R. 5010 in both chambers) are ready for conference
committees to meet once Congress returns from the August recess. The House and
Senate Appropriations Committees, however, have not yet taken up bills to provide
$10 billion that the Administration requested as a contingency fund for costs of
counter-terrorism operations in FY2003.
Conferees have several major issues to resolve, particularly on the defense
authorization bill. A key issue, on which the Administration has threatened a veto,
is whether to permit concurrent receipt of military retired pay and veteran’s disability
benefits. The Senate authorization bill includes a provision to allow immediate, full
concurrent receipt, while the House bill phases in a program to allow concurrent
receipt for those with 60% or greater disabilities. The White House has threatened
to veto a bill that includes either provision.
The Senate version of the authorization also includes a number of other
provisions that the Administration objects to, including measures requiring
independent annual reviews of missile defense programs within the Defense
Department and reports to Congress on several missile defense programs, a measure
prohibiting development of a nuclear earth-penetrator warhead, and a measure
prohibiting deployment of nuclear armed interceptors for missile defense.
Both the House and the Senate authorization bills provide an increase in active
duty end-strength, which the Administration opposes. The House authorization bill
waives the application of some environmental regulations to military training
activities, while the Senate bill does not. The House bill includes a substantial cut
in contributions to the military retirement fund for the estimated cost of retiree health
care benefits.
Although the House authorization bill includes funds for development of the
Crusader artillery system, the issue appears to have been resolved since the time the
bill was passed. Both the House and the Senate versions of the defense
appropriations bill shift Crusader funding into other Army programs, and the
conference agreement on FY2002 supplemental appropriations, H.R. 4775, directs
the Defense Department to allocate funds to develop a substitute for the Crusader to
be deployed by 2008. All four congressional defense committees, including the
House Armed Services Committee, have recently approved a DOD request to
reprogram FY2002 funds from the Crusader program to Army Future Combat System
development.

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Key Policy Staff
Area of Expertise
Name
Telephone
E-Mail
Acquisition
Valerie Grasso
7-7617
vgrasso@crs.loc.gov
Aviation Forces
Christopher Bolkcom
7-2577
cbolkcom@crs.loc.gov
Arms Control
Amy Woolf
7-2379
awoolf@crs.loc.gov
Arms Sales
Richard Grimmett
7-7675
rgrimmett@crs.loc.gov
Base Closure
David Lockwood
7-7621
dlockwood@crs.loc.gov
Stephen Daggett
7-7642
sdaggett@crs.loc.gov
Defense Budget
Amy Belasco
7-7627
abelasco@crs.loc.gov
Defense Industry
Gary Pagliano
7-1750
gpagliano@crs.loc.gov
Defense R&D
John Moteff
7-1435
jmoteff@crs.loc.gov
Edward Bruner
7-2775
ebruner@crs.loc.gov
Ground Forces
Steven Bowman
7-7613
sbowman@crs.loc.gov
Health Care; Military
Richard Best
7-7607
rbest@crs.loc.gov
Intelligence
Richard Best
7-7607
rbest@crs.loc.gov
Military Construction
Daniel Else
7-4996
delse@crs.loc.gov
David Burrelli
7-8033
dburrelli@crs.loc.gov
Military Personnel
Robert Goldich
7-7633
rgoldich@crs.loc.gov
Military Personnel;
Lawrence Kapp
7-7609
lkapp@crs.loc.gov
Reserves
Missile Defense
Steven Hildreth
7-7635
shildreth@crs.loc.gov
Naval Forces
Ronald O’Rourke
7-7610
rorourke@crs.loc.gov
Nuclear Weapons
Jonathan Medalia
7-7632
jmedalia@crs.loc.gov
Peace Operations
Nina Serafino
7-7667
nserafino@crs.loc.gov
Radio Frequency,
Lennard Kruger
7-7070
lkruger@crs.loc.gov
Military
Readiness
Amy Belasco
7-7627
abelasco@crs.loc.gov
Space, Military
Marcia Smith
7-7076
msmith@crs.loc.gov
David Ackerman
7-7965
dackerman@crs.loc.gov
War Powers
Louis Fisher
7-8676
lfisher@crs.loc.gov
Richard Grimmett
7-7675
rgrimmett@crs.loc.gov

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Contents
Key Policy Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Status of Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FY2003 Defense Authorization Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FY2003 Defense Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FY2003 Congressional Budget Resolution . . . . . . . . . . . . . . . . . . . . . . 3
FY2002 Supplemental Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of the Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Impact of Accrual Accounting for Military and Civilian
Personnel Retirement Benefits on the Defense Budget . . . . . . . . . . . . . 6
“Must Pay” Bills in the Defense Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Impact of Growing Personnel and Operating Costs . . . . . . . . . . . . . . . . 8
Reversing the “Procurement Holiday” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Procurement “Bow Wave” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Defense Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Defense Budget Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Key Issues in Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Counter-Terrorism Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Personnel Pay and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Army Modernization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Navy Shipbuilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Aircraft Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Missile Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Strategic Nuclear Weapons Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Environmental Restrictions on DOD Training . . . . . . . . . . . . . . . . . . . . . . 39
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Cap on Military Personnel in Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Base Realignment and Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Abortions in Military Hospitals Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Limitation on Transfer Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Congressional Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

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Defense Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Defense Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
FY2002 Supplemental Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
List of Tables
Table 1a. Status of FY2003 Defense Appropriations . . . . . . . . . . . . . . . . . . . . . . 3
Table 1b. Status of FY2003 Defense Authorization . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. National Defense Budget Function and Department of Defense
Budget, FY2000-FY2007, Administration Projections . . . . . . . . . . . . . . . . . 5
Table 3. Effects of Accrual Accounting on the Defense Budget . . . . . . . . . . . . . 7
Table 4. Changes in Requested National Defense Funding by
Appropriations Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 5. Trends in Military Personnel Funding, FY1990-FY2007 . . . . . . . . . . . 10
Table 6. National Defense Budget Function by Appropriations Title,
FY2000-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 7. Congressional Budget Resolution, Recommended Amounts for
National Defense, FY2003-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 8: House Cost of War Against Terrorism Authorization Act
(H.R. 4547) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Table 9. Congressional Budget Office Estimate of the Costs of the House
Armed Services Committee Increase in Active Duty End-Strength . . . . . . 25
Table 10. Congressional Action on Major Army Acquisition Programs . . . . . . 28
Table 11. Congressional Action on Major Navy Shipbuilding Programs . . . . . 30
Table 12. Congressional Action on Major Aircraft Programs . . . . . . . . . . . . . . 33
Table 13. Congressional Action on Missile Defense Funding by Program
Element and Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table A1. Congressional Action on Defense Authorization by Title . . . . . . . . . 45
Table A2. Congressional Action on Defense Appropriation by Title . . . . . . . . . 45

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Authorization and Appropriations for
FY2003: Defense
Most Recent Developments
On August 1, the Senate approved its version of the FY2003 defense
appropriations bill, H.R. 5010. It provides $355.4 billion for the defense programs
it covers, which is $11.4 billion below the Administration’s request. On June 27, the
House passed its version of the FY2003 defense appropriations bill, H.R. 5010. It
provides $354.7 billion, which is $12.1 billion below the request. Neither the House
nor the Senate version of the bill includes $10 billion that the Administration
requested as a contingency fund for costs of counter-terrorism operations in
FY2003 – both chambers may act on appropriations for counter-terrorism later.
Also on June 27, the Senate approved its version of the FY2003 defense
authorization bill, S. 2514. The bill authorizes $393.4 billion for national defense,
which is $3.1 billion below the Administration’s request. The bill includes $10
billion for counter-terrorism but does not include funds for payment of the full costs
of civilian retirement benefits. On May 10, the House passed its version of the
FY2003 defense authorization bill, H.R. 4546. The bill authorizes $383.4 billion for
national defense, $13.1 billion less than the Administration’s request. The bill does
not include funds for full accrual accounting of civilian retirement benefits, nor does
it include $10 billion that for counter-terrorism that is addressed in H.R. 4547. On
July 24, the House approved H.R. 4547, a bill to authorize $10 billion for counter-
terrorism operations in FY2003.
Background
Congress provides funding for national defense programs in several annual
appropriations measures, the largest of which is the defense appropriations bill.
Congress also acts every year on a national defense authorization bill, which
authorizes programs funded in all of the regular appropriations measures. The
authorization bill addresses defense programs in almost precisely the same level of
detail as the defense-related appropriations, and congressional debate about major
defense policy and funding issues usually occurs mainly in action on the
authorization. Because the defense authorization and appropriations bills are so
closely related, this report tracks congressional action on both measures.
The annual defense appropriations bill provides funds for military activities of
the Department of Defense (DOD), including pay and benefits of military personnel,
operation and maintenance of weapons and facilities, weapons procurement, and
research and development, as well as for other purposes.

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CRS-2
Most of the funding in the bill is for programs administered by the Department
of Defense, though the bill also provides (1) relatively small, unclassified amounts
for the Central Intelligence Agency retirement fund and intelligence community
management, (2) classified amounts for national foreign intelligence activities
administered by the CIA and by other agencies as well as by DOD, and (3) very small
amounts for some other agencies. Five other appropriations bills also provide funds
for national defense activities of DOD and other agencies including:
! the military construction appropriations bill, which finances
construction of military facilities and construction and operation of
military family housing, all administered by DOD;
! the energy and water development appropriations bill, which
funds atomic energy defense activities administered by the
Department of Energy;
! the VA-HUD-independent agencies appropriations bill, which
finances civil defense activities administered by the Federal
Emergency Management Agency, activities of the Selective Service
System, and DOD support for National Science Foundation
Antarctic research;
! the Commerce-Justice-State appropriations bill, which funds
national security-related activities of the FBI, the Department of
Justice, and some other agencies; and
! the transportation appropriations bill, which funds some
defense-related activities of the Coast Guard.
Status of Legislation
FY2003 Defense Authorization Bills. On May 1, the House Armed
Services Committee marked up its version of the FY2003 defense authorization bill,
H.R. 4546. The committee also considered, but did not report, a companion measure,
H.R. 4547, to provide funds for the war on terrorism. The House passed H.R. 4546
early on the morning of May 10. On May 9, the Senate Armed Services Committee
completed marking up its version of the FY2003 defense authorization, S. 2514, and
a report was issued on May 15. On June 13, the committee approved an amendment
to be offered on the floor regarding the Crusader artillery system. On June 18, the
full Senate began considering the bill, and the Senate passed the bill on June 27. On
July 18, the House Armed Services Committee reported H.R. 4547, entitled the Cost
of War Against Terrorism Authorization Act (COWATAA), and the full House
approved the bill under suspension of the rules on July 24.
FY2003 Defense Appropriations Bill. On June 19, the House Defense
Appropriations Subcommittee marked up its version of the FY2003 defense
appropriations bill, and on June 24, the full committee marked up the bill (H.R.
5010) and ordered it to be reported. The House passed the bill on June 27. On July

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CRS-3
18, the Senate Appropriations Committee reported its version of the bill (also H.R.
5010). The Senate passed the bill on August 1.
FY2003 Congressional Budget Resolution. On March 20, the House
passed its version of the annual congressional budget resolution, H.Con.Res. 353, and
the Senate reported its version, S.Con.Res. 100, on March 22. Both versions
recommend funding levels for defense in FY2003 very close to what the
Administration requested. The full Senate has not scheduled floor action, however,
and it is widely expected that the two chambers will not be able to agree on a
common budget. On May 22, as part of the rule governing debate on supplemental
appropriations, the House approved a measure deeming the budget resolution, as
approved in the House, to have been passed for purposes of guiding later action on
funding legislation.
FY2002 Supplemental Appropriations. On March 21, the Administration
submitted a request for $27.1 billion in supplemental FY2002 appropriations for
activities in response to last year’s terrorist attacks, of which $14 billion is for
defense programs. On May 24, the House approved its version of the bill, H.R. 4775,
providing $28.8 billion using Office of Management and Budget (OMB) scoring of
a key provision (as assumed by the appropriations committee) and $30.1 billion using
Congressional Budget Office (CBO) scoring. The Senate approved its version of the
bill on June 7, providing $31.4 billion. On July 18, conferees announced agreement
on a compromise bill that provides $28.9 billion, including $14.5 billion for defense.
The House approved the conference report on July 23 and the Senate on July 24.
Table 1a. Status of FY2003 Defense Appropriations
Subcommittee
Conference
Markup
House
House
Senate
Senate
Conf.
Report Approval
Public
Report Passage Report Passage Report
Law
House
Senate
House
Senate
6/24/02
7/18/02
6/27/02
8/1/02
6/19/02
–
H.Rept.
S.Rept.
–
–
–
–
413-18
95-3
107-532
107-213
Table 1b. Status of FY2003 Defense Authorization
Full Committee
Conference Report
Markup
House
House
Senate
Senate
Conf.
Approval
Public Law
Report
Passage Report Passage Report
House
Senate
House
Senate
5/3/02
5/15/02
5/10/02
6/27/02
5/1/02
5/9/02
H.Rept.
S.Rept.
–
–
–
–
359-58
97-2
107-436
107-151

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CRS-4
Overview of the Administration Request
On February 4, 2002, the Administration submitted its formal FY2003 budget
request to Congress. The Administration proposed $396.8 billion for the national
defense budget function, about $46 billion above the estimated FY2002 level (not
including supplemental FY2002 appropriations of $14 billion proposed on March
21).1 The increase between FY2002 and FY2003 is the largest since at least the first
years of the Reagan Administration. And with supplemental counter-terrorism
funding for FY2001 and FY2002 included, the total increase in defense in the last
year is the largest, in inflation-adjusted dollars, since the Vietnam War. The
Administration projects continued growth in defense through FY2007, though at a
much more modest pace – Table 2 shows the long term trend in defense spending
under the Administration’s plan.
The large increase requested for defense has not been enough, however, to allay
the concerns of defense advocates in Congress. In their view, the budget is not
adequate to accommodate needed increases in weapons procurement. In the House,
several Members threatened to vote against the proposed budget resolution because
it set aside $10 billion for defense in a reserve fund available only for costs of the
global counter-terrorism campaign. The Administration requested the $10 billion as
an unallocated contingency fund for costs of counter-terrorism operations in FY2003,
but several members of the Armed Services Committees both in the House and in the
Senate have said they would prefer using that money to increase spending on major
weapons programs, especially shipbuilding.
1 Early statements by the President and DOD briefing material on the budget request say the
FY2003 increase over FY2002 is $48 billion. This is the increase for Department of
Defense discretionary budget authority if civilian accrual accounting costs are not included
in the FY2002 base.

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CRS-5
Table 2. National Defense Budget Function and Department of Defense
Budget, FY2000-FY2007, Administration Projections
(current and constant FY2003 dollars in billions)
Actual
Actual Estimate
Request Proj.
Proj.
Proj.
Proj.
Fiscal Year:
2000
2001
2002
2003
2004
2005
2006
2007
National Defense Budget Function
Budget Authority
Current year dollars
304.1
329.0
350.7
396.8 405.6
426.6
447.7
469.8
Constant FY2002 dollars
329.9
346.5
358.5
396.8 396.1
406.5
416.2
426.1
Real growth/decline
+1.4%
+5.0%
+3.5%
+10.7% -0.2%
+2.6%
+2.4%
+2.4%
Outlays
Current year dollars
294.5
308.5
348.0
379.0 393.8
413.5
428.5
442.5
Constant FY2003 dollars
319.5
324.9
355.2
379.0 384.5
394.2
398.4
401.1
Real growth/decline
+4.3%
+1.7%
+9.3%
+6.7% +1.5%
+2.5%
+1.1%
+0.7%
Department of Defense
Budget Authority
Current year dollars
290.5
313.0
333.0
378.6 387.4
408.3
429.2
450.9
Constant FY2003 dollars
315.1
329.6
340.4
378.6 378.3
389.0
398.9
409.0
Real growth/decline
+1.7%
+4.6%
+3.3%
+11.2% -0.1%
+2.8%
+2.5%
+2.5%
Outlays
Current year dollars
281.2
294.0
330.6
361.0 375.6
395.2
410.2
423.9
Constant FY2003 dollars
305.1
309.6
337.4
361.0 366.7
376.7
381.3
384.2
Real growth/decline
+4.8%
+1.5%
+9.0%
+7.0% +1.6%
+2.7%
+1.2%
+0.8%
Sources: U.S. Office of Management and Budget, Historical Tables: Budget of the United States Government, Fiscal
Year 2003 , February 2002. Constant dollar figures are CRS calculations using deflators from DOD Comptroller.
Notes: This and other tables in this report use OMB data which reflect enacted and proposed changes in accounting for
retirement benefits. Figures reflect (1) enacted accrual accounting for health care benefits for over-65 military retirees
beginning in FY2003; (2) proposed accrual accounting for health care benefits for under-65 military retirees beginning
in FY2004; and (3) proposed accrual accounting for all civilian retirement pension and health benefits beginning in
FY2003. OMB has also adjusted FY2001 and FY2002 to be consistent with FY2003 and later treatment of civilian
retirement benefits. Data in these tables also reflect OMB scoring of funds provided in the Emergency Terrorism
Response (ETR) supplemental appropriations act approved in September 2001. OMB figures do not show the allocation
of $9.8 billion of funding provided for defense in the ETR supplemental.

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CRS-6
The Impact of Accrual Accounting for Military and Civilian
Personnel Retirement Benefits on the Defense Budget
One important complicating element in the FY2003 defense budget is a series
of changes in accounting for military and civilian personnel retirement benefits.
Most federal retirement benefits, including benefits for uniformed military service
members and DOD civilian personnel, have long been funded on the basis of
“accrual accounting,” in which the cost of future benefits for current employees is
charged to the employing agency as the benefits are accrued. Under accrual
accounting procedures, federal agencies pay the actuarily determined cost of future
benefits into a fund. Payments to retirees are then charged to the fund, not to the
agency. In the FY2003 and FY2004 defense budgets, three substantial adjustments
involving accrual accounting have a large effect on budget totals. These are:
! Accrual accounting for over-65 health care benefits for
uniformed personnel: The FY2001 Defense Authorization Act,
P.L. 106-398, included a provision, known as “Tricare-for-Life,”
that guarantees DOD-provided health care to over-65 military
retirees and their dependents. Beginning in FY2003, these benefits
are being funded on an accrual basis. This results in (1) an increase
of $8.1 billion in FY2003 in the military personnel accounts to
reflect the accrual cost of future benefits for current uniformed
personnel and (2) a reduction of $5.6 billion in operation and
maintenance accounts to reflect a payment from the health care trust
fund to DOD for providing care to over-65 retirees.
! Accrual accounting for all civilian personnel retirement pension
and health benefits: While most federal civilian retirement benefits
have been funded on an accrual basis, a small part has not been.
Now the Administration is proposing to fund all retirement benefits
on an accrual basis. In FY2003, the proposed change results in an
increase of $3.3 billion (both in budget authority and in outlays) in
the Department of Defense budget. OMB has adjusted FY2001 and
FY2002 figures – though not figures for earlier years – to be
comparable to the new, proposed treatment of civilian retirement and
health benefits. Thus, OMB figures include $3.0 billion in FY2001
and $3.2 billion in FY2002 Department of Defense budget totals
(both in budget authority and in outlays) for increased civilian
retirement accrual even though this accounting procedure was not in
place in those years.
! Accrual accounting for under-65 health care benefits for
uniformed personnel: Beginning in FY2004, the Administration
is also proposing to finance health care benefits for under-65
military retirees on an accrual basis, in which, again, DOD would
pay into a fund the cost of future benefits for current employees and
would receive reimbursement from the fund for costs of under-65
retiree health care that it provides. Both the contributions to the

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CRS-7
fund and reimbursements from the fund are reflected in budget
projections from FY2004 on.
Table 3 shows the year-by-year impact of these changes in accrual accounting on the
defense budget through FY2007.
Table 3. Effects of Accrual Accounting on the Defense Budget
(millions of dollars)
2003
2004
2005
2006
2007
DOD Payments to Accrual Funds
Payments for Accrual of Benefits for 65-and-Over
8,102
8,618
9,151
9,720
10,338
Health
Payments for Accrual of Civilian Benefits
3,356
3,629
3,781
3,938
4,114
Payments for Accrual of Benefits for Under-65
6,484
6,889
7,319
7,778
Health
Total Payments to Funds
11,458
18,731
19,821
20,977
22,230
Receipts by DOD for Provision of Services
Receipts for 65-and-Over Health Care
5,634
5,986
6,361
6,758
7,180
Receipts for Under-65 Health Care
5,579
5,928
6,299
6,692
Total Receipts from Funds
5,634
11,565
12,289
13,057
13,872
Net Effect on DOD Budget
+5,824
+7,166
+7,532
+7,920
+8,358
Source: Office of Management and Budget.
“Must Pay” Bills in the Defense Budget
The cost of changes in accrual accounting is only one of a number of so-called
“fact of life” or “must pay” bills in the FY2003 defense budget. Much of the
FY2002-2003 budget increase is taken up by accounting changes, inflation, pay
raises, changes in weapons cost estimates, and costs of the global counter-terrorism
campaign rather than by increases in weapons investment. DOD Comptroller Dov
Zakheim has told congressional committees that such “must pay” bills leave less than
$10 billion for new initiatives.
According to the Defense Department, increased costs include:
! $6.7 billion for inflation;
! $2.7 billion for pay raises;
! $8.1 billion for accrual payments for 65-and-over health care
benefits for current uniformed personnel when they retire (discussed
above);
! $3.3 billion for increased accrual payments to retirement accounts
for current civilian DOD personnel (also discussed above – the
OMB estimate is $3.4 billion for FY2003);

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CRS-8
! $7.4 billion for what DOD calls “realistic costing,” half for revised
estimates of weapons costs (including the F-22 fighter and already
contracted Navy ships) and half for closer to full funding of
projected operating costs; and
! $19.4 billion for counter-terrorism, including $10 billion in an
unallocated contingency fund for continuing the war and $9.4 billion
for specific costs associated with ongoing operations.
In all, this adds up to $47.5 billion in new costs, but the total is offset by $9.3 billion
in savings from procurement programs that were in the FY2002 budget but are not
in the FY2003 plan. So an increase of almost $50 billion in the defense budget, by
this account, still leaves relatively little available for new programs.
Although the point is generally well taken, some items are missing from the
arithmetic. For one thing, DOD is receiving $5.6 billion in payments from the retiree
health care trust fund in FY2003 to cover costs of providing services to 65-and-over
retirees – money it didn’t receive in FY2002. Also, some counter-terrorism costs
were included in the FY2002 budget, so the increased cost in FY2003 is $16 billion
rather than $19 billion. Moreover, OMB budget figures (though not some of the
figures DOD used in its early briefings on the budget), show $3.2 billion in costs of
civilian accrual accounting in the FY2002 budget for purposes of comparison with
the FY2003 request, so the added cost in FY2003 is only $0.2 billion. And, finally,
a substantial part of the $9.4 billion for specifically allocated war-related funding will
go to procure material, such as Unmanned Aerial Vehicles (UAVs), intelligence
infrastructure, and communications equipment, that will be in the force for some
time – DOD officials have said that at least $3 billion of the amount for
counter-terrorism is for weapons procurement. So, in all, the money available for
new initiatives in FY2003, compared to FY2002, is more like $20-25 billion – not
the whole of the defense budget increase, but still not insubstantial.
The Impact of Growing Personnel and Operating Costs
The impact of “fact of life” cost increases on the FY2003 budget is relatively
large because of some special factors, but it is by no means unique. Table 4
compares the FY2003 defense request with FY2002 estimated funding by
appropriations title – a fairly common way of looking at the budget – with comments
on major reasons for some of the changes. What stands out is how much of the large
increase between FY2002 and FY2003 is going to military personnel and to operation
and maintenance (O&M) rather than to procurement or to research and development
(though, as noted, some procurement is being financed from war-related funds
requested in the operation and maintenance title).

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CRS-9
Table 4. Changes in Requested National Defense Funding by
Appropriations Title
(budget authority in billions of dollars)
Estimate
Request
Fiscal Year:
2002
2003
Change
Notes/Comments
Military Personnel
82.0
94.3
+12.3 +$8.1 health benefits accrual
Operation & Maintenance
129.8
150.4
+20.7 +$15.9 war costs;
-$5.6 health care receipts
Procurement
61.1
68.7
+7.6 +$3.7 for increased cost estimates
RDT&E
48.6
53.9
+5.3 –
Military Construction
6.6
4.8
-1.8 Limited pending 2005 base closures
Family Housing
4.1
4.2
+0.2 –
Other
0.9
2.3
+1.4 –
Subtotal, DOD
333.0
378.6
+45.6 –
Atomic Energy Defense Activities
16.0
16.5
+0.4 –
Other Defense-Related Activities
1.7
1.7
+0.0 –
Total, National Defense
350.7
396.8
+46.1 –
Source: Office of Management and Budget; CRS calculations.
Notes: OMB figures include $3.4 billion for civilian retirement benefits accrual in FY2003 and $3.2 billion in
FY2002. FY2002 estimate does not include $14.1 billion in supplemental appropriations requested for
counter-terrorism operations on March 21, 2002.
Military personnel accounts have grown especially rapidly in recent years
because of pay and benefits increases that Congress approved beginning with the
FY2001 defense authorization act (P.L. 106-398), passed in October, 2000. That bill
included:
! a 4.8% across-the-board pay raise;
! “pay table reform” that provided additional substantial pay raises to
mid-career personnel to bolster retention;
! the first increment of a Clinton Administration proposal to reduce
out-of-pocket off-base housing costs by increasing basic allowance
for housing benefits;
! “Tricare for Life,” guaranteeing DOD-provided health care to
over-65 military retirees; and
! a requirement that future military pay raises be equal to the
“employment cost index,” a broad measure of personnel costs in the
economy as a whole, plus 0.5%.
Last year, the FY2002 defense authorization bill included some additional changes
in the pay table to further boost income for selected mid-career personnel, and the bill
also increased special pays and bonuses.

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CRS-10
Increased pay and benefits appear to have improved military recruitment and
retention, though recent gains may, in part, also be due to a less robust economy. The
increases have also driven up personnel costs dramatically. Table 5 illustrates the
point. Under the Administration’s plan, total military personnel funding will grow
from less than $70 billion as recently as FY1998 (in current year dollars – i.e., not
adjusting for inflation) to $94 billion in FY2003 and to $117 billion by FY2007.
After adjusting for inflation (using the Consumer Price Index), personnel costs will
grow from about $48,000 per active duty troop to more than $65,000 in FY2003
prices over the same period.
Table 5. Trends in Military Personnel Funding, FY1990-FY2007
(budget authority)
Funding
Total
for Active
Funding
Funding
Military
Duty
for Active
for Active
Personnel
Military
Military
Active
Military
Funding
Personnel
Personnel
End-
Personnel
Fiscal
(CY$ in
(CY$ in
(FY2003$ in
Strength
Per Troop
Year
billions)*
billions)*
billions)*
(000s)
(FY2003 $)
1990
78.6
69.8
98.6
2,069
47,656
1991
78.4
75.0
101.1
2,002
50,485
1992
78.8
71.5
93.7
1,808
51,799
1993
76.0
66.5
84.7
1,705
49,652
1994
71.4
61.8
76.7
1,610
47,651
1995
71.6
62.1
75.0
1,518
49,389
1996
69.8
60.4
71.0
1,472
48,227
1997
70.3
60.9
69.8
1,440
48,453
1998
69.8
60.3
68.2
1,406
48,471
1999
70.6
60.7
67.2
1,386
48,519
2000
73.8
63.4
68.0
1,384
49,124
2001
76.9
65.7
68.3
1,385
49,287
2002
82.0
70.3
71.9
1,387
51,834
2003
94.3
79.9
79.9
1,390
57,494
2004
104.0
88.4
86.5
1,390
62,236
2005
108.1
91.7
87.6
1,390
63,048
2006
113.7
96.4
90.0
1,390
64,736
2007
117.4
99.4
90.6
1,390
65,183
Source: CRS calculations based on data from the Office of Management and Budget.
*Notes: “CY$” refers to “current year” dollars – i.e., not adjusted for inflation. FY2003 constant
dollar figures are calculated using CPI-W deflators. DOD military personnel deflators are not
appropriate to use because they count the amount of annual pay raises and benefits increases simply
as inflation.

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CRS-11
A similar, though much longer-term upward trend applies to operation and
maintenance (O&M) accounts. A very simple measure of the trend is to calculate
total O&M funding per active duty troop in constant, inflation adjusted prices.
Making some adjustments to reduce inconsistencies from year to year, the result
shows a very constant pattern of growth of about 2.5% per year above inflation from
the mid-1950s on – Figure 1 illustrates the trend.
Figure 1. Trend in DOD Operation & Maintenance Funding per
Active Duty Troop, FY1955-2007
120
100
80
Trend: +2.5% per year
60
40
O&M per Troop
20
Trend
0
1955
1965
1975
1985
1995
2005
In the past, Defense Department projections often showed O&M costs per troop
leveling off in the later years of each successive five or six year funding plan. When
costs continued to grow, the Clinton Administration’s response was either to reduce
planned procurement funding in order to shift money into O&M or to increase the
total defense budget to cover at least part of the shortfall. The Bush Administration
appears, at least from this very rough measure, to be more fully funding likely O&M
cost growth, though the projections, as in the past, do appear to level off between
FY2006 and FY2007. DOD Comptroller Dov Zakheim has said that the
Administration is insisting on more realistic estimates both of procurement and of
operating costs.
Continuing, unabated growth in personnel and in O&M costs takes up a
substantial share of projected increases in overall defense spending over the next few
years. Table 6 shows Administration projections of defense funding by
appropriations title through FY2007. Between FY2000, the last full year of the
Clinton Administration, and FY2007, overall national defense funding is projected
to increase by $166 billion. Of the increase, $90 billion is for personnel and O&M
and $63 billion is for procurement and R&D.

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CRS-12
Table 6. National Defense Budget Function by Appropriations Title,
FY2000-FY2007
(budget authority, current year dollars in billions)
Fiscal Year:
2000
2001
2002
2003
2004
2005
2006
2007
Military Personnel
73.8
76.9
82.0
94.3
104.0
108.1
113.7
117.4
Operation & Maintenance
108.8
117.7
129.8
150.4
140.9
147.0
152.3
155.2
Procurement
55.0
62.6
61.1
68.7
74.7
79.2
86.9
99.0
RDT&E
38.7
41.7
48.6
53.9
57.0
60.7
58.9
58.0
Military Construction
5.1
5.5
6.6
4.8
5.1
6.3
10.8
13.8
Family Housing
3.5
3.7
4.1
4.2
4.3
5.1
4.9
4.8
Other
5.6
4.9
0.9
2.3
1.4
1.9
1.5
2.7
Subtotal, DOD
290.5
313.0
333.0
378.6
387.4
408.3
429.2
450.9
Atomic Energy Defense Activities
12.4
14.4
16.0
16.5
16.5
16.6
16.8
17.1
Defense-Related Activities
1.2
1.6
1.7
1.7
1.7
1.7
1.7
1.7
Total, National Defense
304.1
329.0
350.7
396.8
405.6
426.6
447.7
469.8
Source: Office of Management and Budget.
Note: OMB figures show $3.0 billion in FY2000 and $3.2 billion in FY2001 for full accrual accounting for civilian
retirement benefits, though it was not in effect in those years and is proposed to begin in FY2003.
Reversing the “Procurement Holiday”
One key issue in congressional debate about the defense budget has been
whether the $70 billion or so requested for procurement in FY2003, or even the $99
billion projected for procurement in FY2007, is enough to reverse what former
Secretary of Defense William Perry called the “procurement holiday” in defense
budgets that followed the end of the Cold War. A decline in new weapons purchases,
said Perry in 1996, was justified in the early 1990s, first, because threats had
declined, second, because many new weapons ordered in the 1980s had just entered
the force, and, finally, because older weapons were retired first as the size of the
force declined, so the average age of equipment was dropping even without new
acquisitions. But the holiday would have to end soon, said Perry, in order to avoid
creating an unaffordable “bow wave” of costs in the future to replace large numbers
of rapidly aging weapons.
At the time, the Joint Chiefs set $60 billion per year for procurement by FY1998
as the goal – a target reached in the Clinton Administration’s final budget for
FY2001. In the years since Perry laid out the argument, however, the debate has
shifted. Now the issue – at least among defense advocates – is no longer whether $60
billion a year is adequate, but rather, how much more than $60 billion is needed to
meet modernization needs.
Much of the discussion has been shaped by a series of studies of the amounts
needed to sustain a “steady state” procurement rate for major weapons – i.e., how

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CRS-13
much is needed to replace the existing stock of weapons with more modern systems
as weapons reach the ends of their planned service lives. A study by the Center for
Strategic and International Studies estimated $160 billion a year – in FY2000 prices –
if strategic nuclear weapons are included in the calculus, and $110 billion a year
without strategic modernization. The Congressional Budget Office made its own
estimate of about $90 billion a year, and the Center for Strategic and Budgetary
Assessments said $80 billion – both also in FY2000 prices. Most recently the
Chairman of the Joint Chiefs, General Richard Myers, said that a Joint Staff study,
not released for public review, concluded that $100-110 billion a year, in FY2001
prices, is needed.2 After adjusting for inflation, the $99 billion projected for
procurement in FY2007 does not quite reach CBO estimates of steady-state
procurement requirements – $99 billion in FY2007 prices equals about $83 billion
in FY2000 prices.
Many members of the congressional defense committees have expressed
concern that the Administration’s budget plan – both in FY2003 and in future years –
does not appear sufficient, despite large increases in the defense total, to finance
planned weapons procurement programs. In the FY2003 request, committee
members have been especially critical of the shipbuilding budget, which calls for
procuring just five new ships. Assuming a 35-year service life for Navy ships, it
would take an average of new 8.5 ships per year to maintain a force of 300 ships in
the fleet. Only in the later years of the FY2003-2007 defense plan does the
shipbuilding rate reach the nominal “steady-state” replacement rate. Some argue that
helicopters, munitions, and other programs are inadequately funded as well.
The Procurement “Bow Wave”
Most recently there have been reports that DOD has been discussing how to
cope with a substantial “bow wave” of procurement costs in FY2007 and beyond.
Analytically, a “bow wave” refers to the normal pattern of funding for weapons
programs. The annual budget for any major acquisition program tends to grow as a
system moves from technology development to full scale engineering development
to production. Then the acquisition cost will decline again as production winds
down. Thus the shape of a bow wave. A very large cumulative bow wave can
develop if many new systems are scheduled to begin full production at about the
same time.
This situation now appears to be facing the Defense Department at the end of
the decade, when a number of new systems will be in production, including the F-22
and F-35 (Joint Strike Fighter) aircraft, the Comanche helicopter, and several new
2 Daniel Gouré & Jeffrey M. Ranney, Averting the Defense Train Wreck in the New
Millennium, (Washington: Center for Strategic and International Studies, 1999);
Congressional Budget Office, Budgeting for Defense: Maintaining Today’s Forces,
September 2000; Steven M. Kosiak, “Cost of Defense Plan Could Exceed Available
Funding By $26 Billion a Year Over the Long Run,” Center for Strategic and Budgetary
Assessments, April 2, 1998; Steven M. Kosiak, “CSIS “Train Wreck” Analysis of Defense
Department’s Plans-Funding Mismatch Is Off Track,” Center for Strategic and Budgetary
Assessments, February 2000; prepared statement of General Richard B. Myers, Chairman
of the Joint Chiefs of Staff, before the House Armed Services Committee, February 6, 2002.

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CRS-14
Navy ships. According to numerous press accounts, the Defense Department has
been considering how to cope with the substantial projected shortfalls in procurement
funding. The Navy, reportedly, is proposing to cut back substantially on planned
procurement of F-35 fighters, and Secretary of Defense Rumsfeld is reportedly
considering terminating several weapons programs – perhaps some in addition to the
Crusader self-propelled artillery system – in order to safeguard future funds for more
“transformational” weapons (see below).
Defense Transformation
During the presidential election campaign, then-candidate George Bush strongly
endorsed the notion of a defense transformation to meet the needs of a dramatically
new security environment. Both President Bush and Secretary of Defense Rumsfeld
have reaffirmed their commitment to transformation in major policy speeches in
recent months.3 Defense transformation has been defined in very diverse ways,
however, and the Administration has been under some pressure from Congress to
articulate its definition more fully.
Most recently, using categories of transformation laid out in the Quadrennial
Defense Review that was released last September,4 Deputy Secretary of Defense Paul
Wolfowitz gave a rough estimate of the amount of money requested for
transformation-related initiatives in FY2003 and future years. In testimony before
the Senate Armed Services Committee on April 9,5 Wolfowitz said
The six specific transformation goals identified in the QDR are first, to defend
the U.S. homeland and other bases of operation and defeat nuclear, biological
and chemical weapons and their means of delivery. Second, to deny enemy
sanctuary, depriving them of the ability to run or hide, any time, any where.
Third, to project and sustain forces in distant theaters in the face of access denial
threats. Fourth, to conduct effective operations in space. Fifth, to conduct
effective information operations. And sixth, to leverage our information
technology to give our joint forces a common operational picture.
In all, Wolfowitz said, about $21 billion is requested in FY2003 for such
transformational goals, and $136 billion is planned over the next 5 years.
3 Remarks by the President at the Citadel, December 11, 2001; Remarks by U.S. Secretary
of Defense Donald Rumsfeld, National Defense University, Fort McNair, Washington, D.C.,
Thursday, January 31, 2002.
4 U.S. Dept. of Defense, Office of the Secretary, Quadrennial Defense Review Report,
September 30, 2001, 71 p. Available electronically at:
[http://www.defenselink.mil/pubs/qdr2001.pdf]
5 Statement of Deputy Secretary of Defense Paul Wolfowitz before the Senate Armed
Services Committee, Hearing on Transforming the Armed Forces to Meet the Challenges
of the 21st Century, April 9, 2002. The prepared statement is available electronically at:
[http://www.senate.gov/~armed_services/statemnt/2002/April/Wolfowitz.pdf].

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CRS-15
Defense Budget Total
With a global war against terrorism underway, Congress has not been inclined
to make drastic changes in the Administration’s request for a substantial defense
increase. There has been some skirmishing, however, particularly between the
defense committees and the budget committees, over two issues:
! first, how to treat the Administration’s request for $10 billion in
FY2003 in an unallocated contingency fund for the war against
terrorism and,
! second, how to treat the Administration’s request for full accrual
accounting of civilian retirement benefits, which, across the whole
government, will increase discretionary spending by about $9 billion
and reduce mandatory spending by an equal amount.
For their part, the congressional defense committees would prefer to be able to
allocate the entire amount the Administration requested for national defense – $396.8
billion – as they see fit. The House Budget Committee, however, set aside the $10
billion requested for war costs in reserve funds available only for that purpose. The
House also set aside funds for civilian accrual accounting in a reserve fund, while the
Senate Budget Committee rejected the shift to full accrual accounting altogether.
The House-passed budget resolution also added about $500 million to the
Administration request which is assumed to be available for a phased in program to
allow concurrent receipt of military retirement and disability benefits. Table 7 shows
amounts recommended for national defense in the House and Senate versions of the
budget resolution, compared to the Administration request.
The House approved its version of the FY2003 budget resolution, H.Con.Res.
353, on March 20 by a vote of 221-209. In all, the measure recommended $393.8
billion for the national defense budget function in FY2003, but $10 billion of that
amount was in the reserve fund available only for costs of the global war against
terrorism. An additional $3.4 billion, not shown in the national defense total, was
available for defense in the reserve fund to cover costs of accrual accounting, if
Congress approves it.
The Senate Budget Committee version of the resolution, S.Con.Res. 100, was
reported on March 22 but has not been brought up on the Senate floor. The
committee recommended $393.4 billion for national defense in FY2003 and
explicitly rejected a shift to full accrual accounting for civilian employees. The
committee also recommended lower levels of defense spending after FY2004 than
either the House or the Administration, though the committee set aside future funds
in a reserve to be available either for defense or deficit reduction. Recommended
national defense funding levels in the budget resolution are not binding on the
appropriations committees, however, which are free to allocate funds for
discretionary programs as they decide.

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CRS-16
Table 7. Congressional Budget Resolution, Recommended
Amounts for National Defense, FY2003-FY2007
(billions of dollars)
Fiscal Year:
2002
2003
2004
2005
2006
2007
House-Passed
Budget Authority
347.514
393.831
401.640
422.740
444.243
466.458
Outlays
344.777
375.261
390.579
409.696
425.090
439.181
Senate Budget Committee
Budget
Authority
393.353 401.073 411.744 422.785 434.118
Outlays
380.145 394.354 405.833 411.587 415.278
Difference (House Minus Senate)
Budget Authority
+0.478
+0.567
+10.996
+21.458
+32.340
Outlays
-4.884
-3.775
+3.863
+13.503
+23.903
Administration Request
Budget Authority
396.801
405.642
426.571
447.702
469.750
Outlays
379.012
393.802
413.527
428.549
442.473
CBO Estimate of Administration Request, Excluding Civilian Accrual
Budget Authority
393.445
402.013
422.790
443.764
465.636
Outlays
375.656
390.173
409.746
424.611
438.359
Sources: H.Con.Res. 353; S.Con.Res. 100.
How to treat the $10 billion that the Administration requested as an unallocated
contingency for war costs has been a matter of continuing discussion. On May 22,
the House approved H.Res. 428, the rule governing debate on the FTY2002
supplemental appropriations bill (H.R. 4775), which includes a provision “deeming”
the budget resolution, as passed by the House, to be in effect for purposes of
subsequent House action on appropriations and other funding bills. Appropriators
wanted the “deeming” language amended to allow the appropriations committee to
remove the reserve fund designation for the contingency funding, thus letting the
committee use the $10 billion as it decides. In the face of objections from some
conservatives, however, the House leadership did not agree, and the deeming
language refers to the measure as passed by the House on March 20.
A preview of the debate over treatment of the contingency fund in the
appropriations bills played out in initial congressional action on the defense
authorization. On May 1, the House Armed Services Committee marked up its
version of the FY2003 defense authorization bill, H.R. 4546, and the full House
passed the measure on May 9. The bill authorizes $383.4 billion for national
defense. The Committee also considered but did not report at that time a separate
bill, H.R. 4547, the “Cost of War Against Terrorism Authorization Act”
(COWATAA), to provide the $10 billion that the Administration requested as a
contingency fund for war costs. Taken together the two bills would provide $393.4
billion for national defense. The committee allocated $3.6 billion in H.R. 4547,

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CRS-17
however, to a number of war-related costs that otherwise would have been included
in H.R. 4546. In effect, this is a way of using part of the $10 billion that the
Administration wanted set aside for war costs to offset committee increases in other
parts of the defense budget. Subsequently, the committee completed its markup of
H.R. 4547 on July 18 – see below for a discussion of the reported measure.
The Senate Armed Services Committee took a different approach. It authorized
$293.2 billion for national defense, including the $10 billion for counter-terrorism,
which it provided, as requested, as an unallocated amount.
The House and Senate Appropriations Committees have taken the same
approach as the House authorization. The House version of the defense
appropriations bill, H.R. 5010, approved on June 27, provides $354.7 billion for
defense activities it covers (excluding military construction programs, Department
of Energy defense-related activities, and defense-related activities of some other
agencies). This is $12.1 billion below the amount requested. Later the committee
expects to provided the $10 billion that is currently reserved for war-related costs in
a separate bill. In the meantime, the additional $2.1 billion reduction in defense is
available for other appropriations bills, including the military construction bill, which
is $541 million above the request, and the energy and water bill, which includes
defense-related programs. The Senate Appropriations Committee version of H.R.
5010, reported on July 18, provides $355.4 billion, $11.4 billion below the request.
The committee also will address the $10 billion requested for counter-terrorism later.
The $9 billion requested for full civilian accrual accounting has been at the
center of debate over the total amount available for appropriations bills. The House-
passed budget resolution provides $759 billion in total discretionary funding to the
appropriations committee, which is equal to the Administration request without the
$9 billion government-wide cost of shifting civilian accrual payments from the
mandatory to the discretionary side of the budget. The Senate reported version of the
budget resolution, however, provides $768 billion in discretionary funds, though it
does not assume that Congress will approve the shift of accrual funding. As a result,
without the $9 billion for accrual accounting, the House will end up marking up
appropriations bills with $9 billion less than the Senate – a prescription for gridlock
when conference committees meet on the various appropriations bills.
Key Issues in Congress
Along with negotiations about the overall level of defense spending, there has
been considerable debate in Congress about priorities within the budget and about a
number of specific programs. In general, the defense committees have tried to find
somewhat more money for weapons procurement than the Administration requested.
The House Armed Services Committee version of the FY2003 defense authorization
bill financed increased procurement in part by making offsetting savings in the
operation and maintenance accounts and in part by allocating $3.1 billion of
war-related expenses to the $10 billion “Cost of War Against Terrorism
Authorization Act”, H.R. 4547.

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CRS-18
The House Armed Services Committee also provided money for an increase in
active duty end-strength of about 12,000 personnel, something the services have
requested, but that Secretary Rumsfeld has strongly resisted. The Senate Armed
Services Committee bill financed increased Navy procurement in part by reducing
missile defense research and development funding. The House Appropriations
Committee did not increase procurement significantly, but it remains to be seen what
the committee will do when it takes up legislation to provide $10 billion for war-
related costs.
One of the major issues Congress is addressing this year is concurrent receipt
of military retired pay and veterans disability benefits. The House authorization bill
includes a provision to phase in partial concurrent receipt. The Senate bill includes
a measure approved on the floor to provide immediate, full concurrent receipt. The
White House Statement of Administration Policy on the Senate bill threatens to veto
any bill that includes either partial or full concurrent receipt.
Another major issue emerged on the eve of the House Armed Services
Committee markup of the defense authorization bill, when the committee received
word that the Office of the Secretary of Defense (OSD) had decided to terminate the
Army Crusader self-propelled artillery program. The committee rejected the
Administration plan and included full funding for the Crusader in the bill that it
reported and that was passed on the floor. Subsequently, however, the issue appears
to have been resolved. The conference agreement on H.R. 4775, a bill providing
supplemental appropriations for FY2002, includes a provision that directs the Army
to enter into a contract for a new cannon artillery system to be fielded by 2008, and
all of the congressional defense committees recently approved a Defense Department
request to reprogram funds from the Crusader to the Army Future Combat System
development program.
Other issues in the House debate over the authorization bill included provisions
concerning environmental limitations on military training, missile defense funding,
nuclear weapons force levels, nuclear testing, abortions in overseas military hospitals,
a cap on U.S. troop levels in Colombia, and base realignment and closure provisions.
The Rules Committee did not make in order floor amendments on many of these
issues, however.
A major issue in the Senate version of the authorization bill was the level of
funding for missile defense. The Senate Armed Services Committee reduced
requested missile defense R&D funds by more than $800 million, freeing up funds
for, among other things, increased shipbuilding. Eight Republicans on the
Committee voted against reporting the bill, several citing the missile defense cut as
the reason. In floor action, however, the Senate voted to allocate $814.3 million in
anticipated inflation savings either to missile defense or to counter-terrorism.
The following discussion provides an overview of major elements of the
Administration’s request and of congressional action to date, with particularly
controversial items highlighted.

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CRS-19
Counter-Terrorism Funding
The Administration requested a total of $19.4 billion in the FY2003 defense
budget for costs of the global campaign against terrorism. Of the total, $10 billion
was requested as an unallocated reserve for future, as yet unplanned military
operations, and the remaining $9.4 billion was requested for specified activities. All
of the money, and an additional $700 million to support programs identified in the
Administration’s Nuclear Posture Review, was requested to be appropriated to the
Defense Emergency Response Fund (DERF), a transfer account from which money
would then be allocated to operating accounts of the services. This would allow the
Defense Department considerable flexibility in using the money, since funds can be
shifted to different activities without going through normal reprogramming
procedures.
The counter-terrorism amounts requested for FY2003 are to carry on activities
that were financed in FY2001 and FY2002 mainly through emergency supplemental
appropriations. Last autumn, Congress appropriated $40 billion for responding to the
terrorist attacks of September 11, of which $17.1 billion was devoted to defense
programs. On March 21, 2002, the Administration sent Congress a request for an
additional $27.1 billion in FY2002 supplemental appropriations for responding to the
terrorist attacks, of which $14.0 billion was for defense. On July 23, the House, and
on July 24, the Senate, approved a conference agreement on a bill providing $28.8
billion in supplemental appropriations for FY2002, of which$14.5 billion is for
defense. Of the total in the bill, $5.1 billion was appropriated as contingent
emergency funding, which requires the President to designate the funds as an
emergency before it is made available. The White House has announced that it does
not intend to designate the funds as an emergency, however. Of the $5.1 billion that
will not, therefore, be available, $983 million is for defense. (For a full discussion,
see CRS Report RL31406, Supplemental Appropriations for FY2002: Combating
Terrorism and Other Issues, by Amy Belasco and Larry Nowels.)
Congressional Action. None of the congressional defense committees
agreed to provide the $9.4 billion requested for specific counter-terrorism programs
in the DERF. Instead, all the committees allocated funding to regular operating and
acquisition accounts in the authorization and appropriations bills. All the committees
also reduced funding for combat air patrols and for some other programs requested
in the DERF.
How Congress will handle the $10 billion requested as an unallocated
contingency fund remains a matter of considerable debate. T h e H o u s e A r m e d
Services Committee considered the $10 billion in a separate bill, H.R. 4547. In
preliminary markup of the bill on May 1, the committee allocated $3.6 billion to
specific programs – later, that amount was reduced to $3.1 billion. All but about
$200 million of that amount is for programs the Administration requested as part of
the $9.4 billion in specifically allocated counter-terrorism money. In effect, the
committee freed up about $3 billion of funds for other programs in the regular
authorization bill by using some of the $10 billion in the unallocated contingency
fund for counter-terrorism projects that otherwise would have been financed in the
regular authorization.

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CRS-20
The Senate Armed Services Committee authorized the full $10 billion in a
general provision (Section 1003) of its version of the authorization bill. The
provision authorizes the full $10 billion for continuation of the war on terrorism,
subject to a specific request for the funds and to subsequent appropriations.
On July 3, after considerable prodding from Congress, the Administration
submitted a formal budget amendment revising its request for the $10 billion. The
Administration did not provide significantly more detail on the allocation of the
funds, however. Instead, the revised request would authorize the Secretary of
Defense to transfer the $10 billion to various DOD appropriations accounts 15 days
after notifying Congress of the transfer. The letter accompanying the request
estimates that up to $2.55 billion will be for military personnel accounts, up to $5.57
billion for operation and maintenance accounts (including the Defense Health
Program and Overseas Humanitarian, Disaster, and Civic Aid), military construction
or working capital funds; and up to $1.88 billion for appropriations for procurement
or research development. The Defense Department is working on backup material
that presumably will provide appropriators with more detail on the request.
On July 18, the House Armed Services Committee marked up and reported a
revised version of H.R. 4547. It provides $3.1 billion allocated to specific programs,
with another $6.9 billion four in very broad categories (see Table 8). The House
took up the bill under suspension of the rules late in the evening of July 23, and the
bill was passed on July 24.
Neither the House-passed version of the FY2003 defense appropriations bill nor
the Senate reported version includes the $10 billion of unallocated funds for war-
related costs. Both committees are expected to act on the funding later.
Appropriators have expressed some reservations about the Administration request,
however. Senator Byrd, in particular, has been critical of the request, arguing that it
leaves Congress with too little control over the allocation of the funds. In a floor
statement on July 10 (Congressional Record, pp. S6519-6520), Senator Byrd
complained that the provision as written could allow the Administration to use the
funds for missile defense or other programs that are not related to counter-terrorism
without Congress being able to prevent it.
Table 8: House Cost of War Against Terrorism Authorization Act
(H.R. 4547)
(amounts in millions of dollars)
Procurement
Procurement of Ammunition, Army:
105mm HE Recapitalization
5,000
155mm M795
20,000
MACS
20,000
Fuze M762
5,000
105mm Illumination Round
5,000
120mm Mortar High Explosive/Multi-Option Fuze
10,000
25mm M919
9,000
5.56mm, All Types (Training Ammunition)
15,000
.50 Cal, All Types (Training Ammunition)
5,000

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CRS-21
Other Procurement, Army:
Heavy Armored Sedan (SUV)
10,700
Aircraft Procurement, Navy:
KC–130J
83,500
C41 (E–P3 SIGINT Enhancements)
22,500
Weapons Procurement, Navy:
AGM 114M Hellfire Missiles
35,000
TOMAHAWK 598,000
Procurement of Ammunition, Navy and Marine Corps:
Bomb Bodies
25,000
Laser Guided Bombs
61,300
JDAM
34,300
Procurement, Marine Corps:
C41(Intell/Comm Equipment)
25,200
Aircraft Procurement, Air Force:
Global Hawk
65,000
Predator
60,550
C–135 Reengining
89,000
Procurement of Ammunition, Air Force:
Bomb Bodies
40,000
Laser Guided Bombs
11,900
JDAM
106,000
Other Procurement, Air Force:
C41 (Integrated Broadcast Service)
10,800
Procurement, Defense-wide:
C41 (Bandwidth)
7,400
C41 (Global Information Grid)
517,000
Chem/Bio (Joint Biological Defense Program)
30,000
Chem/Bio (Contamination Avoidance)
60,014
SOF Ordance Acquisition
6,000
Classified Activities
1,618,874
Total Procurement
3,612,038
Research, Development, Test and Evaluation
Research, Development, Test and Evaluation, Defense-wide:
Chemical/Biological Defense
390,100
Classified Activities
60,200
Total Research, Development, Test and Evaluation
450,300
Operation and Maintenance and Working Capital Funds
Operation and Maintenance, Army: Contract Linguists
14,270
Operation and Maintenance, Navy: C41
5,250
Operation and Maintenance, Marine Corps: C41
11,400
Operation and Maintenance, Air Force: Operation Noble Eagle Combat Air Patrol
517,280
Operation and Maintenance, Defense-wide: Counter-terrorism Joint Task Force
5,000
Classified Activities
301,600
Total Operation and Maintenance
854,800
Military Personnel
Military Personnel:
War Pays
320,800
War Pay Increases
182,300
Total Military Personnel
503,100
Military Construction
Military Construction, Army: Qatar

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CRS-22
Military Construction, Navy:
8,600
Naval Station, Guantanamo Bay, Cuba
4,280
Naval Station, Rota, Spain
18,700
Military Construction, Air Force: Bolling Air Force Base, District of Columbia
3,500
Total Military Construction
35,080
War on Terrorism Equipment Replacement and Enhancement Fund
Total War on Terrorism Equipment Enhancement and Replacement Fund .
1,000,000
War on Terrorism Operations Fund
Total War on Terrorism Operations Fund
3,544,682
Total Department of Defense Military
10,000,000
Source: H.Rept. 107-603
Personnel Pay and Benefits
The Administration request includes a 4.1% pay raise for military personnel;
additional selective pay increases for mid-grade personnel of up to 6.5%; the
extension of special pays and bonuses to bolster retention of personnel with critical
skills; and continued incremental increases in the basic allowance for housing
intended to eliminate out-of-pocket off-base housing costs by FY2005.
Congressional Action. Both the House and the Senate Armed Services
Committees approved the Administration’s proposed pay and benefits increases. A
number of significant personnel related issues have emerged, however, including
concurrent receipt of retirement and disability benefits, House cuts in funding for
health benefits accrual, and a House and Senate increase in authorized active duty
military end-strength. The House Appropriations Committee provided full funding
for the pay raise and for housing and other benefits but limited funding for some
enlistment and reenlistment bonuses to last year’s level, and it did not endorse an
increase in end-strength. The Senate Appropriations Committee also fully funded the
pay raise and other benefits. Though the committee did not cut funds for bonuses,
it required a report from DOD on the use of selective reenlistment bonuses and
warned that use of bonuses appears to be growing out of control.
Concurrent Receipt of Retirement and Disability Benefits. The House
Armed Services Committee approved the first increment of a plan to phase in a
measure that would allow military retirees with a disability of 60% or greater to
receive both disability benefits and retirement pensions. Under current law,
retirement benefits are reduced by the amount of disability benefits received.
Allowing phased in, partial concurrent receipt, as in the House bill, will cost an
estimated $516 million in FY2003, $5.8 billion over the five years from FY2003
through FY2007, and $17 billion over ten years through FY2012. These amounts
will be scored not as discretionary funding in the defense bills, but as mandatory
spending coming either from the military retirement trust fund or from the Veteran’s
Administration.

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CRS-23
The measure will also require an increase in contributions to the military
retirement fund to cover the accrual cost of the increased benefits provided to current
military personnel. The House measure provides that the accrual payments will be
made from the general Treasury, however, rather than from discretionary funds in the
defense budget. Including both increased payments to retirees and payments from
the general fund into the military retirement fund, the Congressional Budget Office
estimates that the total budget cost of the House plan will be $1.1 billion in FY2003,
$8.8 billion over the five years, FY2003-FY2007, and $22.6 billion over the next ten
years through FY2012.6
The Senate Armed Services Committee included a similar, phased in, partial
measure in its reported bill, but the committee also voted to offer an amendment on
the floor that would immediately allow full concurrent receipt of disability and retired
pay regardless of the level of disability. Senators Levin and Warner brought up that
amendment on the floor on June 19, and it was approved by a voice vote. The Senate-
passed measure does not insulate the Defense Department from the accrual costs of
the increased benefits as the House measure does. This version of concurrent receipt
would cost $4.3 billion in FY2003, $25.8 billion over the next five years, and $61.0
billion over the next ten years. Of those amounts, the Defense Department would
have to provide $1.1 billion in FY2003, $2.5 billion over the next five years and $6.4
billion over the next ten years in its budget to cover accrual payments for its current
military personnel.
For its part, the Administration is opposed to permitting concurrent receipt. In
its “Statement of Administration Policy” on the Senate authorization bill (available
at [http://www.whitehouse.gov/omb/legislative/sap/107-2/S2514-s.html]), the White
House threatened to veto the defense authorization if it provides for either partial or
full concurrent receipt. The Defense Department also threatened a veto in the
package of appeals of provisions in the House and Senate authorization bills that it
sent to the Armed Services Committees on July 24.
Although concurrent receipt is not directly under the jurisdiction of the
appropriations committees, funds provided in appropriations bills may be needed in
FY2003 if Congress approves a measure, like that passed by the Senate, that requires
DOD to contribute funds to the military retirement fund to cover the accrual costs of
benefits. The Senate Appropriations Committee discussed the issue in its report,
saying that it would defer action on the matter for the present but that part of the $10
billion counter-terrorism contingency fund should be used to cover the accrual costs
if Congress adopts a measure that requires a DOD contribution.
House Reduction in Funding for Estimated Cost of Retiree Health
Care Benefits. When it submitted its budget request, the Administration estimated
that the Defense Department would have to pay $8.1 billion in FY2003 into the
retiree health care reserve fund for accrual costs of 65-and-over health care benefits
(see above). Later officials said that DOD actuaries are expected to reduce the
estimated cost when they convene in August, but the Department will not have any
6 Congressional Budget Office, “Cost Estimate, H.R. 4546, Bob Stump National defense
Authorization Act for Fiscal year 2003,” p. 13 and p. l 5.

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CRS-24
firm figures until then. The House Armed Services Committee reduced military
personnel funding by $810 million, 10% of the estimated cost of health benefits
accrual. Representative Spratt, the second ranking Democrat on the committee,
criticized this measure, saying that the $810 million is at the upper limit of the
amount DOD said might be saved. If defense actuaries do not revise their cost
estimate as much, there could be a shortfall of several hundred million dollars in
military personnel accounts. The House Appropriations Committee reduced funding
for health benefits accrual by $405 million, the lower end of DOD estimates of likely
savings. The Senate Appropriations Committee reduced accrual contributions by
$372.6 million to reflect changes in retiree health benefits that were approved in the
FY2002 defense authorization act (P.L. 107-107). The committee also said it would
revisit the amount of accrual contributions after defense actuaries meet, which will
be before the bill goes to the floor. The Administration package of appeals on the
House and Senate authorization bills opposes the House authorization measure.
Increase in Personnel End-Strength. The House Armed Services
Committee approved an increase of 12,552 in active duty end-strength, including
increases in full time guard and reserve personnel. The House-passed authorization
bill provides $528 million in FY2003 to cover associated costs in the military
personnel accounts. Each of the military services has requested an increase of
personnel end-strength recently, with Army seeking the largest increment of as many
as 40,000 additional soldiers. Secretary Rumsfeld has resisted increases, however,
arguing repeatedly that added personnel would be very expensive over the long term
and that measures should instead be taken to reduce demands on the force.
It is not clear whether the House Armed Services Committee intends the
end-strength increase to be a temporary measure related to the war against terrorism
or a permanent addition to the force. Once fully phased in, an increase of 12,552 in
end-strength would cost more than $1 billion a year in the personnel accounts, with
additional costs required in operation and maintenance accounts to fully train,
sustain, and equip the added troops.
The Senate Armed Services Committee did not include an increase in end-
strength in the authorization bill it reported. But on the floor on June 27, the Senate
approved an amendment offered by Senators Cleland and McCain to increase
authorized active duty end-strength by 12,000. Senator Cleland has called for an
increase of 40,000 service members over the next five years.
The House Appropriations Committee did not approve an increase in end-
strength, arguing that requirements are uncertain. The committee report says that any
increase that might be needed in FY2003 should be addressed in a supplemental
appropriations request. The Senate Appropriations Committee also did not approve
an increase in end-strength.
The Defense Department’s package of appeals on the authorization opposes any
increase in end-strength.

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CRS-25
Table 9. Congressional Budget Office Estimate of the Costs of
the House Armed Services Committee Increase in Active Duty
End-Strength
(budget authority in millions of dollars)
2003
2004
2005
2006
2007
House – H.R. 4546
528
1,089
1,122
1,155
1,191
Source: Congressional Budget Office.
Army Modernization
The Army’s modernization plan involves three overlapping initiatives – one to
upgrade and recapitalize the existing “legacy” force of heavy armored forces; a
second to build new, more easily deployable “interim brigade combat teams”; and a
third to develop the “objective force” of the future.
Key elements of legacy force modernization include upgrading existing weapons
with digitized communications links and new surveillance and reconnaissance
capabilities. The most controversial elements of the plan are the Comanche
helicopter, which has experienced repeated development delays and cost increases,
and the Crusader artillery system.
The central element of the interim force is a new light armored vehicle.
Although Congress has generally supported the interim force concept, there has been
some debate about the characteristics of the armored vehicle. In the past, the issue
was whether it should be a tracked vehicle instead of the wheeled system the Army
has selected. More recently, the issue has been whether the new vehicle will be
transportable on C-130 airlift aircraft.
The key element of the objective force is the “Future Combat System,” which
is now defined as an integrated suite of capabilities, including new armored systems
and also improved communications, intelligence, and surveillance capabilities. The
Army’s FY2003 budget request includes funds to accelerate FCS development.
Congressional Action. Congress has generally supported the Army’s
modernization plan, including plans for the interim combat brigade teams and
development of the Future Combat System. But several issues have been
contentious, including funding for the Crusader artillery system, and for some Army
helicopter programs.
Crusader Artillery System. One of the most contentious issues in the
defense budget this year is the fate of the Crusader self-propelled artillery system.
Advocates of defense transformation have long been critical of the program, arguing
that the 40-ton system is not readily deployable. Supporters of the system respond
that the weight has been reduced substantially, and that the system is needed to allow
artillery to keep up with rapidly moving armored forces on the battlefield. On the eve
of the House Armed Services Committee markup of the defense authorization bill,

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CRS-26
Deputy Secretary of Defense Wolfowitz informed committee members that DOD was
ordering the Army to prepare an analysis of alternatives to the Crusader within 30
days, a step toward canceling the $11 billion program. DOD officials later confirmed
that Secretary Rumsfeld intends to terminate the project.
The program had considerable support in Congress, however, and in the
authorization markup the House Armed Services Committee provided the full $475.6
million for Crusader R&D that was in the Administration’s February budget request.
The Committee also included language in its report on the bill, though not in the
statutory language of the measure, that prohibits a cut in funding until after a more
extensive, formal analysis of alternatives is completed, which likely would not be
until April 2003. This prompted the White House to threaten a presidential veto any
bill if it includes any statutory provisions limiting the Administration’s ability to
cancel the program. The Rules Committee did not permit any floor amendments to
reduce Crusader funding.
When it marked up its version of the authorization bill on May 9, the Senate
Armed Services Committee deferred action pending a committee hearing on the
Crusader on May 16. The reported bill includes $475.6 million for Crusader. But
when reporting the bill, committee Chairman Carl Levin said that the committee
might offer an amendment to reduce funding when the bill is on the floor. Later,
Senator Levin said that DOD’s civilian leadership had not given the Army adequate
time to review the alternatives to the Crusader that civilian officials supported.
On May 29, the Administration formally submitted an amendment to its defense
budget request asking Congress to allocate the Crusader funding to other Army R&D
programs, including the Future Combat System, the Excalibur precision artillery
projectile, the Army tactical unmanned aerial vehicle, and a new precision guided
mortar munition.
On June 13, the Senate Armed Services Committee held a closed session to
consider action on the Crusader. The committee approved an amendment that would
fence Crusader funding for 30 days after the bill is signed into law and require the
Army to complete a study of alternatives during that time. Subsequently the measure
would permit the Secretary of Defense to submit a request to the congressional
defense committees to reprogram the money into other Army indirect fire weapons
development. Senator Levin proposed the committee amendment on the floor on
June 19. Senator Warner then offered a second degree amendment to permit the
Secretary of Defense to allocate funds to other development programs without
seeking congressional permission through a reprogramming request. The Warner
amendment was agreed to by unanimous consent, and the Levin amendment, as
amended by Warner, was subsequently approved by a vote of 96 to 3.
Subsequent to House and Senate action on the defense authorization, however,
the issue appears to have been resolved. In its version of the defense appropriations
bill, the House Appropriations Committee agreed to terminate the Crusader program
and to fund the alternatives that the Administration proposed in its May 29 budget
amendment. But the committee also said that development of an alternative indirect
fire system must be coupled with development of an appropriate platform to carry a
new cannon. The committee therefore added $173 million to develop a platform and

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CRS-27
new munitions and specifically earmarked funds for that purpose in a general
provision. The general provision also requires a system to be delivered by 2008.
Like the House, the Senate Appropriations Committee added $173 million for
a non-line of sight cannon to be deployed by 2008.
The conference agreement on H.R. 4775, providing supplemental appropriations
for FY2002, includes legislative language directing the Army to enter into a
follow-on contract immediately to develop and field a next generation non-line of
sight cannon artillery system by 2008. Subsequently, on July 31, August 1, and
August 2, all four of the congressional defense committees sent letters to the Defense
Department approving a DOD request to reprogram FY2002 funds from the Crusader
to the Army’s Future Combat System development program.
UH-60, CH-47, and TH-67 Helicopters. The bills acted on to date take
different action on several Army helicopter programs. The House authorization bill
adds $115 million for 8 additional UH-60 Blackhawk utility helicopters and one
simulator and specifies what versions to buy. The House appropriations bill adds
funds for 4 helicopters and a simulator. The Senate authorization and appropriations
bills add $96.7 million for 9 aircraft allowing the Army to allocate the funds.
Funding for the CH-47 cargo helicopter appears to be potentially more
contentious. The House authorization adds $13.5 million to the on-going
modification program for crashworthy seats. The Senate authorization as reported
had $4 million for crashworthy seats, but this was reduced in floor action as offsets
for other programs. The Senate appropriations bill adds just $1 million for
crashworthy seats. The House appropriations bill adds $45 million to the
modification plan to increase the production rate and instructs the Army to plan to
upgrade all CH-47s to the most modern “F” version over the next several years.
The House authorization and appropriations bills and the Senate appropriations
bill add funds for 6 TH-67 training helicopters. The Senate authorization provides
no funds.
Comanche Helicopter. Though the fate of the Comanche helicopter
program is not immediately at issue, it has also been a target of criticism from
transformation advocates. Last year, the program cost increased, and the
development plan was restructured and projected procurement delayed. DOD is
reportedly considering cancellation of the Comanche as one of a number of steps to
reduce the procurement “bow wave” at the end of the decade. In its report on the
defense appropriations bill, the House Appropriations Committee warned that its
support for the Comanche program is in jeopardy because of delays and cost growth,
and the committee urged the Army to begin exploring low-cost alternatives.
Other Army Weapons Programs. There are a number of significant
differences between the various bills on several other Army programs. The House
and Senate appropriations bills eliminate funds for the Wide Area Munitions program
and instruct DOD to terminate it. The House authorization and appropriations bills
add $60 million for Bradley fighting vehicle upgrades for the National Guard, the
Senate authorization and appropriations bills add no money. The House

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CRS-28
authorization also adds $45 million to upgrade tank recovery vehicles for the
National Guard. The House bills and the Senate appropriations bill add money for
up-armored HMMWVs. The House bills both cut money for ATACMs Block II
missiles, but the House authorization adds back money to upgrade some Block I
missiles. The Senate appropriations bill eliminates funds for Block II missiles. The
House authorization adds $61 million for SINGCARS radios and the House
appropriations adds $17 million. The Senate authorization, however, cuts $22.1
million that was requested for the program in the DERF. The Senate appropriations
bill provides the amount requested, including the$22.1 million requested in the
DERF. Both House bills shift funds for PAC-3 anti-aircraft missile procurement
from the Army to the Missile Defense Agency, but the Senate bills do not.
Table 10. Congressional Action on Major Army Acquisition Programs
(amounts in millions of dollars)
House
Senate
House
Senate
Request
Authorization
Authorization
Appropriations
Appropriations
Procurement R&D Procurement R&D Procurement R&D Procurement R&D Procurement R&D
#
$
$
#
$
$
#
$
$
#
$
$
#
$
$
RAH-66
Comanche
– –
914.9
– –
914.9
– –
914.9
– –
914.9
– –
914.9
UH-60 Blackhawk
12 180.2
99.1
20 295.5
99.1
21 276.5
99.1
16 269.4
99.1
21 276.5 123.1
TH-67 Creek Training
– – – 6
9.6
– – – – –
9.6
– 6
9.6
–
Helos.
CH-47
Upgrades
– 403.2
–
– 416.7
–
– 407.2
–
– 458.2
–
– 406.2
–
AH-64
Mods
– 93.6
–
–
132.6
–
– 93.6
–
– 96.9
–
–
159.6
–
AH-64D
Apache
Longbow
– 895.5
46.2
– 895.5
46.2
– 895.5
46.2
– 895.5
46.2
– 895.5
46.2
Bradley
Base
Sustainment
– 397.1
–
– 457.1
–
– 397.1
–
– 457.1
–
– 395.3
–
M-1 Abrams
– 691.4
54.6
– 691.4
54.6
– 691.4
54.6
– 679.2
54.6
– 690.4
54.6
Mods/Upgrades
Interim Armored Vehicle
332 811.8 124.4
332 811.8 124.4
332 811.8 124.4
332 772.0 124.4
332 788.0 148.2
Crusader
– – – – –
475.6
– – – – – – – – –
Future
Combat
System
– –
369.9
– –
369.9
– –
474.9
– –
484.4
– –
813.5
Hellfire Missiles
1,797 184.4
– 1,797 224.4
– 1,797 184.4
– 1,478 184.4
– 1,797 184.4
–
SINGCARs
radios
–
52.2
– – 121.3
– –
30.1
– –
72.2
– –
52.2
–
Wide
Area
Munition
–
12.5
– –
12.5
– –
6.5
– – – – – – –
ATACMS
Upgrade
–
58.8
– –
70.4
– –
58.8
– –
32.4
– –
9.1
–
LOSAT
Missile
144
17.9
14.5
– –
14.5
– –
14.5
144
17.9
14.5
– –
14.5
HMMWV
– 196.8
–
– 227.9
–
– 196.8
–
– 204.8
–
– 261.8
–
FMTV
(medium
trucks)
– 681.4
–
– 681.4
–
– 681.4
–
– 681.4
–
– 656.4
–
FMHV
(heavy
trucks)
– 242.8
4.0
– 251.8
4.0
– 251.8
4.0
– 252.8
4.0
– 242.1
20.0
Source: H.Rept. 107-436; S.Rept. 107-151; H.Rept. 107-532.

---

CRS-29
Navy Shipbuilding
The pace of Navy shipbuilding has been a major focus of attention in Congress
this year. The FY2003 budget request includes funds for five new ships, far short of
the 8.5 ships per year needed, in principle, to sustain a fleet of 300 ships, which has
long been the Navy’s goal.
Congressional Action. The House Armed Services Committee added $810
million to procure one additional ship, a DD-51 destroyer, in FY2003, provided the
Justice Department reaches a settlement with General Dynamics Corporation in the
long-standing A-12 termination lawsuit. The tentative settlement would provide
$385 million in advance procurement for Virginia-class submarine acquisition. The
Justice Department has rejected the General Dynamics settlement proposal, though
negotiations are continuing. If the settlement is not agreed to, the $810 million
would be distributed among several shipbuilding programs, including $415 million
for Virginia class submarine advance procurement, $210 million for cruiser
conversion advance procurement, and $185 million for a nuclear submarine refueling
overhaul. The committee also added funds to accelerate procurement of the next
aircraft carrier, the CVN(X). The Navy plan to procure the ship had slipped by one
year, with half the funding to be requested in FY2007 and the remainder in FY2008.
The committee added $229 million in advance procurement to accelerate production
and instructed the Navy wants to move the start date back to FY2006.
The Senate Armed Services Committee also added a significant amount for
Navy shipbuilding, including $690 million that Senator Levin said was transferred
from missile defense R&D. The committee additions include $415 million in
advance procurement for Virginia-class attack submarines, $200 million for refueling
rather than retiring an SSN-688 Los Angeles-class attack submarine, $150 million
in advance procurement for LPD-17 amphibious ships, and $125 million in advance
procurement for DDG-51 destroyers. Like the House Armed Services Committee,
the Senate Armed Services Committee provided $229 million to accelerate CVN(X)
procurement.
The House Appropriations Committee took a substantially different approach
to shipbuilding in general and to aircraft carrier procurement in particular. Rather
than provide money to accelerate CVN(X) procurement, the committee added $250
million for the CVN-77 carrier, which is now being built, and instructed the Navy to
incorporate a more advanced radar and other electronic systems into the ship as a
transition to the CVN(X). The committee did not add money for other major
shipbuilding programs, and it eliminated $253 million requested for the LHD-8
amphibious assault ship – this ship was started in FY2001 and is being incrementally
funded through FY2006.
The Senate Appropriations Committee added a substantial amount for
shipbuilding, but it allocated funding quite differently from the other committees.
The committee added $530.9 million to cover cost overruns on LPD-17 amphibious
ships, DDG-51 destroyers, and Virginia-class submarines approved in prior years,
while it reduced funding requested for advance procurement for the same programs.
The committee also criticized the Navy for overusing advance procurement, saying
that it should only be employed for long lead components of ships and that it should

---

CRS-30
not comprise as large a share of the total cost of ships as it has in recent years. The
committee also added $306 million to pay for the cost of an agreed transfer of work
on LPD-17s and DDG-51s between the two major shipbuilders. Like the authorizing
committees, the committee provided $229 million to accelerate CVN(X) procurement
and about $200 million for an SSN-688 attack submarine refueling overhaul.
Table 11. Congressional Action on Major Navy Shipbuilding Programs
(amounts in millions of dollars)
House
Senate
Request
House Authorization
Senate Authorization
Appropriation
Appropriation
Procurement
R&D
Procurement
R&D
Procurement
R&D
Procurement
R&D
Procurement
R&D
#
$
$
#
$
$
#
$
$
#
$
$
#
$
$
Virginia Class Submarine
1
1,512.7
238.3
1
1,512.7
238.3
1
1,512.7
244.2
1 1,490.7
238.3
1
1,512.7
257.7
Virginia Class Sub. Adv.
–
706.3
–
–
1,121.3
–
–
1,121.3
–
–
706.3
–
–
645.3
–
Proc.
Submarine Refueling
1
271.3
–
1
456.3
–
2
471.3
–
1
231.3
–
2
475.8
–
Overhaul
Submarine Refueling Adv.
–
88.3
–
–
88.3
–
–
88.3
–
–
88.3
–
–
–
–
Proc.
Missile Submarine
2
825.3
–
2
825.3
–
2
825.3
–
2
825.3
–
2
825.3
–
Conversion
Cruiser Conversion Adv.
–
–
–
–
210.0
–
–
–
–
–
–
–
–
–
–
Proc.
CVN Refueling Overhaul
–
296.8
–
–
296.8
–
–
296.8
–
–
296.8
–
–
195.8
–
Adv. Proc.
CVN-77 Aircraft Carrier
–
–
91.7
–
–
91.7
–
–
91.7
–
250.0
91.7
–
–
91.7
CVN(X) Aircraft Carrier
–
243.7
268.0
–
472.7
268.0
–
472.7
268.0
–
243.7
243.0
–
472.7
268.0
Adv. Proc.
DDG-51 Destroyer
2
2,295.5
300.7
2
2,295.5
300.7
2
2,295.5
305.7
– 2,273.0
320.7
2
2,321.5
305.7
DDG-51 Destroyer Adv.
–
74.0
–
–
74.0
–
–
199.0
–
–
74.0
–
–
–
–
Proc.
LPD-17 Amphibious
1
596.5
10.1
1
596.5
10.1
1
596.5
10.1
1
596.5
10.1
–
596.5
10.1
Transport
LPD-17 Adv. Proc.
–
8.0
–
–
8.0
–
–
158.0
–
–
8.0
–
–
–
–
LHD-8 Amphibious
–
253.0
–
–
253.0
–
–
243.0
–
–
243.0
–
–
243.0
–
Assault Ship
Prior Year Shipbuilding
–
644.9
–
–
644.9
–
–
644.9
–
–
644.9
–
–
1,175.8
–
Costs
DDG-51/LPD-17 Work
–
–
–
–
–
–
–
–
–
–
–
–
–
306.2
–
Swap
DD (X) Destroyer
–
–
960.5
–
–
962.5
–
–
973.5
–
–
895.5
–
–
1,006.5
T-AKE Auxiliary Cargo
1
388.8
–
1
388.8
–
1
388.8
–
1
388.8
–
1
388.8
–
Ship
Sources: H.Rept. 107-436; S.Rept. 107-151; H.Rept. 107-532; S.Rept. 107-213.
*Note: Figures shown here for the House authorization include $415 million for Virginia-class submarine advance procurement, $210 million for cruiser
conversion advance procurement, and $185 million for a nuclear submarine refueling overhaul. The bill provides these amounts unless a settlement is reached
with General Dynamics in the A-12 termination lawsuit. If a settlement is reached, the bill provides $810 million for an additional DDG-51 destroyer.

---

CRS-31
Aircraft Programs
Funding for several major aircraft programs is included in the FY2003
Administration request, including Marine Corps V-22 tilt rotor aircraft development
and procurement; Air Force F-22 fighter development and procurement; Air Force
and Navy F-35 Joint Strike Fighter development; Navy F/A-18E/F multirole fighter
procurement; and C-17 cargo aircraft procurement. The Navy has reportedly been
considering reducing future planned F-35 procurement, but this has not affected
congressional support for the program to date. It could, however, drive up unit
procurement costs, which may affect support for the program in the future.
Congressional Action. Both the House and Senate Armed Services
Committees approved requested funding for most major aircraft programs, including
the F-22, F-35, V-22, and C-17. The House Armed Services Committee added funds
for a few lower profile programs, including trainer aircraft, Navy helicopters, and F-
15 communications upgrades. The Senate Armed Services Committee added funds
to procure an additional 4 F/A-18EF fighters for the Navy and Marine Corps. Both
committees added funds for EA-6B electronic warfare aircraft upgrades. The House
Appropriations Committee added funding for F-22 R&D, but otherwise made few
changes in the request for major aircraft programs. The Senate Appropriations
Committee added funds for 4 additional F/A-18E/F fighters. The committee also
added money to fully fund procurement of C-17 aircraft.
C-17 Funding Profile. One rather technical, but potentially significant issue
this year is whether the funding approach that the Air Force has proposed for future
C-17 procurement sets a precedent that would erode DOD policies designed to
promote long-term fiscal discipline. In the past, DOD typically requested enough
money to procure a specific number of fully equipped end-items – funding requested
for 12 C-17 aircraft, for example, would be sufficient to buy 12 deployable aircraft.
This year, however, the Air Force is requesting only enough money to finance
progress payments on a new 5-year contract for multi-year procurement of the
aircraft. The effect is to reduce amounts requested early in the multi-year contract
and increase costs in the later years. This is technically at odds with longstanding
DOD policy, which calls for full funding of the cost of end-items being requested in
any given year, and it is the first time a significant breach of the full funding policy
has occurred in an area apart from Navy shipbuilding. (For an extensive discussion,
see CRS Report RL31404, Defense Procurement: Full Funding Policy –
Background, Issues, and Options for Congress, by Ronald O’Rourke and Stephen
Daggett.) The House Armed Services Committee approved the requested C-17
procurement profile, but warned DOD against using this funding approach in the
future. The House Appropriations Committee also rejected the Air Force approach
and required the Air Force to use C-17 funding in FY2004 to procure complete
aircraft. The committee also instructed the Defense Department to restructure future
funding plans for the C-17 to use full funding. The Senate Appropriations
Committee specifically rejected the Air Force’s incremental funding approach and
instead added $585.9 million to finance the full cost of procuring 15 aircraft.
Tanker Aircraft Leasing. Last year, the conference report on the defense
appropriations bill included a provision allowing the Air Force to pursue negotiations
with the Boeing Corporation to lease tanker aircraft for a ten-year period. The

---

CRS-32
provision was structured so that the aircraft would be returned to the manufacturer
after the lease expired. As a result, the lease is considered an “operating lease” rather
than a “lease-purchase” agreement, so that only the annual cost of actual payments
on the lease would be scored in the Air Force budget on a year-to-year basis –
otherwise, the full cost of the contract would have to be scored in the years when the
money would be obligated. Boeing has offered to lease 100 767 aircraft for this.
Senator McCain and some others have objected to the leasing provision, arguing
that it will cost the government more in the long run than simply procuring additional
tanker aircraft. Recently both the Office of Management and Budget and the
Congressional Budget Office have prepared analyses which project considerably
higher costs for leasing than for regular procurement. (The text of the CBO letter is
available electronically at [ftp://ftp.cbo.gov/34xx/doc3413/tankers.pdf]. Mitch
Daniels, the Director of OMB, has recently criticized the plan, insisting that it will
be cheaper either to buy new tankers or to re-engine older aircraft. The Senate
Armed Services Committee approved an amendment proposed by Senator McCain
that would require Congress to authorize and appropriate funds for any tanker lease
agreement. In floor action on the defense appropriations bill, however, Senator
McCain offered but then withdrew a similar amendment. Most recently, the Air
Force has reported that it is very close to reaching an agreement with Boeing on the
tanker leases.

---

CRS-33
Table 12. Congressional Action on Major Aircraft Programs
(amounts in millions of dollars)
House
Senate
Request
House Authorization Senate Authorization
Appropriations
Appropriations
Procurement
R&D
Procurement
R&D Procurement
R&D Procurement
R&D
Procurement
R&D
#
$
$
#
$
$
#
$
$
#
$
$
#
$
$
Navy Aircraft
V-22 Osprey
11
1,106.0
420.1
11
1,106.0
420.1
11
1,096.8
420.1 11
1,086.0
420.1
11 1,096.8
420.1
F-35 Joint Strike Fighter
1,727.5
1,727.5
1,727.5
1,727.5
1,752.5
F/A-18E/F
44
3,159.5
204.5
44
3,159.5
204.5
48
3,399.5
219.5 44
3,162.5
214.5
48 3,295.4
210.5
JPATS Trainer
10
60.0
6
46.0
15.0
6
42.5
E-2C Hawkeye
5
295.5
19.0
5
295.5
19.0
5
295.5
19.0
5
295.5
19.0
5
281.0
19.0
T-45
8
221.4
8
231.4
8
221.4
8
221.4
8
221.4
MH-60S
15
372.2
23.2
19
460.2
23.2
15
372.2
23.2 15
367.2
23.2
362.2
23.2
MH-60R
116.2
89.0
116.2
89.0
121.2
89.0
116.2
96.0
121.2
89.0
EA-6B Prowler mods
223.5
74.7
327.5
87.7
337.5
74.7
229.5
75.6
267.5
84.7
KC-130J Aircraft (DERF)*
4
334.0
3
249.0
4
334.0
4
334.0
4
315.2
0.0
Air Force Aircraft
F-22
23
4,621.1
808.5
23
4,621.1
808.5
23
4,621.1
808.5 23
4,621.1
808.5
4,592.6
808.5
E-8C Joint STARS
1
279.3
55.5
1
279.3
68.2
1
279.3
55.5
1
279.3
67.5
1
279.3
55.5
F-16C/D mods.
265.0
81.3
325.0
81.3
348.0
81.3
270.0
85.3
268.1
81.3
F-15 mods.
232.5
81.7
291.5
81.7
232.5
81.7
259.9
81.7
300.0
81.7
JPATS Trainer
35
211.8
35
211.8
35
211.8
35
211.8
35
211.8
C-17 Globemaster
12
3,698.5
157.2
12
3,698.5
157.2
12
3,650.1
157.2 12
3,708.0
157.2
15 4,236.5
157.2
F-35 Joint Strike Fighter
1,743.7
1,743.7
1,743.7
1,743.7
1,733.7
B1-B Bomber
98.0
160.7
98.0
160.7
98.0
160.7
98.0
78.7
109.0
120.7
B-2 Stealth Bomber*
72.1
275.3
104.1
292.3
97.3
258.3
104.1
315.3
72.1
317.0
Sources: H.Rept. 107-436; S.Rept. 107-151; H.Rept. 107-532; S.Rept. 107-213.
Notes: Funding for 4 KC-130Js was requested in the Defense Emergency Response Fund (DERF). The House funded 3 aircraft in H.R. 4546
and transferred $83.5 million for one aircraft to H.R. 4547. B-2 request includes $50 million for R&D requested in the DERF. The Senate
authorization transferred $25.2 million from B-2 R&D to procurement.
Missile Defense
The Administration requested $7.8 billion for missile defense programs in
FY2003. The request includes
! $3.2 billion for mid-course defenses, including funds for the
National Missile Defense program to develop ground-based systems
to protect the entire United States, and the Navy Theater Wide
program, which is a theater defense system to be based on navy
ships;
! $1.1 billion for battle management and related support programs;

---

CRS-34
! $935 million for the ground-based Theater High Altitude Area
Defense (THAAD) system;
! $858 million for Patriot PAC-3 development and procurement;
! $797 million for boost phase defense systems, including the
Airborne Laser (ABL) and the Space-Based Laser (SBL); and
! $373 million for space-based sensors, including the Space-Based
Infrared System-Low (SBIRS-Low);
! an additional $815 million in the Air Force budget for the Space-
Based Infrared System-High (SBIRS-High).
Recently, the SBIRS-High program has had very large cost increases, and the
program was under review because the cost growth violated Nunn-McCurdy cost cap
provisions. DOD decided to continue the program, however, though its status
remains a matter of concern. There continues to be extensive debate in Congress
about the status of the National Missile Defense program, which the Administration
has tried to accelerate, and about space-based systems like the SBL.
Congressional Action. The House Armed Services Committee generally
supported the Administration’s request. The committee reduced funding for the ABL
(now funded under the title “Air-Based Boost” defense) by $77.5 million, on the
premise that a second test aircraft, that was included in the request, may not yet be
needed. That judgment was disputed in House floor action on the defense
appropriations bill (discussed below). The committee distributed the savings to a
number of other missile defense programs. The House Armed Services Committee
also refused to fund Patriot PAC-3 or Medium Extended Air Defense System
(MEADS) development in the Army budget, as requested, but instead shifted the
money back to the Missile Defense Agency.
During the House Armed Services Committee markup, Representative Spratt
offered an amendment to reduce funding for the SBL and for space-based kinetic
interceptor development and to transfer the savings to the PAC-3 and Arrow theater
missile defense programs. The amendment was defeated in the committee. On the
floor, the House approved an alternative offered by Representative Hunter to add
funds for PAC-3 and Arrow to be financed from funds available to the Missile
Defense Agency, but without specifying the offsetting source of funds.
In committee markup, Representative Spratt also offered an amendment to
prohibit deployment of nuclear tipped interceptor missiles for missile defense, which
was rejected. On the floor, Representative Spratt offered a motion to recommit the
bill to committee with instructions to prohibit nuclear interceptor development, and
that motion was defeated.
The Senate Armed Services Committee reduced overall missile defense funding
by more than $814.3 million (see Table 13 for a detailed tabulation of funding),
prompting several Republicans on the committee to vote against reporting the bill.
Most of the reductions were in systems engineering and other support activities,
which the committee argued are not adequately justified in support material provided
by DOD. This became a major issue on the Senate floor. The Senate Armed Services
Committee also reduced ABL funding by $135 million and SBIRS-High funding by
$100 million.

---

CRS-35
In addition, the committee approved several provisions designed to require
stricter oversight of missile defense programs and adherence to more traditional
acquisition procedures in the development programs. One provision would require
the independent Director of Operational Test and Evaluation to conduct an annual
assessment of missile defense programs. Another provision requires the Secretary
of Defense to provide annual schedule and cost estimates for major elements of the
program to Congress.
On June 12, Secretary Rumsfeld send at letter to Senator Levin opposing the
Senate Armed Services Committee reduction in missile defense funding and
objecting to the committee’s provisions regarding acquisition procedures. The
committee’s measures, said Rumsfeld, “would impose a number of burdensome
statutory restrictions that would undermine our ability to manage the program
effectively.” The Secretary said he would recommend a veto if a final authorization
bill includes either the Senate cuts in missile defense funding or the Senate
provisions regarding management of the program. OMB’s June 19 “Statement of
Administration Policy” repeats the veto threat.
On June 26, the Senate approved an amendment offered by Senator Warner,
with a second degree amendment by Senator Levin, that would likely restore some
or all of the missile defense funding that the committee cut. The amendment would
permit the President to allocate up to $814.3 million of anticipated inflation savings
either to missile defense or to counter-terrorism programs. The Levin amendment
stipulates that priority should be given to counter-terrorism. The Senate did not
consider any measures to revise committee provisions on program management.
Also on June 26, the Senate approved an amendment proposed by Senators
Feinstein and Stevens to prohibit development or deployment of nuclear armed
interceptors for missile defense. This measure is similar to the Spratt amendment
that the House turned down.
The House Appropriations Committee made a number of changes in requested
missile defense funding. The committee denied funding for Navy sea-based terminal
defense, a replacement for the terminated Navy Area Defense program, saying that
DOD had not presented a plan for using the research funds. The committee also
denied funding for the Russian-American Observation Satellite Program (RAMOS)
because the Russian government has not yet responded to a U.S. proposal to
implement the program. The committee said it would revisit the issue in conference
if the two governments sign an agreement. The committee also cut funding for sea-
based and space-based boost phase defenses, saying that requested large increases in
funding were not justified in view of requirements for near term programs like the
PAC-3 system. The committee added $30 million for additional PAC-3 testing and
required a report on planned testing of the Theater High Altitude Area Defense
(THAAD) system.
In floor action, the House approved an amendment by Representative Spratt to
reduce funding for the space-based kinetic interceptor program by $30 million and
shift the funds to the Airborne Laser program.

---

CRS-36
The Senate Appropriations Committee largely followed the Senate authorization
bill. In a general provision, it provided an additional $814.3 million for missile
defense or for counter-terrorism programs, offset by anticipated inflation savings.
The provision also itemizes the programs to and amounts for which funds are to be
restored, should the President choose to allocate these funds to missile defense.
Table 13. Congressional Action on Missile Defense Funding by Program Element and
Project
(millions of dollars)
Change
Change
Change
Change
FY2003
House
to
Senate
to
House
to
Senate
to
Program Element/Project
Request
Auth.
Request
Auth.
Request
Approp.
Request
Approp.
Request
Missile Defense Agency R&D
0603175C BMD Technology
6010 Advanced Technology Development
118.9
118.9
– 142.6
+23.7
124.9
+6.0
142.6
+23.7
6090 Program Operations
2.9
2.9
–
2.9
–
2.9
–
2.9
–
0603880C BMD System


BM/C2
112.8
112.8
– 112.8
– 112.8
– 112.8
–
1020 Communications
12.0
12.0
–
12.0
–
12.0
–
12.0
–
1030 Targets & Countermeasures
128.2
128.2
–
128.2
–
128.2
–
128.2
–
1050 Systems Engineering & Integration
371.1
371.1
–
231.1
-140.0
371.1
–
29.1
-342.0
1060 Test & Evaluation
382.0
382.0
–
412.0
+30.0
382.0
–
392.0
+10.0
1070 Producibility & Manufacturing
21.9
21.9
– 21.9
– 21.9
– 21.9
–
Technology
1090 Program Operations
37.9
37.9
–
37.9
–
37.9
–
37.9
–
Wide bandwidth technology program
–
10.0
+10.0
–
–
5.0
+5.0
–
–
Battlespace environment and signatures
–
10.0
+10.0
– –
– – –
toolkit
High Energy Laser Transmitters for LADAR
–
–
–
–
–
5.0
+5.0
–
–
General Reduction, Lack of Justification
–
–
–
-222.0
-222.0
–
–
–
–
0603881C Terminal Defense Segment
2015 Medium Extended Air Defense System
– 117.7
+117.7
–
– 117.7
+117.7
69.7
+69.7
(MEADS)
2016 Israeli Arrow Program
65.7
221.7
+156.0
105.7
+40.0
129.7
+64.0
145.7
+80.0
2022 Sea-Based Terminal
90.0
90.0
–
90.0
–
–
-90.0
50.0
-40.0
2090 Program Operations
14.2
14.2
–
0.2
-14.0
14.2
–
0.2
-14.0
0603882C Midcourse Defense Segment
3011 Block 2004 Test Bed
533.9
533.9
–
533.9
–
533.9
–
533.9
–
3012 Ground-Based Midcourse Defense
2,075.0
2,075.0
– 2,075.0
– 2,075.0
– 2,075.0
–
(GMD)
3020 Sea-Based Midcourse Defense (SMD)
426.6
426.6
–
426.6
–
426.6
–
386.6
-40.0
3050 Segment Common Systems
95.0
95.0
– –
-95.0
95.0
– –
-95.0
Engineering and Integration
3090 Program Operations
64.5
64.5
–
0.5
-64.0
64.5
–
40.5
-24.0

---

CRS-37
Change
Change
Change
Change
FY2003
House
to
Senate
to
House
to
Senate
to
Program Element/Project
Request
Auth.
Request
Auth.
Request
Approp.
Request
Approp.
Request
Aegis LEAP interceptor flight demonstration
–
27.0
+27.0
–
–
–
–
–
–
Long-range X-band and S-band
–
25.0
+25.0
– – – – – –
discrimination radar development
High Power Discriminator Radar
– – –
40.0
+40.0
– – – –
Development
Small Kill Vehicle Technology Development
–
–
–
10.0
+10.0
–
–
–
–
Concept Development, Studies, and Risk
– – –
-52.0
-52.0
– –
-2.0
-2.0
Reduction
0603883C Boost Defense Segment
4020 Sea-Based Boost
89.6
89.6
– 34.6
-55.0
69.6
-20.0
34.6
-55.0
4030 Air-Based Boost
598.0
520.5
-77.5
463.0
-135.0
598.0
–
463.0
-135.0
4040 Space-Based Boost
54.4
54.4
–
24.4
-30.0
14.4
-40.0
24.4
-30.0
4043 Space-Based
Laser
34.8
34.8
– 24.8
-10.0
34.8
– 24.8
-10.0
4090 Program Operations
20.1
20.1
–
0.1
-20.0
20.1
–
0.1
-20.0
0603884C Sensors
5041 Space-based Infrared System (SBIRS)
293.9
293.9
– 238.9
-55.0
293.9
– 250.9
-43.0
Low
5049 Russian-American Observation
69.1
69.1
– 79.1
+10.0
– -69.1
79.1
+10.0
Satellite Program (RAMOS)
5090 Program Operations
10.4
10.4
–
0.4
-10.0
10.4
–
0.4
-10.0
Airborne Infrared Surveillance (AIRS)
– – –
22.0
+22.0
– –
10.0
+10.0
System
0604861C THAAD System
2011 Theater High Altitude Area Defense
932.2
932.2
– 892.2
-40.0
932.2
– 892.2
-40.0
(THAAD)


2090
Program
Operations
– – – – – – – – –
0604865C Patriot PAC3 - EMD
–
220.8
+220.8
–
–
180.8
+180.8
150.8
+150.8
0604867C
Navy
Area
-
EMD
– – – – – – – – –
0901585C Pentagon Reservation Maintenance
7.5
7.5
– 7.5
– 7.5
– 7.5
–
Fund
0901598C
Management
Headquarters
27.9
27.9
– 27.9
– 27.9
– 27.9
–
General
Reduction
–
-135.0
-135.0
– – – – – –
Total, R&D Missile Defense Agency (MDA)
6,690.7
7,044.7
+354.0
5,924.4
-766.3
6,850.2
+159.4
6,145.0
-545.7
Army R&D
0604865A - Patriot PAC-3 - EMD
150.8
–
-150.8
150.8
–
–
-150.8
–
-150.8
0603869A - Meads Concepts - Dem/Val
117.7
–
-117.7
69.7
-48.0
–
-117.7
–
-117.7
0203801A - Patriot PAC-3 Product
43.7
43.7
– 43.7
– 43.7
– 43.7
–
Improvement
Total, R&D Army
312.2
43.7
-268.5
264.2
-48.0
43.7
-268.5
43.7
-268.5
House Spratt/Hunter Offset
–
-135.0
-135.0
– – – –
-135.0
–
Senate Warner/Levin Amendment*
–
–
– [814.3]
[+814.3]
–
– [814.3]
[+814.3]

---

CRS-38
Change
Change
Change
Change
FY2003
House
to
Senate
to
House
to
Senate
to
Program Element/Project
Request
Auth.
Request
Auth.
Request
Approp.
Request
Approp.
Request
Total, R&D Missile Defense Agency and Army*
Without Warner/Levin Amendment
7,003.0
6,953.4
-49.6
6,188.7
-814.3
6,893.9
-109.1
6,188.7
-814.3
With Warner/Levin Amendment Added
7,003.0
6,953.4
-49.6
7,003.0
– 6,893.9
-109.1
7,003.0
–
Procurement
Patriot
Mod
151.3
151.3
– 151.3
– 151.3
– 151.3
–
Patriot Mod Initial Spares
40.7
40.7
–
40.7
–
40.7
–
40.7
–
Patriot PAC-3
471.7
536.7
+65.0
471.7
–
536.7
+65.0
471.7
–
Total, Procurement
663.7
728.7
+65.0
663.7
– 728.7
+65.0
663.7
–
Military Construction
PE 0603881C, Terminal Defense MILCON
23.4
23.4
–
23.4
–
NA
–
NA
–
Total, Military Construction
23.4
23.4
– 23.4
– NA
– NA
–
Total, R&D, Procurement, MilCon*
Without Warner/Levin Amendment
7,690.1
7,840.5
+150.4
6,875.8
-814.3
7,622.6
-67.5
6,852.4
-837.7
With Warner/Levin Amendment Added
7,690.1
7,840.5
+150.4
7,690.1
– 7,622.6
-67.5
7,666.7
-23.4
Related Program
0604441F Space Based Infrared System
814.9
814.9
– 814.9
– 714.9
-100.0
714.9
-100.0
(SBIRS) High
Sources: Department of Defense, FY2003 RDT&E Program Descriptive Summaries; H.Rept. 107-436; S.Rept. 107-151; H.Rept. 107-532; S.Rept. 107-
213.
*Note: Warner/Levin amendment to the Senate authorization bill provides up to $814.3 million for missile defense and counter-terrorism programs.
Strategic Nuclear Weapons Policy
In January, the Administration completed a congressionally mandated Nuclear
Posture Review and submitted a classified report on the review, with an unclassified
summary, to Congress. Parts of the classified report were later leaked to the press,
prompting considerable public debate about several issues, including the potential
use of nuclear weapons against non-nuclear states that use or threaten to use non-
nuclear weapons of mass destruction, plans to shorten the time needed to resume
nuclear testing, and potential development of new nuclear weapons for missions such
as destruction of deeply buried and hardened targets. The review also reaffirmed
Administration plans to reduce offensive nuclear warhead numbers. Later, on May
13, the White House announced an agreement with Russia on a treaty to reduce
strategic offensive force levels to between 1,700 and 2,200 warheads.
Congressional Action. In the House Armed Services Committee markup,
Representative Tauscher offered an amendment to limit strategic nuclear force levels
to 1,700. The proposal was rejected in committee. On the floor, the House approved
a Tauscher amendment to require a report on options for achieving a level of 1,700

---

CRS-39
to 2,200 warheads. Representative Spratt offered an amendment, also rejected in
committee, to require one-year advance notification of a decision to resume nuclear
testing. The Rules Committee did not permit a floor vote on the amendment. The full
House also rejected an amendment offered by Representative Markey to prohibit
development of a nuclear earth penetrator weapon.
The Senate Armed Services Committee version of the authorization eliminates
$15.5 million requested in the Department of Energy weapons budget for
development of a “Robust Nuclear Earth Penetrator” weapon and requires a detailed
report on the proposed program. On July 26, the Senate approved an amendment to
the bill, offered by Senators Feinstein and Stevens, to prohibit development or
deployment of nuclear armed interceptors for missile defense.
The Senate bill also includes a provision that would require the Secretary of
Energy to request funds before beginning research and development or production
of any new or modified nuclear weapon. The provision also requires a specific
authorization for a new or modified nuclear weapon program before funds could be
obligated or expended.
Environmental Restrictions on DOD Training
The Defense Department has voiced increasing concern in recent years about
the effect on training of environmental regulations. Shortly before the House Armed
Services Committee markup of the defense authorization bill, the Administration
proposed legislation to exempt DOD training activities from the requirements of
several environmental statutes ranging from the Endangered Species Act to the Clean
Air Act.
Congressional Action. The House-passed version of the authorization bill
addresses exemptions or waivers for DOD of application of the Endangered Species
Act, the Migratory Bird Treaty Act, and the Wilderness Act to areas used for military
training exercises. On the Endangered Species Act, Section 312 of the House bill
would allow DOD to substitute its own Integrated Natural Resource Management
Plan to protect endangered species rather than having installations designated as a
critical habitat. DOD would, however, still be prohibited from taking any actions
that would harm endangered or threatened species. In designating new critical
habitats, the bill would also require that the effect on national security, as well as the
economic impact, must be considered.
Section 311 of the House bill provides that in the case of military training
activities, DOD would not be subject to the part of the Migratory Bird Treaty Act
that designates certain types of activities as unlawful. According to the committee
report, this provision was intended to permit DOD to carry out military exercises
even if they might unintentionally harm migratory birds. The language adopted
would exempt DOD more broadly from any activity deemed to be unlawful under the
Act.
The House bill also permits DOD to conduct training activities and have
emergency access to the Utah Test and Training Range, despite the fact that a portion
of that range has been designated as a wilderness area with certain restrictions on

---

CRS-40
noise and disturbances. The House bill also includes provisions that would designate
several areas owned by the Bureau of Land Management that are adjacent to the Utah
Test and Training Range as wilderness areas although DOD’s training activities in
these areas would also not be covered by Wilderness Act restrictions. (For a
discussion of these and other provisions, see CRS Report RL31456, Defense Cleanup
and Environmental Programs: Authorization and Appropriations for FY2003, by
David Michael Bearden, and CRS Report RL31415, The Endangered Species Act,
Migratory Bird Treaty Act, and Department of Defense Readiness Activities: Current
Law and Legislative Proposals, by Pamela Baldwin.)

The House Armed Services Committee did not address other environmental
measures that DOD included in its legislative proposal. In the House Armed
Services Committee markup, Representative James Maloney offered an amendment
to remove the environmental waiver provisions, but the proposal was rejected. The
Rules Committee did not permit a similar amendment proposed by Representatives
Rahall, Dingell and Maloney to be offered on the floor.
The Senate Armed Services Committee did not address these environmental
issues in its version of the authorization bill. Instead, it referred the Administration’s
proposals to the Environment and Public Works Committee, which recently held a
hearing on those proposals. The Senate bill authorizes $20 million to allow the
Secretary of Defense to acquire lands adjacent to military installations to serve as a
buffer zone and provide additional natural habitat areas for endangered species in
areas where animals have moved to military installations as a result of development.
Cap on Military Personnel in Colombia
Under current law, there is a cap of 400 on the number of U.S. military
personnel who can operate in Colombia. The cap specifically excludes personnel
serving diplomatic functions or performing emergency missions. The House
authorization bill includes a provision that would establish a cap of 500 on the
number of U.S. military personnel in Colombia who are supported or maintained by
Department of Defense funds. The measure also provides the Secretary of Defense
may waive the cap for national security reasons and must inform Congress within 15
days of a waiver.
Base Realignment and Closure
Last year, Congress approved a measure that will permit a new round of military
base closures in 2005, following procedures that were used in earlier rounds in 1991,
1993, and 1995. In the House Armed Services Committee markup of the
authorization bill, Representative Taylor offered an amendment to repeal last year’s
base closure provisions. The committee defeated the amendment by a vote of 38-19.
The Rules Committee did not allow the amendment to be offered on the floor, which
was a matter of considerable contention when the bill was debated.

---

CRS-41
Abortions in Military Hospitals Overseas
Abortions are readily available in the United States, but are often not available
to U.S. personnel deployed abroad. Congress has perennially debated measures to
allow abortions for U.S. military personnel at military hospitals overseas.
Congressional Action. In the House Armed Services Committee markup,
the committed rejected an amendment by Representative Sanchez to allow abortions
at U.S. military hospitals abroad; the full House rejected the proposal in a floor vote.
On June20 the Senate debated and on June 21 approved by a vote of 52-40 an
amendment to the authorization bill by Senators Murray and Collins that would
remove the prohibition on privately funded abortions at overseas military facilities.
Limitation on Transfer Authority
Like other House FY2003 appropriations bills, the House-passed measure
includes a provision, Section 8122, that prohibits the transfer of funds to any other
agency unless approved in an appropriations act. One effect would be to prevent the
transfer of defense funds to the new Department of Homeland Security without the
approval of the appropriations committees.
Legislation
Congressional Budget Resolution
H.Con.Res. 253 (Nussle)
A concurrent resolution establishing the congressional budget for the United
States Government for fiscal year 2003 and setting forth appropriate budgetary levels
for each of fiscal years 2004 through 2007. Reported by the House Budget
Committee (H.Rept. 107-376), March 15, 2002. Passed by the House, 221-209,
March 20, 2002.
S.Con. Res. 100 (Conrad)
An original concurrent resolution setting forth the congressional budget for the
United States Government for fiscal year 2003 and setting forth the appropriate
budgetary levels for each of the fiscal years 2004 through 2012. Reported by the
Senate Budget Committee, March 22, 2002. Written report filed (S.Rept. 107-141),
April 11. 2002.
Defense Authorization
H.R. 4546 (Stump)
A bill to authorize appropriations for fiscal year 2003 for military activities of
the Department of Defense, and for military construction, to prescribe military
personnel strengths for fiscal year 2003, and for other purposes. Marked up and
ordered to be reported by the House Armed Services Committee, May 1, 2002.
Report filed (H.Rept. 107-436), May 3, 2002. Considered by the House and
approved, with amendments (359-58), May 10, 2002. Laid before the Senate, Senate

---

CRS-42
struck all after the enacting clause and substituted the language of S. 2514, and
passed by the Senate by unanimous consent, June 27, 2002.
H.R. 4547 (Stump)
A bill to authorize appropriations for the costs of the war against terrorism.
Considered by the House Armed Services Committee, May 1, 2002. Marked up and
ordered reported by the House Armed Services Committee July 18, 2002. Report
filed (H.Rept. 107-603), July 23, 2002. Considered under suspension of the rules,
yeas and nays ordered, and further consideration postponed, July 23-24, 2002.
Approved by the House (413-3), July 24, 2002.
S. 2514 (Levin)
An original bill to authorize appropriations for fiscal year 2003 for military
activities of the Department of Defense, for military construction, and for defense
activities of the Department of Energy, to prescribe personnel strengths for such
fiscal year for the Armed Forces, and for other purposes. Marked up and ordered to
be reported by the Senate Armed Services Committee, May 9, 2002. Report filed
(S.Rept. 107-151), May 15, 2002. Considered by the Senate, June 18, 19, 20, 21, 24,
25, 26, 27. Approved by the Senate as amended (97-2), June 27, 2002.
Defense Appropriations
H.R. 5010 (Lewis)
Making appropriations for the Department of Defense for the fiscal year ending
September 30, 2003, and for other purposes. Marked up and reported by the House
Appropriations Committee (H.Rept. 107-532), June 25, 2002. Considered by the
House and approved as amended (413-18), June 27, 2002. Marked up and reported
as amended by the Senate Appropriations Committee (S.Rept. 107-213), July 18,
2002. Considered by the Senate July 31 and August 1, 2002. Approved by the
Senate, as amended (95-3), August 1, 2002.
H.R. 5011 (Hobson)
Making appropriations for military construction, family housing, and base
realignment and closure for the Department of Defense for the fiscal year ending
September 30, 2003, and for other purposes. Marked up and reported by the House
Appropriations Committee (H.Rept. 107-533), June 25, 2002. Considered by the
House and approved, as amended (426-1), June 27, 2002. Senate struck all after the
enacting clause and substituted the text of S. 2709, as reported, July 17, 2002.
Approved by the Senate, with an amendment (96-3), July 18, 2002.
S. 2709 (Feinstein)
An original bill making appropriations for military construction, family housing,
and base realignment and closure for the Department of Defense for the fiscal year
ending September 30, 2003, and for other purposes. Marked up and ordered to be
reported by the Senate Appropriations Committee, June 27, 2002. Report filed
(S.Rept. 107-202), July 3, 2002.

---

CRS-43
FY2002 Supplemental Appropriations
H.R. 4775 (C.W. Bill Young)
Making supplemental appropriations for the fiscal year ending September 30,
2002, and for other purposes. Reported by the House Appropriations Committee
(H.Rept. 107-180), May 20, 2002. Considered by the House, May 22-23, 2002.
Approved by the House (280-138), May 24, 2002. Measure laid before the Senate
and Senate struck all after the enacting clause and substituted the language of S. 2551
to be used as original text, June 3, 2002. Cloture motions presented in the Senate,
June 4, 2002. Cloture motion invoked (87-10), June 6, 2002. Approved by the
Senate (71-22), June 7, 2002. Conference agreement reported (H.Rept. 107-593),
July 19, 2002. Conference report agreed to by the House (397-32), July 23, 2002.
Conference report agreed to by the Senate (92-7), July 24, 2002. Signed into law by
the President (P.L. 107-206), August 2, 2002.
S. 2551 (Byrd)
An original bill making supplemental appropriations for further recovery from
and response to terrorist attacks on the United States for the fiscal year ending
September 30, 2002, and for other purposes. Marked up and ordered to be reported
by the Senate Appropriations Committee, May 22, 2002. Written report filed
(S.Rept. 107-156), May 29, 2002.
For Additional Reading
CRS Report RL31310. Appropriations for FY2003: Military Construction, by Daniel
H. Else.
CRS Report RS21218. Crusader XM2001 Self-Propelled Howitzer: Background and
Issues for Congress, by Edward F. Bruner and Steven R. Bowman.
CRS Report RL31456. Defense Cleanup and Environmental Programs:
Authorization and Appropriations for FY2003, by David Michael Bearden.
CRS Issue Brief IB10062. Defense Research: DOD’s Research, Development, Test
and Evaluation Program, by John Dimitri Moteff.
CRS Report RL31415. The Endangered Species Act, Migratory Bird Treaty Act, and
Department of Defense Readiness Activities: Current Law and Legislative
Proposals, by Pamela Baldwin.
CRS Issue Brief IB93103. Military Medical Care Services: Questions and Answers,
by Richard A. Best, Jr.
CRS Issue Brief IB10089. Military Pay and Benefits: Key Questions and Answers,
by Robert L. Goldich.
CRS Issue Brief IB85159. Military Retirement: Major Legislative Issues, by Robert
L. Goldich.

---

CRS-44
CRS Report RL31111. Missile Defense: the Current Debate, coordinated by Steven
A. Hildreth and Amy F. Woolf.
CRS Report RS20535. Navy Ship Procurement Rate and the Planned Size of the
Navy: Background and Issues for Congress, by Ronald O’Rourke.
CRS Report RS20643. Navy CVNX Aircraft Carrier Program: Background and
Issues for Congress, by Ronald O’Rourke.
CRS Report RS21059. Navy DD(X) Future Surface Combatant Program:
Background and Issues for Congress, by Ronald O’Rourke.
CRS Issue Brief IB94040. Peacekeeping: Issues of U.S. Military Involvement, by
Nina Maria Serafino.
CRS Report RL31297. Recruiting and Retention in the Active Component Military,
by Lawrence Kapp.
CRS Issue Brief IB92115. Tactical Aircraft Modernization: Issues for Congress, by
Christopher Bolkcom.
CRS Report RL31187. Terrorism Funding: Congressional Debate on Emergency
Supplemental Allocations, by Amy Belasco and Larry Q. Nowels.
CRS Report RS21133. The Nuclear Posture Review: Overview and Emerging Issues,
by Amy F. Woolf.
CRS Report RL31384. V-22 Osprey Tilt-Rotor Aircraft, by Christopher Bolkcom.

---

CRS-45
Appendix
Table A1. Congressional Action on Defense Authorization by Title
(budget authority in billions of dollars)
Request
With
House
Senate
DERF
DERF
Author-
Change
Author-
Change
Request Allocated Allocated
ization to Request
ization to Request
Military Personnel
94.3
0.0
94.3
93.7
-0.6
94.4
+0.0
Operation and Maintenance
130.4
3.9
134.3
130.7
-3.7
130.2
-4.1
Defense Emergency Response Fund
20.1
10.0
10.0
0.0
-10.0
0.0
-10.0
Procurement
68.7
2.9
71.6
73.2
+1.6
72.2
+0.6
RDT&E
53.9
2.3
56.1
56.4
+0.3
56.4
+0.3
Military Construction
4.8
0.6
5.3
5.7
+0.4
6.0
+0.6
Family Housing
4.2
0.0
4.2
4.3
+0.0
4.2
-0.0
Revolving Funds/Other
1.9
0.3
2.3
0.9
-1.3
1.6
-0.6
General Provisions
0.0
0.0
0.0
+0.0
10.0
+10.0
Total DOD
378.2
20.1
378.2
364.9
-13.3
375.0
-3.3
Atomic Energy Defense Activities
16.4
16.4
16.3
-0.0
16.7
+0.3
Other Defense-Related Activities
1.7
1.7
1.6
-0.1
1.6
-0.1
Total National Defense
396.3
396.3
382.8
-13.5
393.2
-3.1
Sources: H.Rept. 107-436; S.Rept. 107-151.
Note: DERF allocation as shown by the Senate Armed Services Committee in S.Rept. 107-151.
Table A2. Congressional Action on Defense Appropriation by Title
(budget authority in billions of dollars)
Request
With
House
Change
Senate
Change
DERF
DERF
Appro-
to
Appro-
to
Request Allocated Allocated
priation
Request
priation
Request
Military Personnel
94.2
0.0
94.3
93.4
-0.9
93.8
-0.5
Operation and Maintenance
111.6
3.9
115.5
114.8
-0.8
114.8
-0.7
Defense Emergency Response Fund
20.1
10.0
10.0
0.0
-10.0
0.0
-10.0
Procurement
67.2
2.9
70.1
70.3
+0.2
71.5
+1.4
RDT&E
53.7
2.3
56.0
57.8
+1.8
56.1
+0.2
Revolving & Mgmnt Funds
2.4
0.3
2.8
2.8
+0.0
2.7
-0.0
Other DOD Programs
17.1
0.0
17.1
17.1
+0.0
17.5
+0.4
Related Agencies
0.4
0.4
0.4
+0.0
0.4
+0.0
General Provisions
0.0
0.0
-1.8
-1.9
-1.6
-1.6
Total DOD
366.8
19.5
366.8
354.7
-12.1
355.4
-11.4
Sources: H.Rept. 107-532, S.Rept. 107-213.
Note: DERF allocation as shown by the Senate Armed Services Committee in S.Rept. 107-151.

---