FY2018 Defense Budget: Issues for Congress

June 5, 2017 ZZZA3C322220554F0AC


FY2018 Defense Budget:
Issues for Congress
Kathleen J. McInnis Analyst in International Security
Pat Towell Specialist in Defense Policy and Budget
Lynn M. Williams Analyst in U.S. Defense Budget Policy
Kristy Kamarck Analyst in Military Manpower
Ronald O’Rourke Specialist in Naval Affairs
June 5, 2017
February 23, 2016

Agenda
• Strategic Context / U.S. Role in the World
• The FY2018 Defense Budget Overview
• The FY2018 Budget in Historical Context
• Military Personnel Matters
• Weapons Procurement Matters
• Talk to the Experts
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FY2018 Defense Budget: Strategic Context

Kathleen McInnis
Analyst in International Security
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2016...
CRS-4


2015 National Military Strategy
• Revisionist States

• Violent Extremist Organizations
“..[G]lobal disorder has significantly increased, while some of
our comparative military advantage has begun to erode.”
-The Chairman’s Foreword to the
2015 National Military Strategy
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Possible Oversight Questions for Congress
• Are DOD’s priorities right, strategically
and programmatically?
• Can programmatic decisions enable
DOD to meet current & emerging
challenges?
• Is DOD appropriately configured to
meet current and emerging security
challenges?
• Is the interagency appropriately
resourced to meet national objectives?
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The FY2018 Defense Budget Overview

Pat Towel
Specialist in Defense Policy and Budget
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Unless otherwise specified,
al funding amounts in this briefing
refer to Budget Authority
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FY2018 President’s Budget Request
National Defense
$677.1B
Budget Function 050
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FY2018 Defense Budget Request
$677.1B =
DOD Military
$646.9B
(051)
Atomic Energy
$21.8B
Defense Activities (053)
Other Defense-
$8.4B
related (054)
Totals may not reconcile due to rounding.
CRS-10

FY2018 Defense Budget Request
$677.1B =
Base Budget
OCO
DOD Military
$582.4B
$64.6B
(051)
Atomic Energy
$21.8B
Defense Activities (053)
Other Defense-
$8.4B
related (054)
Totals may not reconcile due to rounding.
CRS-11

FY2018 Defense Budget Request
Base Budget
$677.1B = Discretionary Mandatory OCO
DOD Military
$574.5B
$7.8B
$64.6B
(051)
Atomic Energy
$20.6B
$1.2B
Defense Activities (053)
Other Defense-
$7.9B
$0.6B
related (054)
Totals may not reconcile due to rounding.
CRS-12

FY2018 Defense Discretionary Budget Request
Base Budget
= $603 B
Discretionary Mandatory
OCO
DOD Military
$574.5B
$7.8B
$64.6B
(051)
Atomic Energy
$20.6B
$1.2B
Defense Activities (053)
Other Defense-
$7.9B
$0.6B
related (054)
Totals may not reconcile due to rounding.
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DOD Military Discretionary Budget
Base Budget
= $639.1 B Discretionary Mandatory OCO
DOD Military
$574.5B
$7.8B
$64.6B
(051)
Atomic Energy
$20.6B
$1.2B
Defense Activities (053)
Other Defense-
$7.9B
$0.6B
related (054)
Totals may not reconcile due to rounding.
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BCA Effects on DOD Military Funding
DOD Military
DOD accounts for about
Base
95.5% of the base
Discretionary
discretionary

National Defense Budget
$574.5B
Function 050

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Selected FY2018 Defense Funding Proposals
Discretionary billions of dollars
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FY2018 DOD Request By Title/Account
Discretionary billions of dollars

FY2018 Request
Title/Account
Base
OCO
Total
Military Personnel
$141.7
$4.3
$146.0
Operations & Maintenance
$223.3
$48.7
$271.9
Procurement
$115.0
$10.2
$125.2
Research, Development, Test & Evaluation
$82.7
$0.6
$83.3
Revolving & Management Funds
$2.1
$0.1
$2.2
Military Construction
$8.4
$0.6
$9.0
Family Housing
$1.4
$0.0
$1.4
TOTAL
$574.5
$64.6
$639.1
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Administration’s Budget Guidance
Focus on Readiness
1. FY2017 budget amendment request: address “immediate and
serious readiness chal enges”
2. FY2018 budget request: “focus on balancing the program…
while continuing to rebuild readiness”
3. FY2019 budget request: “inform our targets for force
structure growth.”
James Mattis, “Implementation Guidance for Budget Directives in the National Security
Presidential Memorandum on Rebuilding the U.S. Armed Forces,” Department of
Defense, January 31, 2017, emphasis added.
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“Readiness” Often Used in Two Ways
Broadly: “Readiness is the capability of our forces to conduct
a full range of military operations to defeat all enemies.... It is
generated through manning, training and equipping our units
and leader development.”

Lieutenant General Joseph Anderson, HASC hearing on The Current State of U.S. Army
Readiness, March 8, 2017.

Narrowly: “...current budget levels require…making difficult
tradeoffs between force structure, readiness, and
modernization.”

General Stephen Wilson, HASC hearing on The State of the Military, February 8, 2017.
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“Readiness” in FY2017 Additional Appropriations
by Select Accounts
Compared to appropriated base funding
Activity
Army
Navy
Air Force
Operations & Maintenance
+2.6%
+4.4%
+3.1%
Operations & Maintenance,
+3.8%
+5.6%
+5.0%
Budget Activity 1: Operating Forces
Procurement
+11.5%
+1.9%
+6.0%
Total
+2.8%
+2.1%
+3.1%
Source: Explanatory statement for H.R. 244, p. 26, as posted on the House Rules Committee website.
Notes: DOD distinguished in its request between additional appropriations for base and OCO funding. The omnibus designates al of Title X,
Additional Appropriations, as OCO funding. This table assumes all Title X funding save the Counter-ISIL Train and Equip Fund and Counter-ISIL
OCO Transfer Fund are for base activities. These accounts are not included in the Army numbers.
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“Readiness” in the FY2018 Request
by Select Accounts
Compared to FY2017 Final Appropriations
Army
Navy
Air Force

Operations & Maintenance
+14.6%
+17.3%
+4.8%
Operations & Maintenance,
+21.9%
+21.8%
+22.2%
Budget Activity 1: Operating Forces
Procurement
+4.3%
+0.3%
+4.3%
Source: DOD Budget Overview Table A-10 and CRS compilation of HR 244.
Notes: Figures do not include rescissions from HR 244, Title VIII save for $336 million rescinded from the Army’s O&M
accounts.
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The FY2018 Budget in Historical Context

Lynn Wil iams
Analyst in U.S. Defense Budget Policy
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DOD Spending in a Historical Perspective
FY1950-2017
Billions of FY2018 Dollars
$1,000 B
$900 B
Iraq & Afghanistan Wars:
84% buildup, 1997-2010
$800 B
Korean War:

288% buildup, 1950-1952
Reagan Buildup/
Post Cold War:
$700 B
57% drawdown, 1952-1955
65% buildup, 1979-1985
33% drawdown, 1985-1997
$600 B
Vietnam War:

54% buildup, 1961-1968
$500 B
31% drawdown, 1968-1975

$400 B
$300 B
$200 B
$100 B
$0 B
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
Sources: CRS estimates based on OMB and DOD data
Dedicated funding outside DOD
“base budget”
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National Defense Outlays as % of GDP
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Budget Control Act of 2011 Statutory Limits
Discretionary billions of dollars

National Defense (050) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Budget Control Act of
2011
555

546 556 566 577 590 603* 616 630 644
Budget Control Act of
2011 after revision
555

492 502 512 523 536 549 562 576 590
American Taxpayer
+ 26 - 4
Relief Act of 2012
518 498
603 – 549
= $54 B
Bipartisan Budget Act of
+ 22 + 9
2013
520 521
Bipartisan Budget Act of
+ 25 + 15
2015
548 551
*Equal to the administration’s FY2018 Defense Budget Request
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Effect of the BCA on DOD Budget Authority
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Recent Legislative Action
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Military Personnel Matters

Kristy Kamarck
Analyst in Military Personnel
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Active Component End Strength (FY2001-17)
Active Component End Strength Over Time
600,000
(FY2001-2016 actual; FY2017 authorized)
566,045
480,801
500,000
476,000
Army
377,810
400,000
Navy
323,900
353,571
Marine Corps
300,000
321,000
Air Force
202,786
200,000
172,934
185,000
100,000
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Army Active Component Personnel Strength
FY2017 requested end-strength = 460,000
FY2017 authorized end-strength = 476,000
Actual strength (March 31, 2017) = 465,056
FY2018 requested end-strength = 476,000
“We will build an active Army of
From 2006-2010, the Army
around 540,000”
increased its strength by
- Candidate Trump, Sep. 7, 2016
about 60,000.
“We were on a path to reduce the active component to 460,000. [In
response to the FY17 NDAA] we…increased our enlistments by
6,000,…retained 9,000 more soldiers in the field and we increased
our officer accessions by 1,000 to get that 16,000.”
- Lt. Gen. McConville, Deputy Chief of Staff (G-1), HASC Hearing, Feb. 7, 2017
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Marine Corps Active Component Personnel Strength
FY2017 requested end-strength = 182,000
FY2017 authorized end-strength = 185,000
Actual strength (March 31, 2017) = 183,866
FY2018 requested end-strength = 185,000
Estimated strength to
“We will build a Marine Corps based
increase to 36 battalions is
on 36 battalions”
approximately 12,000.
- Candidate Trump, Sep. 7, 2016
(U.S. Naval Institute, December 7,
2016)
“…we need to increase active component end strength to at least
194,000…. An increase of 3,000 Marines per year maintains a rate of
growth consistent with effective recruiting and accession.”
- General Walters, Marine Corps Assistant Commandant, HASC Hearing, Feb. 7, 2017
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Navy Active Component Personnel Strength
FY2017 requested end-strength = 322,900
FY2017 authorized end-strength = 323,900
Actual strength (March 31, 2017) = 322,368
FY2018 requested end-strength = 327,900
“We wil build a Navy of 350 surface
ships and submarines”
“…the exact number [to man 355
- Candidate Trump, Sep. 7, 2016
ships] will depend on what the
makeup of that new force
contract exactly would look
like…anywhere from 20 to 40,000
In December 2016, the Navy released a
additional sailors.”
new force-structure goal, calling for a

fleet of 355 ships, up from a 2015 goal
-Vice Admiral Robert Burke, Chief of Naval
of 308 ships.
Personnel, HASC Hearing, March 17, 2017
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Air Force Personnel Strength
FY2017 requested end-strength = 317,000
FY2017 authorized end-strength = 321,000
Actual strength (March 31, 2017) = 319,707
FY2018 requested end-strength = 325,100
General Goldfein, Air Force
“We wil build an Air Force of at least
Chief of Staff, recommended
1,200 fighter aircraft”
increasing size of the Air Force
- Candidate Trump, Sep. 7, 2016
to 350,000 over 5-6 years.

-USA Today, December 21, 2016
At the end of FY2016, the total force was short 1,555 pilots…the active
fighter pilot shortage is projected to exceed 1,000 by the end of FY2017. In
the aircraft maintenance field…we expect the shortfal to drop [from 4,000
in FY15] to around 1,500 [in FY17].
-- Lt. Gen. Grosso, Deputy Chief of Staff, Manpower, Personnel, and Services,
HASC Hearing, May 7, 2017
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Strength Increases: Key Points
1. Cost of additional personnel
•
~ $100,000 per servicemember per year in military pay
and benefits (methodologies vary)
•
Other agency costs (e.g., veterans disability, VA health
care, GI Bill)
•
Recruiting and retention costs

2. Quality of the force

3. Time required to increase manning levels
•
Training pipelines
•
Equipment procurement and production (e.g., new ships
and aircraft)
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Increases in Basic Pay, 2001-2018
Increase in Basic Pay ≥ ECI
Increase in
Increase in Pay ≤ ECI
Pay = ECI
Estimated savings of 2.1% versus 2.4% = $200 mil ion in FY2018,
$1.4 bil ion for FY2018-2022.
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Proposed Compensation Changes in the President’s
Budget (Health Benefits)
Proposed changes in three main areas
• Eliminate TRICARE Select grandfathering provisions
• Consolidate TRICARE Prime and TRICARE Select
• Pharmacy Co-Pay Increases

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Contact: Don Jansen, x7-4769


Weapons Procurement Matters

Ronald O’Rourke
Specialist in Naval Affairs

CRS-37

Nuclear Weapons Programs
Key modernization programs continue general y as expected
• Ground-based strategic deterrent (FY17: $114M; FY18: $216M)
• B-21 Bomber (FY17: $1.4B; FY18: $2B)
• Columbia-class ballistic missile submarine (FY17: $1.89B; FY18: $1.93B)
• Long-range standoff missile (FY17: $96 mil ion; FY18: $451M)
• National Nuclear Security Administration (NNSA)
o Total Weapons Activities (FY17: $9.3B; FY18: $10.2B)
o Directed Stockpile Work (includes life extension programs) (FY17: $3.3B; FY18:
$3.97B)
Al show funding increases over FY17, but some rates of change differ
from expectations
• DOD funding changes do not appear to reflect changes in scope, pace,
priority of programs
• NNSA funding changes address perceived shortfalls in prior funding in some
areas
Budget recognizes Nuclear Posture Review could alter pace, scope of
some programs
• NPR expected by end of year

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Bal istic Missile Defense (BMD) and
Space Control
FY2018 request for BMD is $9.2B
•
Missile Defense Agency (MDA) request is $7.9B
• Increase of $379M from FY2017 request
•
GMD test—first ICBM-range intercept test since 1984
•
THAAD in South Korea
•
Hawaii Aegis test site

FY2018 request for National Security Space is $6.9B
•
EELV (Evolved Expendable Launch Vehicle) System
• Russian rocket engine replacement



CRS-39

Contact: Steve Hildreth, x7-7635




Aircraft FY2017 to FY2018 Changes
• FY2018 request close to FY2017 projection
• 11 more major aircraft than projected, mostly unmanned
• Most reductions from vertical lift programs
• 7 fewer CH-47 Chinook
• 12 fewer UH-60 Black Hawk (Army)
• 5 fewer H-1 upgrades (Marines)
• 5 additional AH-64 Apache (Army)
• Most additions are surveillance & reconnaissance
systems
• 11 MQ-1 Gray Eagle (Army)
• 16 MQ-9 Reaper (Air Force)
• 1 P-8 Poseidon (Navy)
• F-35 is DOD’s largest procurement program
• 46 Air Force
• 4 Navy
• 20 Marine Corps


CRS-40

Contact: Jeremiah “J.J.” Gertler, x7-5107



Ground Forces Equipment
Army and Marine Corps Joint Light Tactical Vehicle (JLTV)
• FY2018 request (Base and OCO)
• Army: 2,110 vehicles, $827.9 M (RDT&E and proc.)
• USAF: 140 vehicles, $60.5M (proc. only)
• USMC: 527 vehicles, $254.3M (RDT&E and proc.)
• Total planned procurement (FY2015-FY2040)
• Army: 49,909 vehicles
• Marines: wil increase from initial requirement of 5,500 to 9,091 vehicles (+65%)

Army Armored Multi-Purpose Vehicle (AMPV)
• BAE Systems delivered prototypes to Army in 2016 for testing
• FY2018 request (Base and OCO)
• 107 vehicles, $647.4M (RDT&E and proc.)
• Total planned procurement for
• Armored Brigade Combat Teams (ABCTs): 2,936 vehicles
• Echelons above brigade: 1,922 vehicles
• Totals could change based on proposed ABCT increase

CRS-41


Contact: Andrew Feickert, x7-7673



Ground Forces Equipment
Marine Corps Amphibious Combat Vehicle (ACV) Version 1.1
•
Supplement to the legacy Amphibious Assault Vehicle (AAV)
• BAE Systems and SAIC have delivered first ACV 1.1 prototypes for testing
• Down select to single vendor expected in 2018
•
FY18 request (Base): 26 vehicles, $340.5M (RDT&E and Proc.)
•
Total planned procurement: 204
•
Plan to fol ow ACV 1.1 with a ful y amphibious tracked ACV Version 1.2 vehicle
• To replace AAVs and operate from Navy amphibious ships


AAV Version - Current
ACV Version 1.1
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Contact: Andrew Feickert, x7-7673

Ships
Navy’s new 355-ship force-level goal
• Time needed to reach 355
• Additional funding needed
• Industrial base ability to take on additional work
• Employment impact of additional shipbuilding work
• Navy desire to first improve readiness


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Contact: Ronald O’Rourke, x7-7610


Ships
FY2018 request: 9 ships
•
1 CVN-78 aircraft carrier
•
2 Virginia-class SSNs
•
2 DDG-51 destroyers
•
2 Littoral Combat Ships (LCSs)
•
1 TAO-205 class oiler
•
1 TATS tug/salvage ship

LCS request was increased from 1 to 2 on May 24
•
Budget docs show request and funding for 1
• $541 mil ion needed to turn 1-ship buy into 2-ship buy
• Errata sheets wil be printed

FY2018 request is same as FY2017 budget’s projection for FY2018
•
Except for LCS (which was projected at 1)

CRS-44

Contact: Ronald O’Rourke, x7-7610

Ships
Options for FY2018 plus-ups to start toward 355 ships
•
AP to accelerate next aircraft carrier; potential block buy
•
AP for additional Virginia-class SSNs in future years
•
1 or 2 additional DDG-51 destroyers
•
1 or 2 additional LCSs
•
1 additional TAO-205 oiler

LCS/Frigate program
•
Annual procurement rate and total planned procurement quantity
•
Requirements, design, builder(s) of frigate; transition to frigate

Columbia-class SSBN
•
Navy use of procurement authorities in National Sea-Based Deterrence Fund

Use of FY2017 funding for procurement of additional LPD-17

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Contact: Ronald O’Rourke, x7-7610

QUESTIONS?
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Backup Slides


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Proposed Compensation Changes in the President’s
Budget (Housing Allowances)
Housing Allowance (BAH) reductions continue this year.
• In 1996, housing al owances covered about 80% of average
housing costs.
• Statutory changes in 1998 and 2000 resulted in BAH covering
100% of average housing costs by 2005.
• For FY2015, Congress authorized the Secretary of Defense to
reduce BAH rates by up to 1% of the national average monthly
housing costs.
• For FY2016, Congress authorized the Secretary of Defense to
reduce BAH rates by up to 5% of the national average monthly
housing costs; phased in at 1% increments over 4 years. DoD
will apply a “save pay” provision during implementation.

CRS-48

Contact: Lawrence Kapp, x7-7609



Department of Defense
Research, Development, Test, and Evaluation, FY2017-FY2018
(current dollars, in mil ions)
By Appropriation Account
By Budget Activity, Title IV + OCO Only
Change
Change
FY2017
FY2018
FY2017 (Base + OCO)-
FY2017
FY2018
FY2017(Base + OCO)-
Base +
FY2018
FY2018
Base +
FY2018 (Base + OCO)
Base +
FY2018
FY2018
Base +
FY2018 (Base + OCO)
Appropriation
OCO
Base
OCO
OCO
OCO
Base
OCO
OCO
Account
Enacted
Request
Request
Request
Dol ar
Percent
Budget Activity
Enacted
Request
Request
Request
Dol ar
Percent
TITLE IV + OCO
Basic Research (6.1)
$ 2,276
$ 2,229
-
$ 2,229
$ -48
-2
Army, RDT&E
$ 8,675
$ 9,425
$ 119
$ 9,545
$ 869
10
Applied Research (6.2)
5,296
4,973
-
4,973
-323
-6
Navy, RDT&E
17,541
17,675
130
17,805
264
2
Advanced Technology
Development (6.3)
6,456
5,997
25
6,022
-434
-7
Air Force, RDT&E
28,154
34,914
135
35,050
6,896
24
Adv. Component
Defense-Wide,
Development &
RDT&E
19,221
20,491
226
20,717
1,496
8
Prototypes (6.4)
15,376
17,451
59
17,510
2,134
14
Operational Test
System Development &
and Evaluation
190
211
-
211
21
11
Demonstration (6.5)
12,781
14,671
58
14,728
1,947
15
Subtotal, Title IV
$73,781
$82,717
$ 611
$83,328
$9,547
13
RDT&E Management
Support (6.6)
4,575
6,085
-
6,085
1,509
33
Other Titles
Operational Systems
Defense Health
Development (6.7)
26,987
31,311
469
31,780
4,793
18
Programs
2,102
673
-
673
-1,429
-68
Undistributed DARPA
Chemical Agents
Reduction
-50
-
-
-
50
-100
and Munitions
Destruction
516
839
-
839
324
63
Undistributed FY2017
Supplemental OCO
82
-
-
-
-82
-100
National Defense
Sealift Fund
-
19
-
19
19
na
Total, Title IV & OCO
RDT&E
$73,781
$ 82,717
$611
$83,328
$9,547
13
Inspector General
3
3
-
3
0
-11
Under the President’s FY2018 request, budget activities 6.1-6.3
Total, RDT&E
$76,401
$ 84,251
$ 611
$ 84,862
$ 8,461
11
(broadly referred to as the DOD “Science and Technology” budget)
would decrease by $755 million (5.4%) from the FY2017 level.*

Contact: John Sargent, x7-9147
* Includes FY2017 undistributed DARPA reduction of $50 mil ion.
Sources: CRS analysis of Department of Defense Budget, Fiscal Year 2018, RDT&E Programs (R-1), May 2017; CRS analysis of explanatory statement
accompanying P.L. 115-31, as published in the Congressional Record, May 3, 2017, Volume II, H3391-H3703; Division B, P.L. 114-254.
CRS-49
Note: Columns may not sum to subtotal or total due to rounding.

Budgeting for National and
Defense Intelligence
• Includes most funding for the intelligence-related programs,
projects, and activities of the 17 component organizations of
the U.S. intelligence community

• Includes two major elements:
o National Intel igence Program (NIP)
o Military Intelligence Program (MIP)

• Detailed budgets for the NIP and the MIP are highly classified

• Title 50 requires annual public disclosure of aggregate NIP
budget request
• Secretary of Defense has also publicly disclosed aggregate
MIP budget request in recent years

CRS-50

Contact: Heidi Peters, x7-0702

Annual NIP and MIP Budget Request: FY2012-FY2017
$800B
$700B
$600B
$500B
National Defense Budget Request
$400B
$300B
$200B
$100B
Military Intel igence
Program (MIP)
National Intel igence
Program (NIP)
Nominal dollars
2012
2013
2014
2015
2016
2017
Total Intel igence
Budgets
Source: CRS, derived from information made available by OMB, ODNI, and DOD. National defense budget request figures derived from OMB Historical Table 5.1 (Budget
CRS-51
Authority By Function and Subfunction: 1976-2022), as released with the FY2018 President’s Budget Request, and includes al national defense (budget function 050)
discretionary spending.

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