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Budget Panel: Current Financial Crisis.

John Roth Deputy Comptroller (Program/Budget) Office of the Under Secretary of Defense (Comptroller)

John Kohler Assistant Deputy Assistant Secretary of the Army for Budget

Robert Panek Associate Director of Budget, USN

Charles Cook Director, Fiscal Department Programs &Resources, USMC

Robert D. Stuart Deputy for Budget, USAF

At first glance, one would expect the Professional Development Institute (PD1) workshop titled "Budget Panel: Current Financial Crisis" to be an informed, yet somewhat predictable, discussion with top representatives from the Office of Secretary of Defense and the Military Services. However, as discussions ensued, this particular gathering became much more.

OUSD(C) Overview

Before a substantial crowd of PDI attendees, John Roth opened discussions with an overview of the Department of Defense (DoD) fiscal year (FY) 2004 budget. The Department's FY 2004 budget request, at nearly $380 billion, weighed in at $15.3 billion above the FY 2003 budget. The good-news story sees a $10-billion growth sustained over the Future Years Defense Program (FYDP).

Mr. Roth echoed three themes that illustrated the FY 2004 budget request: winning the war on terrorism, sustaining quality people and forces, and transforming the Military Departments and Defense establishment.' He added that the FY 2004 budget request reflected even-handed growth over all appropriations and that the Service shares showed a positive gain across the board. Much of the funding request will support fact-of-life efforts (for example, pay raises and core inflation); quality of life (for example, health care and housing); shipbuilding; special operations programs; missile defense; intelligence, surveillance, and reconnaissance; and command and control, to name a few.

Mr. Roth noted that Military Construction and Family Housing can expect an emphasis on privatization, striving for more "bang for the buck" and aligning with Secretary of Defense Donald Rumsfeld's focus on doing business better. Mr. Roth added that this would require flat-lining organizations and looking at core competencies.

Although there's no easy solution, performance metrics may guide the Military Departments in their management improvement opportunities. One such vehicle is the Program Assessment Rating Tool (PART), used by federal agencies and the Office of Management and Budget (OMB) to measure and diagnose performance both systematically and consistently. (2)

In the personnel resources arena, Mr. Roth acknowledged that end strength numbers remain stable. He stated that before any potential personnel increases are considered, the active engagement and stabilization of current manpower must be ensured. He continued by touching on future efforts for creating new or reforming existing legislation in the areas of Civilian Personnel system changes, the reorganization of OSD and the Joint Staff, competitive sourcing, and training.

Mr. Roth lauded the Bush Administration for healthier budget baselines, but cautiously informed that the future challenge will be the post-conflict environment and assessing where to invest future dollars. However, he stated, "There is a sense within the White House to give dollars increased scrutiny regarding what we are doing and how we are spending." He cited the fact of greater OMB and Armed Services Committee attention over information technology expenditures as an example.

Overall, Roth summed up the FY 2004 Operation and Maintenance budget as non-controversial, mainly focused on sustained readiness and training. The Procurement account shows some growth through the FYDP, and research and development will remain stable through FY 2005.

In concluding, Mr. Roth advised, "The FY 2005 budget will be looked at closer as new base realignment and closure rounds are considered."

Services Echo Similar Sentiments

Mr. John Kohler spoke next, asserting that the current budget "crisis" is not war-driven, since the Congress certainly will support troops deployed in hostile operations. "Contingency expenditures will pay back in years of peace; the world will see this payback." The real challenge lies within the budget baseline as the Services seek to sustain current readiness while simultaneously transforming. Said another way, either efficiencies need to be increased or tradeoffs need to be made in order for the Services to modernize and transform while maintaining operational readiness.

Another dynamic is created by the pending presidential election season. Mr. Kohler believes that the budget deficit will become a political issue for debate, and that process may well determine where future dollars are spent.

Mr. Robert Panek restated John Kohler's point that there was no doubt regarding DoD's receipt of dollars to execute the war on terrorism. Mr. Panek described the Navy's challenge in determining future disposition of ships and equipment, specifically those procured for the war. The Navy budget saw minimal growth, with most of the increase applied toward raises in civilian pay. He added that the Navy creatively found cost savings to offset shortfalls, citing, as one example, retiring some weapons systems to free up fiscal resources. According to Panek, "It will be essential for the [Military] Departments to find new efficiencies to recapitalize forces, keep ready, and transform the Departments."

Mr. Charles Cook opined that as the deficit grows, increased pressure will be levied on the Department of Defense. To counterbalance this pressure, the Department must make significant progress in its transformation initiatives. He stated, "There will be a demand to change and solve budget challenges at a much faster pace."

Mr. Robert Stuart acknowledged that American public confidence in the Military Services ensured that war dollars currently are available. His concern, however, is the escalation of costs. "Operating aging fleets and growing competent manpower will require a very ambitious transformation agenda while staying ready," he charged. Mr. Stuart continued that it is essential for the Services to become energetic and creative in managing and keeping costs minimal. He reflected that today's threats are harder in think out, calling for certain dexterity in our investment strategies.

Reporter's Note: I would be remiss if I did not mention the Budget Panel's deviation, early in the session, from the traditional briefing format. The panel, instigated by John Kohler with the assistance of Charlie Cook (all members swiftly changing into Hawaiian shirts, hats, and shades), led an initially reluctant audience in singing a revised version of Harry Belafonte's "Banana Boat Song" ("Day-O").

Before long, the normally reserved PDI attendees were on their feet and belting out, "Congress tells us we'll be flush real soon. Cash flows gone and I want to go home. The Supp is working, might not pass 'til June! We're belly up and I want to go home. Day-O, day-ay-ay-ay-o, Daylight come and he wan'go home!"

A fitting interlude in an informative, enlightening, and a most enjoyable session!

(1) "Fiscal 2004 Department of Defense Budget Release." DefenseLink 3 Feb 2003: 044-03. http:// Feb2003/b02032003_bt044-03.html.

(2) "Managing for Results, Budget and Performance Integration: Program Performance Assessment." OMB June 2002. omb/budgetintegration/port_outreach_presentation.pdf.

Paula Ann Lumby is currently a budget operations analyst for the Headquarters, Air Intelligence Agency, in San Antonio, Texas. She holds a BS in business management from the University of Maryland and Certified Defense Financial Management certification. She is a member of the ASMC Alamo City Chapter.
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Title Annotation:Workshop Reports
Author:Lumby, Paula Ann
Publication:Armed Forces Comptroller
Date:Jun 22, 2003
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