oversight

Defense Budget: Analysis of Operation and Maintenance Accounts for 1985-2001

Published by the Government Accountability Office on 1997-02-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to Congressional Committees




February 1997
                  DEFENSE BUDGET
                  Analysis of Operation
                  and Maintenance
                  Accounts for 1985-2001




GAO/NSIAD-97-73
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      National Security and
      International Affairs Division

      B-275972

      February 28, 1997

      The Honorable Pete V. Domenici
      Chairman, Committee on the Budget
      United States Senate

      The Honorable John R. Kasich
      Chairman, Committee on the Budget
      House of Representatives

      The Honorable Herbert H. Bateman
      Chairman, Subcommittee on Military Readiness
      Committee on National Security
      House of Representatives

      The Department of Defense’s (DOD) budget request for fiscal year 1997
      includes almost $89.2 billion for operation and maintenance (O&M)
      accounts. This represents about 37 percent of DOD’s fiscal year 1997 budget
      request. DOD estimates that in fiscal year 2001, O&M will represent about
      36 percent of its total budget. Because O&M funds represent the largest
      share of DOD’s budget, we (1) determined how annual funding relates to
      military and civilian personnel levels through fiscal year 2001,
      (2) identified overall trends from fiscal years 1985 to 2001, and
      (3) identified key drivers (areas in which most money has been budgeted)
      through fiscal year 2001.

      This report highlights significant information upon which Congress can
      focus its future budget deliberations. Throughout the report, we present
      some questions raised by reported O&M trends. In addition, we explain the
      reasons for major changes in funding due to migrations of funds between
      O&M programs and activities. However, we did not inquire into the reasons
      for changes in trends and funding differences among the services after
      taking the migrations into account. We anticipate that our future work will
      address some of the reasons for changes concerning specific programs.
      Finally, we did not attempt to determine an appropriate level of O&M
      funding.

      This review was performed under our basic legislative responsibilities.
      However, because of your expressed interest and oversight
      responsibilities in the O&M accounts, we are addressing the report to you.




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             O&M  is large, diverse, and widespread. Since 1987, the O&M accounts have
Background   been the largest appropriation group in DOD’s budget and are expected to
             remain the largest through fiscal year 2001. O&M is one of six appropriation
             groups for DOD.1 When compared with the federal budget, DOD’s fiscal year
             1997 O&M budget request represents approximately 18 percent of total
             federal discretionary spending and is larger than most federal agencies’
             fiscal year 1997 budget requests.2

             O&M funds support portions of DOD’s readiness and quality-of-life priorities.
             This appropriation funds a diverse range of programs and activities that
             include salaries and benefits for most civilian DOD employees; depot
             maintenance activities; fuel purchases; flying hours; environmental
             restoration; base operations; consumable supplies; and health care for
             active duty service personnel, dependents of active duty personnel, and
             retirees and their dependents. Moreover, each service and DOD agency
             spends O&M funds.

             Under DOD’s measurement of infrastructure, O&M funds approximately half
             of DOD’s infrastructure costs that can be clearly identified in DOD’s Future
             Years Defense Program (FYDP).3 Because DOD wants to decrease
             infrastructure costs to help pay for modern weapon systems, it must look
             at this appropriation group for some of the intended savings.
             Infrastructure comprises activities that provide support services to
             mission programs and primarily operate from fixed locations.

             O&M  funding is affected by civilian and military personnel levels. DOD’s
             fiscal year 1997 budget includes funds for about 800,000 civilians and
             1.5 million active duty and full-time National Guard and Reserve military
             personnel. Civilian personnel levels have a direct effect because the




             1
             The other appropriations are Military Personnel; Procurement; Research, Development, Test, and
             Evaluation; Military Construction; and Family Housing.
             2
              The Budget Enforcement Act, as amended, categorizes all federal spending as either discretionary or
             direct. “Discretionary” programs are funded through annual appropriation acts. Examples of
             discretionary spending programs are national defense, education, law enforcement, and space
             exploration. “Direct” spending is often referred to as mandatory spending because it flows
             automatically from authorizing legislation and is not controlled through appropriations. Examples of
             direct spending programs are food stamps, medicare, and federal pensions.
             3
              In Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little Savings for Modernization
             (GAO/NSIAD-96-131, Apr. 4, 1996), we reported that 90 percent of planned direct infrastructure costs
             are funded out of three appropriations: O&M (about 50 percent); Military Personnel (about
             30 percent); and Research, Development, Test, and Evaluation (about 10 percent).



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                   majority of civilian salaries and benefits are funded by O&M.4 Although O&M
                   does not fund military pay and allowances, the appropriation group
                   supports many readiness activities and quality-of-life programs that are
                   affected by the number of military personnel.

                   We examined trends in annual O&M funds and personnel levels and
                   identified the activities funded by O&M appropriations using DOD’s FYDP. The
                   FYDP is an authoritative record of current and projected force structure,
                   costs, and personnel levels that have been approved by the Secretary of
                   Defense. The FYDP displays resources and personnel levels by programs
                   and activities known as program elements. There are about 3,800 program
                   elements in the FYDPs between fiscal years 1985 and 2001. We analyzed
                   FYDP data from several different perspectives: aggregate O&M, federal
                   budget account structure, DOD organization, DOD’s Infrastructure Category
                   and Defense Mission Category (DMC) analytical frameworks,5 and DOD’s
                   major defense program structure. Each perspective produces a different,
                   but equally valid, overview.


                   Total DOD O&M funds, in constant fiscal year 1997 dollars,6 are projected to
Results in Brief   decline at a slower rate than either civilian or military personnel levels
                   between fiscal years 1985 and 2001. However, beginning in fiscal year
                   2000, projections show that O&M funds begin to rise at the same time
                   civilian personnel decline and military personnel remain relatively stable.
                   Because a significant portion of O&M funds pay for civilian salaries and
                   benefits, FYDP projections must show an increase in other O&M-funded
                   programs. Increases for these programs will more than offset the decline
                   in O&M-funded civilian salaries.

                   O&M resources are significantly concentrated when grouped by the federal
                   budget account structure, DOD major defense program, or defense mission
                   category. Since 1993, approximately 85 percent of the funds are
                   concentrated in five budget accounts—Navy, Army, Air Force,
                   Defense-wide, and Defense Health Program. Another data view shows that
                   three major defense programs receive the majority of annual O&M

                   4
                    Approximately 85 percent of DOD civilian payroll costs are paid from O&M appropriations. The
                   remainder is funded in the Research, Development, Test, and Evaluation; Military Construction; and
                   Family Housing appropriation accounts.
                   5
                    The DMC structure divides DOD programs into three basic categories: major force missions,
                   Defense-wide missions, and Defense-wide support missions. Within each basic category, missions are
                   then divided into five additional levels. The third level of detail, the most common, is used in our
                   analysis. Appendix II describes the DMC structure in greater detail.
                   6
                    Throughout this report, funding levels are presented in constant fiscal year 1997 dollars.



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funds—general purpose forces; central supply and maintenance; and
training, medical, and other general purpose activities. Between fiscal
years 1993 and 2001 about 50 percent of annual O&M funds are found in five
of DOD’s mission categories. The five categories are land forces, medical,
naval forces, tactical air forces, and other logistics support. In total, there
are about 30 mission categories during the fiscal year 1993-2001 period.

From an organizational perspective, the military services’ portion of total
annual O&M funds declines.7 Beginning in fiscal year 1998, the Army is
projected to receive a smaller proportion of annual O&M funds than either
of the other two services or the combined DOD agencies. Even though the
Army will receive the smallest portion of annual O&M funds, this service
will have the second largest active military force and the largest civilian
workforce.8 The Navy/Marine Corps’ share of annual O&M funds declined
by almost 10 percent prior to fiscal year 1996. In contrast, the Air Force’s
proportion of annual O&M funds changes the least of the three services,
while Air Force military and civilian personnel levels fall significantly over
the fiscal year 1985-2001 period. Only the combined DOD agencies’ share of
annual O&M funds increases between fiscal years 1985 and 2001 because of
the health program funding consolidation into a Defense-wide account.

Regardless of how the O&M budget is analyzed, medical is the only area
where consistent growth occurred. O&M funds for medical activities
increase by 72.8 percent from fiscal years 1985 to 2001. The majority of
these costs are for the health care needs of DOD’s 8.3 million eligible
beneficiaries.

During fiscal years 1985 through 2001, O&M infrastructure funds that can be
clearly identified in the FYDP decline by 22.6 percent and thus mirror total
O&M trends. Despite decreases, O&M continues to fund about half of DOD’s
clearly identifiable infrastructure costs. Thus, if DOD is to identify
significant savings from infrastructure to fund modernization, it must look
to the O&M appropriations.




7
 Navy and Marine Corps resources are combined in our organizational analysis.
8
 The combined Navy/Marine Corps has the largest active military force and the second largest civilian
workforce. The Air Force has the smallest active military force and smallest civilian workforce. (See
table 2.)



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                                          Total O&M funding for DOD is projected to decline at a slower rate than
O&M Has Declined                          either civilian or military personnel levels between fiscal years 1985 and
More Slowly Than                          2001.9 Figure 1 shows that, between fiscal years 1985 and 2001, annual O&M
Personnel Levels                          funds are projected to decrease by over 20 percent (from $110.4 billion to
                                          $87.8 billion), and both civilian and military personnel levels are also
                                          projected to decline, but at different rates.



Figure 1: Annual DOD O&M Appropriations and Personnel Levels for Fiscal Years 1985-2001 (Constant 1997 dollars in
billions)
Dollars                                                                                   Personnel

140                                                                                             2.5


120
                                                                                                2.0

100


                                                                                                1.5
 80


 60
                                                                                                1.0


 40

                                                                                                0.5
 20


  0                                                                                             0.0
      1985   1987     1989      1991     1993        1995       1997         1999       2001
                                       Fiscal year

                    O&M value          Military personnel       Civilian personnel




                                          Note: Military personnel include active military and full-time Guard and Reserve personnel. The
                                          surge in fiscal year 1991 funding was due to an infusion of O&M money for the Army for the
                                          Persian Gulf War.

                                          Source: Our analysis of DOD FYDP data.




                                          9
                                           Personnel levels are as of the end of a fiscal year, or endstrength. Military personnel levels in this
                                          report, unless noted otherwise, include active military and full-time Guard and Reserve personnel.



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Between fiscal years 1985 and 1996, the level of annual O&M funding
declined by 13 percent, from $110.4 billion to $96.0 billion. However, this
decline is projected to end during the 1997 FYDP period (fiscal
years 1997-2001), and annual O&M funds are projected to increase slightly
in fiscal years 2000 and 2001. Civilian personnel levels have fallen steadily
since fiscal year 1989 and are projected to continue to decline through
fiscal year 2001. This is important because, according to DOD, over
40 percent of annual O&M appropriations fund civilian salaries and benefits.
O&M is projected to increase at the same time that the number of civilians
is projected to decline. This indicates that other O&M-funded programs are
projected to increase to a greater extent than O&M-funded civilian salaries
are projected to decrease.

The number of civilian personnel in DOD has fallen by about 27 percent
between fiscal years 1985 and 1996, from 1.1 million persons to 830,000. By
fiscal year 2001, DOD plans to have 729,000 civilians employed, an
additional 12-percent decline.

Although military personnel levels are projected to fall over the 17-year
period covered by this report, most of the decline occurred prior to fiscal
year 1996. Military personnel levels fell by over 30 percent between the
peak of 2.2 million persons in fiscal year 1987 to 1.5 million in fiscal
year 1996. After fiscal year 1996, military personnel levels are expected to
decline by only 4 percent. Although military personnel salaries are not
paid by O&M funds, O&M funds a variety of activities and programs that
support military personnel and most readiness-related resources.

Because personnel levels decline at a faster rate than annual O&M funding
levels, annual O&M funds when allocated per person (military and civilian)
are projected to increase by about 20 percent over the fiscal
year 1985-2001 period, as shown in figure 2.10




10
 Per person values, unless noted otherwise, are per a combination of active military, full-time Guard
and Reserve personnel, and DOD civilians.



Page 6                                                           GAO/NSIAD-97-73 Defense Budget
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Figure 2: Per Person Annual O&M Funding for Fiscal Years 1985-2001 (Constant 1997 dollars in thousands)

Dollars

50




40




30




20




10




 0
     1985    1987      1989      1991      1993        1995      1997       1999   2001
                                         Fiscal year




                                          Source: Our analysis of DOD FYDP data.




                                          O&M funding per person increased from $33,100 to $40,400 between fiscal
                                          years 1985 and 1996, a 21.9-percent increase. Although O&M funding per
                                          person is projected to decline in fiscal years 1997 and 1998, it is expected
                                          to increase by 4.2 percent after fiscal year 1998 to $39,700 per person in
                                          fiscal year 2001.

                                          A small portion of the increase in O&M funding per person may be a result
                                          of DOD’s transferring functions previously performed in house to outside
                                          providers. Our analysis of DOD’s budget documents shows that the
                                          purchase of goods and services through contracts or from other federal



                                          Page 7                                            GAO/NSIAD-97-73 Defense Budget
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                        agencies uses over half of DOD’s annual O&M funds. The amount of
                        contracting paid by O&M funds is projected to increase slightly between
                        fiscal years 1988 and 1997.

                        The following are some questions raised by the trend information
                        presented in this section:

                        Why are O&M funds not projected to decline during the period
                        covered by the 1997 FYDP when civilian personnel levels decrease
                        and military personnel levels stabilize?

                        How will outsourcing impact O&M costs in the out-years, that is,
                        after fiscal year 1997?


                        O&M budget accounts are organized in two ways, by service and program.
O&M Funding Is          The 11 service-oriented accounts include funding for multiple programs
Concentrated When       and activities for specific-service, Defense-wide, and the services’ National
Viewed by the Federal   Guard and Reserve programs.11 The number of service budget accounts
                        remained stable at 11 from fiscal years 1985 to 2001. In contrast, the
Budget Account          number of program accounts grew from 4 in fiscal years 1985 to 1989 and
Structure               peaked at 11 in fiscal years 1993, 1994, and 1997.12 Projections show that
                        between fiscal years 1998 and 2001, DOD will have 10 program accounts.
                        Congress created the largest program account, the Defense Health
                        Program, in fiscal year 1993. DOD moved all defense health care resources
                        from the service and Defense-wide accounts to this account. As a share of
                        total annual O&M funds, the Defense Health Program budget account is
                        projected to grow from 10.6 percent in fiscal year 1993 to 11.8 percent in
                        fiscal year 2001.

                        Most program accounts were created to increase visibility for certain
                        efforts or respond to unique needs. For example, the Former Soviet Union
                        Threat Reduction budget account was created in fiscal year 1994 to help
                        several newly independent states destroy weapons of mass destruction;

                        11
                         The 11 service accounts are: Navy, Air Force, Army, Defense-wide, Air National Guard, Army
                        National Guard, Marine Corps, Air Force Reserve, Army Reserve, Navy Reserve, and Marine Corps
                        Reserve.
                        12
                          In fiscal year 1985, the four program accounts were Claims-Defense, Court of Military
                        Appeals-Defense, National Board for Promotion Rifle Practice, and Defense Environmental
                        Restoration Fund. In fiscal year 1997, the 11 program accounts are Defense Health Program; Drug
                        Interdiction and Counter-Drug Activities; Former Soviet Union Threat Reduction; Office of the
                        Inspector General; Overseas Humanitarian, Disaster, and Civic Aid; Payment to Kaho’olawe Island
                        Fund; Court of Military Appeals-Defense; and separate Environmental Restoration accounts for
                        Defense, Navy, Army and Air Force.



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                                 store and transport the weapons to be destroyed; and reduce the risk of
                                 proliferation. Funds for this account peaked at $439 million in fiscal
                                 year 1995 and are projected to decline to $395 million in fiscal
                                 year 2001. The program accounts without the Defense Health Program
                                 represent a small share of O&M funds, from less than one-tenth of a percent
                                 in fiscal year 1989 to a peak of almost 3 percent in fiscal year 1999.

                                 The O&M budget accounts vary in size. From fiscal years 1985 to 1992,
                                 approximately 90 percent of O&M funds are concentrated in four budget
                                 accounts: Navy, Army, Air Force, and Defense-wide. This concentration
                                 (approximately 85 percent) continues through fiscal year 2001 with the
                                 addition of one account—Defense Health Program. Table 1 shows the
                                 concentration of resources by budget account for fiscal year 1996.

Table 1: Summary of O&M Budget
Accounts for Fiscal Year 1996    Constant 1997 dollars in thousands
                                                                                         Fiscal year 1996            Cumulative
                                                                                        total obligational         percentage of
                                 Budget account title                                            authority                 total
                                 O&M, Navy                                                    $21,893,235                      22.8
                                 O&M, Army                                                      19,819,719                     43.5
                                 O&M, Air Force                                                 19,225,690                     63.5
                                 O&M, Defense-wide                                              10,416,978                     74.4
                                 Defense Health Program                                         10,378,416                     85.2
                                 Other budget accounts                                          14,221,691                    100.0
                                 Total                                                        $95,955,729
                                 Note: Other budget accounts are seven service accounts (Air National Guard, Army National
                                 Guard, Marine Corps, Air Force Reserve, Army Reserve, Navy Reserve, and Marine Corps
                                 Reserve) and eight program accounts (Defense Environmental Restoration, Drug Interdiction and
                                 Counter-Drug Activities; Former Soviet Union Threat Reduction; Office of the Inspector General;
                                 Payment to Kaho’olawe Island Fund; Overseas Humanitarian, Disaster, and Civic Aid; Summer
                                 Olympics; and Court of Military Appeals-Defense).

                                 Source: Our analysis of DOD FYDP data.



                                 DOD  has considerable discretion in budgeting for and carrying out O&M
                                 activities. Unlike the military personnel appropriation accounts, which are
                                 primarily composed of entitlements,13 most O&M spending is not set by law.
                                 However, the O&M program accounts receive an annual appropriation
                                 separately. As a practical matter, this means that funding levels for these
                                 specific programs are set by law. For example, in fiscal year 1996,


                                 13
                                  See Defense Budget: Trends in Active Military Personnel Compensation Accounts for 1990-97
                                 (GAO/NSIAD-96-183, July 9, 1996).



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                        Congress appropriated $50 million for the program account, Overseas
                        Humanitarian, Disaster, and Civic Aid.

                        The fact that DOD has discretion over most O&M funds does not mean that
                        O&M funds are available without any controls. O&M funds can only be
                        obligated for authorized programs and purposes and are available for one
                        fiscal year unless a longer period of availability is specified. Further, in
                        annual authorization and appropriation acts, Congress can impose
                        direction to carry out particular activities or programs and can limit or
                        prohibit spending for other activities. Finally, although reprogramming of
                        funds within an appropriation is permitted, DOD has committed itself to
                        seek congressional approval before reprogramming $10 million or more in
                        an O&M account.

                        The following is a question raised by the trend information presented in
                        this section:

                        Should other budget accounts be created to increase visibility for
                        O&M-funded programs?



                        Prior to fiscal year 1992, the three services received about 90 percent of
Major Shifts in Funds   O&M funds, and DOD agencies received approximately 10 percent.14 During
Occur Among the         this period, the Navy/Marine Corps’ share of O&M funds declined the most,
Services and            by almost 6 percent, while the Air Force’s annual share decreased by less
                        than 2 percent. The significant decrease in the Navy/Marine Corps’ portion
Combined DOD            of annual O&M funds occurred even though the Navy/Marine Corps’ civilian
Agencies                personnel levels declined by 5 percent less than the Air Force and the
                        Navy/Marine Corp’s military personnel levels grew slightly over this
                        period.15 Only the Army experienced an increase in its share of annual O&M
                        funds. Between fiscal years 1985 and 1990, the Army’s portion of funding
                        increased by 4 percent, while Army military personnel levels fell by almost
                        3 percent and Army civilian personnel levels fell by about 9 percent. The
                        Army received an additional increase of 5 percent in its share of annual
                        O&M funds between fiscal years 1990 and 1991, but this surge in fiscal
                        year 1991 funding was due to an infusion of O&M money for the Army for
                        the Persian Gulf War.



                        14
                         Annual O&M funds for the three services include the funding for their respective Guard and Reserve
                        units.
                        15
                         In this section, service military personnel levels do not include service personnel assigned to DOD
                        agencies.



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After fiscal year 1991, DOD centralized funding for health programs into a
Defense-wide O&M appropriation by shifting the funds for the program
from the services’ O&M appropriations. This change caused a significant
increase in the total annual O&M funds provided to the combined DOD
agencies. In fiscal year 1992, Defense-wide O&M was almost 20 percent of
total DOD O&M funding. In fiscal year 1996, O&M funding became almost
equally proportional among the three services and the combined DOD
agencies. Defense-wide appropriations remain at about one-quarter of
total annual O&M appropriations through fiscal year 2001.

Although the proportion of O&M funds received by each of the three
services declined after fiscal year 1991, the Army’s share declined the
most. Beginning in fiscal year 1998, the Army will annually receive the
smallest portion of O&M funds. By fiscal year 2001, the Army is expected to
receive less than 23 percent of total annual O&M funds, while the
Navy/Marine Corps and the Air Force will each get approximately
26 percent of total O&M funds. Figure 3 shows the changes in O&M funding
distribution in fiscal years 1985, 1992, 1996, and 2001.




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Figure 3: Percentage of DOD’s Annual
O&M Funding Allocated by Operating                         28.2%
Organization in Fiscal Years 1985,                                                                            24.8%
1992, 1996, and 2001
                                                                                                                                19.2%

                                                                            9.6%


                                       26.8%


                                                                                                      27.4%

                                                                                                                             28.7%
                                                                    35.4%


                                                         1985                                                         1992


                                            24.6%                       24.5%                           26.1%                 25.1%




                                           24.4%                                                        22.9%
                                                                        26.5%                                                25.9%



                                                         1996                                                         2001

                                                                Defense agencies   Air Force   Army     Navy/Marine Corps

                                       Note: Annual percentages may not add to 100 due to rounding.

                                       Source: Our analysis of DOD FYDP data.




                                       The Navy/Marine Corps’ annual portion of O&M funds continued to decline
                                       after fiscal year 1991 and by fiscal year 1996 fell to 26.5 percent, almost
                                       10 percent lower than the portion of funding in fiscal year 1985. The level
                                       of Navy/Marine Corps military personnel fell almost 10 percent less than
                                       the other two services, while Navy/Marine Corps civilian personnel levels
                                       fell by almost 30 percent, similar to the Army. After fiscal year 1996, the
                                       portion of O&M funding provided to the Navy/Marine Corps is projected to
                                       remain between 25.9 and 26.5 percent, while military personnel levels fall
                                       by 5 percent and civilian personnel levels decrease by 15 percent.




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                                        The Air Force’s proportion of annual O&M funds changed the least of the
                                        three services. Although the Air Force’s share of O&M funds fell by about
                                        2 percent between fiscal years 1991 and 1992, the Air Force’s annual
                                        portion of O&M funds are planned to remain between 24.6 and 27.6 percent
                                        for the fiscal year 1993 through 2001 period. During this period, both Air
                                        Force civilian and military personnel levels are projected to decline by 19
                                        and 17 percent, respectively.

                                        Of the three services, the Air Force has the highest O&M cost per military
                                        and civilian person. As shown in table 2, even though the Air Force had
                                        fewer active military, full-time Guard, Reserve, and civilian personnel than
                                        either the Army or the Navy/Marine Corps, the Air Force’s O&M cost per
                                        person in fiscal year 1996 was more than $46,000 per person compared
                                        with about $31,000 per person for the Navy/Marine Corps and the Army.
                                        The Army had approximately 152,000 more military and about 76,000 more
                                        civilians than the Air Force but received $100 million less in O&M funds in
                                        fiscal year 1996.

Table 2: O&M Funding and Personnel
Levels in Fiscal Year 1996 by Service                                Fiscal year     Active militaryb and
                                                                      1996 O&M       full-time Guard and                       O&M funding
                                        Service                        fundinga       Reserve personnel            Civilians    per personc
                                        Air Force                           $23.6                  324,904          183,357           $46.5
                                        Army                                  23.5                 477,403          259,462            31.8
                                        Navy/Marine
                                        Corps                               $25.4                  576,495          239,961           $31.1
                                        a
                                        In billions of fiscal year 1997 dollars.
                                        b
                                            Active military does not include personnel assigned to DOD agencies.
                                        c
                                        In thousands of fiscal year 1997 dollars.

                                        Source: Our analysis of DOD FYDP data.




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                            The following are some questions raised by the trend information
                            presented in this section:

                            What factors contribute to the major shifts in funds among the
                            services and combined DOD agencies (even after taking into account
                            the DOD health care funding migrations)? Specifically,

                        •   Why is the Army’s share of annual O&M funds declining?
                        •   What causes the Air Force to have the highest per person O&M costs
                            among the three services?

                            Using the FYDP, DOD has identified program elements that fund
O&M Funding of              infrastructure activities. DOD refers to these program elements as “direct
Direct Infrastructure       infrastructure.” O&M funds about 50 percent of direct infrastructure during
Is Projected to             the fiscal year 1985-2001 period. DOD assigned each infrastructure program
                            element to one of the following eight categories on the basis of the
Decline Slightly            program’s activities: acquisition infrastructure; installation support;
                            central command, control, and communications; force management;
                            central logistics; central medical; central personnel; and central training.
                            These categories are described in appendix I.

                            There are parts of infrastructure that DOD cannot identify using the FYDP.
                            According to DOD officials, this is about 20 to 25 percent of DOD’s total
                            infrastructure funding and mostly represents logistics purchases that
                            cannot be identified specifically. Funding for logistics purchases would
                            likely come from O&M appropriations. Therefore, the proportion of total
                            DOD infrastructure funded by O&M is clearly greater than 50 percent.


                            During fiscal years 1985 through 2001, direct infrastructure O&M funds
                            decline by 22.6 percent, similar to total O&M trends. As shown in figure 4,
                            O&M funding of direct infrastructure programs decreases after fiscal
                            year 1991.




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Figure 4: Direct Infrastructure Funded by O&M Appropriations for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars
80




60




40




20




  0
      1985     1987      1989      1991         1993     1995        1997         1999        2001
                                           Fiscal year



                                           Source: Our analysis of DOD FYDP data.




                                           This decline was primarily in the central logistics infrastructure category
                                           when the Defense Business Operations Fund was created.16 Moreover, the
                                           central logistics category received 35 percent less O&M funds in fiscal year
                                           1992 than in fiscal year 1991, in part, due to the conclusion of the Persian

                                           16
                                             The Defense Business Operations Fund is a revolving fund. Activities financed by the Fund provide
                                           goods and services such as depot maintenance, spare parts, and supplies in exchange for
                                           reimbursement of total costs incurred in delivering the goods or services. When the Defense Business
                                           Operations Fund revolving fund was created, functions like depot maintenance and supply
                                           management were no longer directly funded. Each of the Fund’s customers (that is, the services and
                                           some defense agencies) now pay the Fund the cost of providing the goods and services to them. While
                                           the funding has been consistently provided in O&M appropriations, the funding for these activities has
                                           migrated to the customers of the Fund goods and services. The Defense Business Operations Fund has
                                           been replaced by four service-specific revolving funds.



                                           Page 15                                                         GAO/NSIAD-97-73 Defense Budget
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                                         Gulf War. Despite these reductions, this category accounted for about
                                         27 percent of the total value of direct infrastructure in fiscal year 1992.

                                         When O&M funding for the central logistics infrastructure category is
                                         excluded, as shown in figure 5, O&M funding of direct infrastructure
                                         actually increased between fiscal years 1985 and 1996.



Figure 5: Direct Infrastructure—Excluding Central Logistics—Funded by O&M Appropriations for Fiscal Years 1985-2001
(Constant 1997 dollars in billions)

Dollars
 60




 50




 40




 30




 20




 10




   0
          1985   1987   1989     1991      1993        1995      1997       1999   2001
                                         Fiscal year




                                         Source: Our analysis of DOD FYDP data.




                                         Page 16                                            GAO/NSIAD-97-73 Defense Budget
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                        Large increases occurred in four infrastructure categories: central medical;
                        central command, control, and communications; central personnel; and
                        acquisition infrastructure. The increase in central medical O&M funding had
                        the largest impact because in fiscal year 1985 central medical accounted
                        for 15 percent of total direct infrastructure (without central logistics) and,
                        by fiscal year 1996, central medical’s portion had grown to over
                        20 percent.

                        DOD  projects a slight decrease, about 3 percent, in O&M-funded direct
                        infrastructure (with and without central logistics) between fiscal
                        years 1997 and 2001. Most of this decline is projected to occur in the
                        installation support, force management, acquisition infrastructure, and
                        central personnel infrastructure categories.

                        The following are some questions raised by the trend information
                        presented in this section:

                        What causes the projected out-year increases in O&M-funded direct
                        infrastructure (fiscal years 2000 and 2001)?

                        Where will DOD get savings in infrastructure to pay for
                        modernization?

                        How will DOD’s modernization plans affect future O&M levels?


                        Another way to analyze the changes and components of O&M funding is to
O&M Funds Are           aggregate FYDP data by DOD’s major defense programs. For its own force
Concentrated in Three   programming and budgeting purposes, DOD organizes the defense budget
Major Defense           into program elements that consist of collections of weapons, manpower,
                        and support equipment. Program elements are grouped into 11 major
Programs, and Only      defense programs. Each major defense program reflects a force mission or
One of                  support mission of DOD and contains the resources needed to achieve an
                        objective or plan.
Those—Training,
Medical, and Other      Three major defense programs—general purpose forces; central supply
General Purpose         and maintenance; and training, medical, and other general purpose
                        activities—receive the majority of annual O&M funding. In fiscal year 1996,
Activities—Increased    these three programs were allocated 65 percent of DOD’s O&M funds.
                        Figure 6 shows that of the three programs, only the training, medical, and
                        other general purpose activities program’s annual funding has continued
                        to increase over the fiscal year 1985-2001 period.



                        Page 17                                          GAO/NSIAD-97-73 Defense Budget
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Figure 6: Annual DOD Operation and Maintenance Appropriations for Three Major Defense Programs in Fiscal Years
1985-2001 (Constant 1997 dollars in billions)
Dollars

50




40




30




20




10




 0
     1985    1987        1989          1991          1993           1995        1997         1999       2001
                                                  Fiscal year
                 General purpose forces                           Central supply and maintenance


                 Training, medical and other activities




                                                     Source: Our analysis of DOD FYDP data.




                                                     The training, medical, and other general purpose activities program’s
                                                     annual share of O&M appropriations increased by almost $4 billion between
                                                     fiscal years 1985 and 1996 to about $19 billion. DOD plans to maintain this
                                                     level of O&M funding for this program through fiscal year 2001. O&M funding
                                                     per person for training, medical, and other general purpose activities has
                                                     almost doubled over the fiscal year 1985-2001 period;17 most of this growth
                                                     occurred prior to fiscal year 1996.




                                                     17
                                                          Funding per person is per all military (active and full-time Guard and Reserve) and all DOD civilians.



                                                     Page 18                                                              GAO/NSIAD-97-73 Defense Budget
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O&M funding for the general purpose forces program is projected to fall by
28 percent between fiscal years 1985 and 2001. This corresponds to the
decline in DOD’s overall force level. The O&M funding per person assigned to
this program is expected to generally remain between $25,000 and $30,000
per person over the entire fiscal year 1985 to 2001 period.

Central supply and maintenance O&M funding declined significantly
(by 34 percent) between fiscal years 1991 and 1992 when the Defense
Business Operations Fund was created. Many of this program’s supply,
maintenance, and service activities were no longer directly funded, and
the funds to pay for the goods and services provided by the program’s
activities were allocated to the customers (e.g., strategic and general
purpose forces programs) of these services. The decline in program
funding continued through fiscal year 1997, albeit at a slower rate, and is
projected to remain fairly stable at about $12 billion annually until fiscal
year 2001.

Of the remaining eight major defense programs, the next two
largest—(1) command, control, communications, intelligence, and space
and (2) Guard and Reserve forces—are projected to receive approximately
$10 billion and $8 billion, respectively, in annual O&M funds over the fiscal
year 1985-2001 period. (See fig. 7.)




Page 19                                          GAO/NSIAD-97-73 Defense Budget
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Figure 7: Annual DOD O&M Appropriations for Command, Control, Communications, Intelligence, and Space and for Guard
and Reserve Forces for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

 Dollars

 12



 10



   8



   6



   4



   2



   0
       1985   1987      1989         1991        1993        1995         1997          1999   2001
                                               Fiscal year

                      Intelligence and communications        Guard and Reserve forces

                                               Source: Our analysis of DOD FYDP data.




                                               Even with the downsizing of the force, the annual level of O&M funding for
                                               both of these programs has remained fairly constant over the entire
                                               17-year period covered by this report. For the Guard and Reserve program,
                                               full-time personnel levels increased by almost 11,000 people over the fiscal
                                               year 1985-1996 period, yet part-time Guard and Reserve personnel levels
                                               declined by over 170,000 persons over the same period. Both full-time and
                                               part-time personnel numbers are projected to decline through 2001. Even
                                               though the command, control, communications, intelligence, and space
                                               program’s annual O&M funding level has not changed significantly
                                               throughout the fiscal year 1985-2001 period, its level of annual O&M funding
                                               per person associated with this program has increased by 30 percent over




                                               Page 20                                                GAO/NSIAD-97-73 Defense Budget
                       B-275972




                       these 17 years. Most of this increase in O&M funding per person occurred
                       prior to fiscal year 1995.

                       The following are some questions raised by the trend information
                       presented in this section:

                       What factors cause the training, medical, and other general
                       purpose activities program funding to increase steadily while
                       military and civilian personnel levels decrease?

                       Why is central supply and maintenance O&M funding not declining
                       in the out-years (after fiscal year 1997) if DOD is improving the
                       efficiency of these activities by using privatization and
                       outsourcing?

                       Why has the command, control, communications, intelligence, and
                       space program’s O&M funding not declined over time as DOD has
                       downsized?

                       Why has the Guard and Reserve forces program’s O&M funding not
                       declined as the overall force level has declined?

                       Why did the level of full-time Guard and Reserve personnel
                       increase when part-time personnel declined by 170,000 prior to
                       fiscal year 1996?


                       Partitioning total O&M funds using DOD’s DMC analytical framework shows
O&M Funds Are          that funding is concentrated among a few categories. From fiscal
Concentrated From a    years 1985 to 2001, five mission categories received and are projected to
Defense Mission        receive about 50 percent of O&M funding. Between fiscal years 1993 and
                       2001, the five largest categories are land forces, medical, naval forces,
Category Perspective   tactical air forces, and other logistics support. In total, there are about
                       30 mission categories during the fiscal year 1993-2001 period. Figure 8
                       compares funding for different fiscal years for these five defense mission
                       categories.18




                       18
                         Definitions for the five categories are included in appendix II.



                       Page 21                                                              GAO/NSIAD-97-73 Defense Budget
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Figure 8: Comparison of Annual O&M Funding for Fiscal Year 1996 Five Highest Dollar Defense Mission Categories
(Constant 1997 dollars in billions)
Dollars

16




12
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 0
           1985                         1990                         1995                         2001
                                                     Fiscal year


                  Land forces                    Medical                           Naval forces
                                         AAAAAA
                                         AAAA
                                         AAAAAA
                                              AA Other logistics support
                  Tactical air forces    AAAA AA
                                         AAAA
                                         AAAAAA
                                              AA


                                                      Source: Our analysis of DOD FYDP data.




                                                      Among the five largest categories in fiscal year 1996, medical is the only
                                                      category that experiences real growth—from $5.9 billion in fiscal
                                                      year 1985 to $10.2 billion in fiscal year 2001, a 72.8-percent increase. Most
                                                      of the growth in medical occurs prior to fiscal year 1997, and the majority
                                                      of these costs are for health care needs. In contrast, the naval forces
                                                      category experiences the largest decline in real terms—from $15.2 billion
                                                      in fiscal year 1985 to $8.4 billion in 2001, a 44.6-percent decrease.

                                                      Figure 9 shows the distribution of fiscal year 1996 O&M funding by defense
                                                      mission category. Eight categories make up 71 percent of O&M funding




                                                      Page 22                                                   GAO/NSIAD-97-73 Defense Budget
                                      B-275972




                                      ($68.4 billion), and each category is greater than $5.1 billion. Remaining
                                      resources, $27.6 billion or 28.8 percent, reside in 22 categories and funding
                                      ranges from slightly more than $5 billion (intelligence) to $4.7 million
                                      (federal agency support). FYDP projections show that resources remain
                                      concentrated in the same eight categories for fiscal years 1997 through
                                      2001.


Figure 9: Percentage of Fiscal Year
1996 O&M Funding Allocated by
Defense Mission Category                                                                          Land forces (14.31%)

                                            Other (28.77%)

                                                                                                                Medical (10.67%)




                                                                                                                Naval forces (9.92%)
                                       Training (6.04%)



                                       Mobility forces (6.07%)
                                                                                                       Tactical air forces (8.91%)
                                                 Departmental (6.96%)
                                                                                          Other logistics support (8.36%)

                                      Note: Other defense mission categories are intelligence; strategic offense; maintenance
                                      operations; supply operations; other personnel support; communications; personnel acquisition;
                                      special operations forces; geophysical sciences; strategic defense; counterdrug support; space
                                      launch support; information management; international support; strategic command, control and
                                      communications; general purpose support; security and investigative functions; command and
                                      control; nuclear weapons support; individuals; undistributed adjustments; and federal agency
                                      support. Total shares exceed 100 percent due to rounding.

                                      Source: Our analysis of DOD FYDP data.




                                      Our analysis of the eight categories with the highest dollar values in fiscal
                                      year 1996 shows that from fiscal years 1985 to 2001, three categories
                                      (medical, mobility forces, and departmental) are projected to grow and
                                      five categories (naval forces, other logistics support, training, land forces,
                                      and tactical air forces) are projected to decline. However, as shown in
                                      table 3, these overall trends are not consistent over the 17-year period.




                                      Page 23                                                       GAO/NSIAD-97-73 Defense Budget
                                         B-275972




Table 3: Summary of Changes in O&M
Funds for Eight Highest Dollar Defense   Constant 1997 dollars in billions; change in percentages
Mission Categories in Fiscal Year 1996                                                                Fiscal years    Fiscal years
                                         Defense mission          Fiscal year   Fiscal years            1996-2001       1985-2001
                                         category               1996 funding 1985-96 change               change          change
                                         Land forces                   $13.73             1.63             –23.48          –22.24
                                         Medical                        10.24           73.21               –0.25           72.77
                                         Naval forces                    9.52          –37.48              –11.34          –44.57
                                         Tactical air forces             8.55           –2.76               –9.11          –11.62
                                         Other logistics
                                         support                         8.02          –13.10              –13.21          –24.58
                                         Departmental                    6.68           13.17               –5.24             7.24
                                         Mobility forces                 5.82           54.55               –5.85           45.51
                                         Training                        5.79          –21.35               –2.84          –23.58
                                         Source: Our analysis of DOD FYDP data.



                                         For example, the medical category increased by 73.2 percent between
                                         fiscal years 1985 and 1996 but is projected to decline between fiscal
                                         years 1996 and 2001. In the land forces category, there is a slight increase
                                         between fiscal years 1985 and 1996 but a substantial decrease projected
                                         for the fiscal year 1996-2001 period. Although projections show that all
                                         categories will decrease in real terms from fiscal years 1996 to 2001,
                                         medical’s projected decrease is insignificant. Appendix II provides a
                                         detailed analysis of trends and per person costs for the fiscal year 1996
                                         eight highest dollar categories: land forces, medical, naval forces, tactical
                                         air forces, other logistics support, departmental, mobility forces, and
                                         training.

                                         A similar concentration emerges when distributing annual O&M funds by
                                         DMCs for the 11 service budget accounts throughout the 17-year period. For
                                         example, in fiscal year 1996, over 55 percent of each account’s O&M funds
                                         are concentrated in three defense mission categories. The three largest
                                         dollar categories differ for each service budget account. For example, in
                                         fiscal year 1996 Defense-wide’s three largest categories were intelligence,
                                         departmental, and other personnel support and received about 61 percent
                                         of total funding. In contrast, the Army’s three largest dollar categories
                                         were land forces, training, and other logistics support and received about
                                         70 percent of total funding. Table 4 shows the distribution of fiscal
                                         year 1996 O&M funds by DMCs for the O&M, Navy budget account. O&M, Navy
                                         has and is projected to have the largest share of annual O&M funds




                                         Page 24                                                    GAO/NSIAD-97-73 Defense Budget
                                       B-275972




                                       compared with the other budget accounts—except in fiscal year 1991. O&M,
                                       Army was the largest budget account in fiscal year 1991.

Table 4: Total Fiscal Year 1996 O&M,
Navy Budget Account Funds by           Constant 1997 dollars in thousands
Defense Mission Category                                                                                                    Cumulative
                                                                                              Total obligational         percentage of
                                       Defense mission category                                       authority           total funding
                                       Naval forces                                                   $8,950,562                      40.88
                                       Other logistics support                                         2,366,699                      51.69
                                       Maintenance operations                                          1,619,407                      59.09
                                       Tactical air forces                                             1,447,081                      65.70
                                       Training                                                        1,311,518                      71.69
                                       Strategic offense                                               1,297,196                      77.62
                                       Departmental                                                    1,054,886                      82.43
                                       Other categories                                                3,845,887                     100.00
                                       Total obligational authority                                  $21,893,235
                                       Note: Fourteen categories make up the other categories: supply operations; mobility forces;
                                       intelligence; land forces; communications; other personnel support; personnel acquisition;
                                       geophysical sciences; security and investigative functions; strategic command, control, and
                                       communications; international support; strategic defense; individuals; command and control.

                                       Source: Our analysis of DOD FYDP data.




                                       Page 25                                                       GAO/NSIAD-97-73 Defense Budget
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                      The following are some questions raised by the trend information
                      presented in this section:

                      What factors contribute to the significant decline in the naval
                      forces category between fiscal years 1985 and 2001?

                      What factors are projected to contribute to the substantial decline
                      in the land forces category during the fiscal year 1996-2001 period?

                      What factors contribute to the projected real decline during the
                      fiscal year 1996-2001 period for medical, departmental, and
                      mobility forces? (In contrast, these categories experienced
                      substantial real growth during the fiscal year 1985-96 period.)

                      Can analyzing trends in concentrated O&M areas help DOD in future
                      budget plans?

                      We analyzed trends of three O&M programs—the Defense Health Program
Selected Activities   (O&M budget account), environmental spending, and base operating
and Programs Show     support—because of congressional interest and relevance in DOD’s effort
Varying Trends        to reduce infrastructure costs. DOD’s health care system is considered a
                      critical quality-of-life issue. The Defense Health Program budget account
                      emerged in the fiscal year 1993 President’s Budget to centralize O&M health
                      care resources. Prior to fiscal year 1993, the resources were located in the
                      service and DOD-wide budget accounts. This budget account differs from
                      the DMC medical in that the account does not include resources for medical
                      contingency hospitals and medical readiness units. For fiscal year 1997,
                      DOD estimates that 8.3 million beneficiaries are eligible to use the Defense
                      Health Program. Figure 10 shows that trend data for this budget account
                      remains relatively stable, a 1.1-percent real decline during fiscal years 1993
                      through 2001. However, in the fiscal year 1997 FYDP, DOD projected a
                      7.2-percent real decline between fiscal years 1996 and 1997. Discussions
                      with a DOD official indicated that fiscal year 1997 health care funds were
                      reduced by the Office of Secretary of Defense during preparation of the
                      fiscal year 1997 President’s Budget submission.




                      Page 26                                          GAO/NSIAD-97-73 Defense Budget
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Figure 10: Defense Health Program Funding for Fiscal Years 1993 through 2001 (Constant 1997 dollars in billions)
Dollars
12



10



8



6



4



2



0
      1993    1994     1995     1996      1997     1998        1999        2000       2001
                                       Fiscal year

                                           Total funds


                                           Source: Our analysis of DOD FYDP data.




                                           The DOD’s environment-related programs that we analyzed are the Defense
                                           Environmental Restoration Program, environmental compliance,
                                           environmental conservation, and pollution prevention programs.19 Annual
                                           O&M funding for these environment-related programs more than doubled


                                           19
                                            The Defense Environmental Restoration Program funds the investigation and cleanup of hazardous
                                           substances and waste, demolition and removal of unsafe buildings, and research of technology that
                                           could reduce hazardous wastes in the future. Environmental compliance funds DOD actions to sustain
                                           compliance with federal, state, and local environmental laws. Environmental conservation funds
                                           activities that protect or rehabilitate natural and cultural resources in DOD lands and waters. Pollution
                                           prevention is any action that will reduce or eliminate future pollutants of the environment from DOD
                                           operations.



                                           Page 27                                                           GAO/NSIAD-97-73 Defense Budget
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                                          between fiscal years 1991 and 1996, as shown in figure 11.20 Over
                                          90 percent of the funds for these environment-related programs in fiscal
                                          year 1996 was for the Defense Environmental Restoration Program and
                                          environmental compliance. By fiscal year 2001, the level of O&M funding for
                                          DOD’s environment-related programs is projected to decline by 23 percent
                                          from its fiscal year 1996 peak of $3.3 billion. Most of this decline is due to a
                                          planned 25-percent decrease in Defense Environmental Restoration
                                          Program O&M funds and a projected 18-percent decrease in funding for
                                          environmental compliance programs.



Figure 11: Annual DOD O&M Funding for Environment-Related Programs for Fiscal Years 1991-2001 (Constant 1997 dollars
in billions)
Dollars
3.5



3.0



2.5



2.0



1.5



1.0



0.5



0.0
          1991      1993          1995                 1997           1999              2001
                                         Fiscal year


                                          Note: Environment-related programs are the Defense Environmental Restoration Program,
                                          environmental compliance, environmental conservation, and pollution prevention.

                                          Source: Our analysis of DOD FYDP data.
                                          20
                                           Fiscal year 1991 was the first year funding was clearly identified for environmental compliance.
                                          Specific program elements for pollution prevention and environmental conservation appeared in fiscal
                                          years 1993 and 1994, respectively.



                                          Page 28                                                        GAO/NSIAD-97-73 Defense Budget
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Base operations and maintenance activities are required to sustain mission
capability, quality-of-life, and workforce productivity.21 Funding for these
programs is found throughout DOD, in both force and support missions,
and was analyzed at the FYDP program element level for this report.
Figure 12 shows that overall annual funding for base operations and
maintenance activities has declined since fiscal year 1985.




21
  These activities are base operations (including family and child support programs), base
communications, and real property maintenance (maintenance and repair, minor construction, real
property services, non-Defense Environmental Restoration Program environmental activities, and
installation engineering).



Page 29                                                       GAO/NSIAD-97-73 Defense Budget
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Figure 12: Annual DOD O&M Funding for Base Operations and Maintenance Activities for Fiscal Years 1985-2001 (Constant
1997 dollars in billions)
Dollars

 30




 20




 10




  0
      1985    1987      1989     1991       1993        1995       1997        1999        2001
                                          Fiscal year



                                         Note: Includes base operations, child and family centers, base communications, and real
                                         property maintenance and support.

                                         Source: Our analysis of DOD FYDP data.




                                         The level of O&M funds these programs received decreased by 16 percent
                                         between fiscal years 1985 and 1996 and is projected to decline by an
                                         additional 18 percent by 1999. Most of the falloff in earlier years is due to a
                                         decrease in O&M funding for real property maintenance and support
                                         activities, while after fiscal year 1994 the level of O&M funds provided
                                         annually to base operations activities decreases, as shown in figure 13. In
                                         fiscal years 2000 and 2001, base operations and maintenance activities are
                                         projected to receive a slight increase (2 percent) in annual O&M funds as a



                                         Page 30                                                      GAO/NSIAD-97-73 Defense Budget
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                                                    result of an increase in funding of real property maintenance and support
                                                    activities.



Figure 13: Annual DOD O&M Funding for Selected Base Operations and Maintenance Activities for Fiscal Years 1985-2001
(Constant 1997 dollars in billions)
Dollars

14


12


10


 8


 6


 4


 2


 0
     1985          1987         1989     1991      1993          1995     1997        1999        2001
                                                Fiscal year


            Base operations activities     Base communications            Real property maintenance
                                                                                  activities



                                                    Note: Base operations activities include child and family centers.

                                                    Source: Our analysis of DOD FYDP data.




                                                    Page 31                                                         GAO/NSIAD-97-73 Defense Budget
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                  The following are some questions raised by the trend information
                  presented in this section:

                  Why is funding for environmental-related programs expected to
                  decline between fiscal years 1996 and 1997? What factors cause
                  environmental projections to be considerably lower than prior-year
                  spending (since fiscal year 1993)?

                  What factors cause O&M base operating support projections to
                  increase after fiscal year 1999?

                  What impact has the Base Realignment and Closure decisions had
                  on base operations and maintenance costs?

                  Why are annual base operations O&M funding levels cyclical?

                  Why are real property maintenance funding levels not expected to
                  decline in the fiscal year 1997-2001 period?

                  In oral comments, DOD agreed with the report and offered points of
Agency Comments   clarification. Specifically, DOD said that O&M funding per person is an
                  inappropriate measure to assess future O&M requirements. In our report,
                  we analyzed O&M trends in a number of different ways, including annual
                  O&M on a per person basis. We believe each measure of O&M funding
                  produces a different, but equally insightful and appropriate, overview.
                  Furthermore, we did not attempt to determine an appropriate level of O&M
                  funding.

                  DOD noted that answering the questions following each section requires an
                  understanding of the significant accounting changes that have occurred
                  since fiscal year 1981. DOD recommended that future O&M analysis use
                  normalized FYDP data. (Normalized FYDP data account for the movement of
                  funds whether inside the O&M accounts or to and from other appropriation
                  accounts.) We attempted to obtain the department’s normalized database
                  but at the time of our review it was unavailable. Moreover, we recognize
                  that there are significant accounting changes that impacted DOD’s O&M
                  accounts. We discuss some of the changes in our report and structured our
                  analysis to minimize their impact.


                  To identify trends in annual O&M appropriations and personnel levels and
Scope and         to determine the programs and activities funded by O&M, we analyzed data
Methodology

                  Page 32                                       GAO/NSIAD-97-73 Defense Budget
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contained in DOD’s FYDP. The FYDP is the most comprehensive and
continuous source of current and historical defense resource data. We
used funding and personnel data from the historical FYDP update
(June 1995) for fiscal years 1985-1993, the fiscal year 1996 FYDP for fiscal
year 1994 data, and the fiscal year 1997 FYDP for fiscal years 1995-2001.
Historical FYDP data reflects actual (1) total obligational authority for
programs and (2) personnel levels. We adjusted the nominal dollars to
constant fiscal year 1997 dollars using 1997 DOD inflation indices for O&M
costs. Since DOD had not yet released its revised FYDP database that adjusts
FYDP data for known accounting and program changes since fiscal
year 1975, while we were conducting our work, we were unable to
normalize the data for these changes. We do note in the report where these
changes have impacted the trends.

We analyzed the FYDP data by DOD’s major defense programs, federal
budget account structure, and operating organization. To aid in the
identification and classification of the components that affect annual O&M
funding levels, we also evaluated the FYDP data using two analytical tools
developed by DOD—the DMC and the Infrastructure Categories. The DMC
structure is used to analyze FYDP data in terms of a mission-oriented view
of DOD resources rather than a service-specific program view, and the
infrastructure categories structure aids in the analysis of the resources
required to support the combat forces. We did not verify DOD’s allocation
of program elements in its DMC and Infrastructure Category analytical
tools.

In addition, we interviewed officials in the following DOD offices: Office of
the DOD Comptroller, Office of the Under Secretary of Defense (Personnel
and Readiness), Office of the Under Secretary of Defense (Acquisition and
Technology), Office of Program Analysis and Evaluation, and the Office of
Reserve Affairs. We also met with officials from the Institute for Defense
Analyses. We reviewed our prior reports, pertinent reports by the
Congressional Budget Office, Congressional Research Service, DOD, the
Institute for Defense Analyses, and others.

Our work was conducted from June 1996 to January 1997 in accordance
with generally accepted government auditing standards.


We are providing copies of this report to appropriate congressional House
and Senate committees; the Secretaries of Defense, the Air Force, the




Page 33                                          GAO/NSIAD-97-73 Defense Budget
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Army, and the Navy; and the Director, Office of Management and Budget.
We will also provide copies to other interested parties upon request.

If you have any questions concerning this report, please call me on
(202) 512-3504. Major contributors to this report were Robert Pelletier,
Edna Thea Falk, and Deborah Colantonio.




Richard Davis
Director, National Security
  Analysis




Page 34                                         GAO/NSIAD-97-73 Defense Budget
Page 35   GAO/NSIAD-97-73 Defense Budget
Contents



Letter                                                                                            1


Appendix I                                                                                       40

Categories of Defense
Infrastructure
Appendix II                                                                                      42
                        Land Forces                                                              42
Analysis of Eight       Medical                                                                  46
Defense Mission         Naval Forces                                                             50
                        Tactical Air Forces                                                      55
Categories              Other Logistics Support                                                  60
                        Departmental                                                             63
                        Mobility Forces                                                          68
                        Training                                                                 71

Tables                  Table 1: Summary of O&M Budget Accounts for Fiscal Year 1996              9
                        Table 2: O&M Funding and Personnel Levels in Fiscal Year 1996            13
                          by Service
                        Table 3: Summary of Changes in O&M Funds for Eight Highest               24
                          Dollar Defense Mission Categories in Fiscal Year 1996
                        Table 4: Total Fiscal Year 1996 O&M, Navy Budget Account                 25
                          Funds by Defense Mission Category
                        Table II.1: DMC Structure for Training                                   42

Figures                 Figure 1: Annual DOD O&M Appropriations and Personnel Levels              5
                          for Fiscal Years 1985-2001
                        Figure 2: Per Person Annual O&M Funding for Fiscal Years                  7
                          1985-2001
                        Figure 3: Percentage of DOD’s Annual O&M Funding Allocated by            12
                          Operating Organization in Fiscal Years 1985, 1992, 1996, and 2001
                        Figure 4: Direct Infrastructure Funded by O&M Appropriations             15
                          for Fiscal Years 1985-2001
                        Figure 5: Direct Infrastructure—Excluding Central                        16
                          Logistics—Funded by O&M Appropriations for Fiscal Years
                          1985-2001
                        Figure 6: Annual DOD Operation and Maintenance                           18
                          Appropriations for Three Major Defense Programs in Fiscal Years
                          1985-2001




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Contents




Figure 7: Annual DOD O&M Appropriations for Command,                    20
  Control, Communications, Intelligence, and Space and for Guard
  and Reserve Forces for Fiscal Years 1985-2001
Figure 8: Comparison of Annual O&M Funding for Fiscal Year              22
  1996 Five Highest Dollar Defense Mission Categories
Figure 9: Percentage of Fiscal Year 1996 O&M Funding Allocated          23
  by Defense Mission Category
Figure 10: Defense Health Program Funding for Fiscal Years 1993         27
  through 2001
Figure 11: Annual DOD O&M Funding for Environment-Related               28
  Programs for Fiscal Years 1991-2001
Figure 12: Annual DOD O&M Funding for Base Operations and               30
  Maintenance Activities for Fiscal Years 1985-2001
Figure 13: Annual DOD O&M Funding for Selected Base                     31
  Operations and Maintenance Activities for Fiscal Years 1985-2001
Figure II.1: Annual Land Forces O&M Funds and Personnel                 43
  Levels for Fiscal Years 1985-2001
Figure II.2: Percentage of Annual Land Forces O&M Funds                 44
  Allocated by Federal Budget Account for Fiscal Years 1985-2001
Figure II.3: Annual Land Forces O&M Funds by Mission for Fiscal         46
  Years 1985-2001
Figure II.4: Annual Medical O&M Funds for Fiscal Years                  48
  1985-2001
Figure II.5: Annual Medical O&M Costs Per Eligible Beneficiary          49
  for Fiscal Years 1985-2001
Figure II.6: Defense Health Program Beneficiaries for Fiscal            50
  Years 1989-2001
Figure II.7: Annual O&M Funding for Naval Forces for Fiscal             52
  Years 1985-2001
Figure II.8: Percentage of DOD’s Annual O&M Funding Allocated           53
  by Naval Forces Activities for Selected Fiscal Years
Figure II.9: Annual O&M Funding for Active Naval Forces                 54
  Allocated by Activity for Fiscal Years 1985-2001
Figure II.10: Per Person Annual O&M Funding for Selected Active         55
  Naval Force Activities for Fiscal Years 1985-2001
Figure II.11: Annual Tactical Air Forces O&M Funds and                  57
  Personnel Levels for Fiscal Years 1985-2001
Figure II.12: Annual Tactical Air Forces O&M Funds by Service           58
  Missions for Fiscal Years 1985-2001
Figure II.13: Annual Tactical Air Forces O&M Funds by Mission           60
  Activities for Fiscal Years 1985-2001




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Contents




Figure II.14: Annual O&M Funding for Selected Other Logistics            62
  Support Activities for Fiscal Years 1985-2001
Figure II.15: Per Person Annual Operation and Maintenance                63
  Funding for Selected Other Logistics Support Activities
Figure II.16: Annual O&M Funding for Departmental Mission                65
  Activities for Fiscal Years 1985-2001
Figure II.17: Annual O&M Funding for Departmental Mission                66
  Activities That Support the Active Military for Fiscal Years
  1985-2001
Figure II.18: Per Person Annual O&M Funding for Departmental             68
  Mission Activities That Support the Active Military
Figure II.19: Annual Mobility Forces O&M Funds for Fiscal Years          69
  1985-2001
Figure II.20: Annual Mobility Forces O&M Funds by Mission for            70
  Fiscal Years 1985-2001
Figure II.21: Percentage of Fiscal Year 1996 Airlift Forces O&M          71
  Funds Allocated by Mission
Figure II.22: Annual O&M Funding for Training for Fiscal Years           72
  1985-2001
Figure II.23: Annual O&M Funding for Selected Training Mission           73
  Activities for Fiscal Years 1985-2001
Figure II.24: Annual O&M Funding by Service for Active Military          75
  Training Mission Activities for Fiscal Years 1985-2001
Figure II.25: Per Person Annual O&M Funding for Training                 77
  Activities for Fiscal Years 1985-2001
Figure II.26: Per Person Annual O&M Funding by Service for               78
  Active Military Training Activities for Fiscal Years 1985-2001




Abbreviations

DMC        Defense Mission Category
DOD        Department of Defense
FYDP       Future Years Defense Program
O&M        Operation and Maintenance


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Appendix I

Categories of Defense Infrastructure


               Installation support consists of activities that furnish funding, equipment,
               and personnel to provide facilities from which defense forces operate.
               Activities include construction planning and design, real property
               maintenance, base operating support, real estate management for active
               and reserve bases, family and bachelor housing, supply operations, base
               closure activities, and environmental programs.

               Acquisition infrastructure consists of all program elements that support
               program management, program offices, and production support, including
               acquisition headquarters, science and technology, and test and evaluation
               resources. This category includes earlier levels of research and
               development, including basic research, exploratory development, and
               advanced development.

               Central logistics consists of programs that provide support to centrally
               managed logistics organizations, including the management of material,
               operation of supply systems, maintenance activities, material
               transportation, base operations and support, communications, and minor
               construction. This category also includes program elements that provide
               resources for commissaries and military exchange operations.

               Central training consists of program elements that provide resources for
               virtually all non-unit training, including training for new personnel,
               aviation and flight training, military academies, officer training corps,
               other college commissioning programs, and officer and enlisted training
               schools.

               Central medical consists of programs that furnish funding, equipment, and
               personnel that provide medical care to active military personnel,
               dependents, and retirees. Activities provide for all patient care, except for
               that provided by medical units that are part of direct support units.
               Activities include medical training, management of the medical system,
               and support of medical installations.

               Central personnel consists of all programs that provide for the recruiting
               of new personnel and the management and support of dependent schools,
               community, youth, and family centers, and child development activities.
               Other programs supporting personnel include permanent
               change-of-station costs, personnel in transit, civilian disability
               compensation, veterans education assistance, and other miscellaneous
               personnel support activities.




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Categories of Defense Infrastructure




Command, control, and communications consists of programs that
manage all aspects of the command, control, and communications
infrastructure for DOD facilities; information support services; mapping and
charting products; and security support. This category includes program
elements that provide nontactical telephone services, the General Defense
Intelligence Program and cryptological activities, the Global Positioning
System, and support of air traffic control facilities.

Force management consists of all programs that provide funding,
equipment, and personnel for the management and operation of all the
major military command headquarters activities. Force management also
includes program elements that provide resources for Defense-wide
departmental headquarters, management of international programs,
support to other defense organizations and federal government agencies,
security investigative services, public affairs activities, and criminal and
judicial activities.




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Appendix II

Analysis of Eight Defense Mission
Categories

                                         This appendix describes operation and maintenance (O&M) funding and
                                         military and civilian personnel trends in detail for eight defense mission
                                         categories (DMC) for fiscal years 1985 through 2001. In fiscal year 1996, the
                                         eight categories were the highest dollar missions and represented
                                         71 percent of O&M funds.

                                         With assistance from the Institute for Defense Analyses, Department of
                                         Defense (DOD) developed the DMC structure to display (by mission) funds,
                                         personnel, and forces programmed in the Future Years Defense Program
                                         (FYDP). The DMC framework is multitiered with each tier progressively
                                         more detailed. For example, the first tier divides DOD programs into three
                                         basic categories: major force missions, Defense-wide missions, and
                                         Defense-wide support. These three programs are subdivided into five
                                         additional levels of detail. One of these levels is the training category.
                                         Table II.1 illustrates an example of the DMC structure for training.

Table II.1: DMC Structure for Training
                                         Defense mission category code                    Defense mission category title
                                         3                                                Defense-wide support missions
                                         32                                               Personnel support
                                         322                                              Training
                                         3221                                             Military personnel training
                                         32210                                            Military personnel training
                                         32210A                                           Military personnel training, active
                                         Source: DOD.



                                         Our analysis of the eight categories aggregates O&M funds and personnel
                                         data at various levels of detail to provide comprehensive and useful
                                         information.


                                         For the land forces category, O&M funds consist of Army and Marine Corps
Land Forces                              division increments, non-divisional combat units, tactical support units,
                                         base operations and management headquarters, and operational support;
                                         Army systems support; and Army special mission forces. Total land forces
                                         O&M funds decrease more slowly than military and civilian personnel
                                         assigned to this category between fiscal years 1985 and 2001 as shown in
                                         figure II.1. O&M funds decrease by 22.2 percent, with most of the decline
                                         projected to occur between fiscal years 1996 and 2001. In contrast,
                                         between fiscal years 1985 and 2001 military and civilian personnel levels
                                         decline by 34.4 and 36.5 percent, respectively. Between fiscal years 1996



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                                           Analysis of Eight Defense Mission
                                           Categories




                                           and 2001 military personnel decrease by an additional 4.6 percent, while
                                           civilians decrease by less than 1 percent. Annual per person costs increase
                                           from $16,865 in fiscal year 1985 to $20,114 in fiscal year 2001, a
                                           19.3-percent increase.



Figure II.1: Annual Land Forces O&M Funds and Personnel Levels for Fiscal Years 1985-2001 (Constant 1997 dollars in
billions)

Dollars                                                                            Personnel

25                                                                                  700,000


                                                                                    600,000
20

                                                                                    500,000

15
                                                                                    400,000


                                                                                    300,000
10

                                                                                    200,000

 5
                                                                                    100,000


 0                                                                                  0
     1985   1987    1989    1991      1993     1995      1997      1999      2001
                                   Fiscal year

             Total O&M land forces dollars           Military personnel

             Civilian personnel


                                           Note: Personnel levels are active military, full-time Guard and Reserve, and civilians assigned to
                                           the land forces category. Civilian personnel levels reflect those paid with O&M funds.

                                           Source: Our analysis of DOD FYDP data.




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                                         Analysis of Eight Defense Mission
                                         Categories




                                         As expected, the Army has the largest share of total annual O&M funds for
                                         land forces. From fiscal years 1985 to 2001, the Army has and is projected
                                         to have about 67 to 80 percent of total annual O&M funds.
                                         Figure II.2 shows annual land forces O&M funds by federal budget account
                                         for fiscal years 1985 through 2001. Infusion of O&M funds for the Persian
                                         Gulf War contributed to the Army’s higher share of O&M land forces funds
                                         in fiscal year 1991.



Figure II.2: Percentage of Annual Land Forces O&M Funds Allocated by Federal Budget Account for Fiscal Years 1985-2001

Percentage of annual total
100%



 80%



 60%



 40%



 20%



   0%
        1985    1987       1989     1991 1993 1995           1997         1999       2001
                                        Fiscal year
                    Army                            Army National Guard


                    Navy/Marine Corps               Army/Navy/Marine Corps Reserve




                                         Source: Our analysis of DOD FYDP data.




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Analysis of Eight Defense Mission
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When funds are grouped by missions within land forces, base operations
and management headquarters is the largest category from fiscal years
1985 to 2001. This category supports real property maintenance, base
communications, and base operations and management headquarters at
fixed Army and Marine Corps installations. When compared with the other
three land forces mission categories,1 as shown in figure II.3, the base
operations and management headquarters category experiences the
largest decline, a 37.4-percent decrease from fiscal years 1985 to 2001.
Most of the decline takes places after fiscal year 1991.




1
 The three other land forces categories are Army increments and Marine ground forces, Army special
mission forces, and support activities. Army increments and Marine ground forces consist of Army
divisions and the non-divisional combat increment and units and Marine divisions and the
non-divisional combat increment. Support activities consist of Army and Marine tactical support
increments and operational support and Army systems support.



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                                                    Analysis of Eight Defense Mission
                                                    Categories




Figure II.3: Annual Land Forces O&M Funds by Mission for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars

10



 8



 6



 4



 2



 0
     1985     1987       1989        1991           1993      1995        1997        1999     2001
                                              Fiscal year
              Base operations/management headquarter             Support activities


              Army divisions/Marine ground forces                Army special mission forces



                                                    Source: Our analysis of DOD FYDP data.



                                                    The medical category provides funds for care for active duty personnel,
Medical                                             retired military personnel, and dependents. The fiscal year 1997
                                                    President’s Budget estimates that 8.3 million beneficiaries are eligible to
                                                    use the health care program in fiscal year 1997. Unlike the Defense Health
                                                    Program budget account, the medical category includes funds for
                                                    programs related to medical contingency hospitals and medical readiness.
                                                    Another difference is that the medical category does not include funds for




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Analysis of Eight Defense Mission
Categories




health personnel training;2 however, the Defense Health Program budget
account has funds for education and training programs.

Total medical O&M funds are projected to increase from $5.9 billion to
$10.2 billion or by 72.8 percent between fiscal years 1985 and 2001.
Although projections show that the fiscal year 1997-99 funding will be
slightly lower than in fiscal year 1996, medical O&M funds will begin to rise
starting in fiscal year 2000. Moreover, the fiscal year 2001 FYDP projection
almost matches the fiscal year 1996 level.

When funds are grouped by missions within the medical category,
hospitals and other medical activities is the largest category between fiscal
years 1985 through 2001. Trends for the hospital and other medical
activities category mirror those of total medical O&M funds. O&M funds for
the base operations and management headquarters category also grow
between fiscal years 1985 and 2001, a 69.8-percent increase. Unlike the
hospital category, which declines slightly between fiscal years 1996 and
2001, O&M funds for base operations and management headquarters
increase by 12.1 percent during this period. Figure II.4 compares the
trends in funding for hospitals and other medical activities, base
operations and management headquarters, and overall medical category.




2
 Funds for the Uniformed Services University of the Health Sciences are part of the medical category.



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                                               Categories




Figure II.4: Annual Medical O&M Funds for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars

12


10


 8


 6


 4


 2


 0
     1985     1987       1989        1991      1993 1995            1997         1999            2001
                                            Fiscal year
               Total O&M medical dollars                    Hospitals/other medical activities


               Base operations/management headquarter




                                               Source: Our analysis of DOD FYDP data.




                                               Figure II.5 shows that medical costs per eligible beneficiary will increase
                                               by 86 percent between fiscal years 1985 and 2001. Further, the fiscal
                                               year 2001 projected cost per eligible beneficiary of $1,223 nearly matches
                                               the fiscal year 1996 level of $1,229.




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                                           Categories




Figure II.5: Annual Medical O&M Costs Per Eligible Beneficiary for Fiscal Years 1985-2001 (Constant 1997 dollars)

Dollars

1,400


1,200


1,000


  800


  600


  400


  200


     0
          1985   1987    1989     1991 1993 1995                1997       1999       2001
                                      Fiscal year
                               Costs per eligible beneficiary


                                           Note: Per eligible beneficiary costs were calculated using the Office of Secretary of Defense
                                           (Health Affairs) beneficiary data from the fiscal year 1997 President’s Budget for fiscal
                                           years 1989-2001. Beneficiary information for fiscal years 1985-1988 is based on Office of
                                           Secretary of Defense (Health Affairs) estimates.

                                           Source: Our analysis of DOD FYDP data.




                                           Although the total number of eligible beneficiaries is projected to decline
                                           between fiscal years 1989 and 2001, starting in fiscal year 1995, the total
                                           number of retirees and their dependents exceed the total number of active
                                           duty military personnel and their dependents (see fig. II.6). Between fiscal




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                                                Analysis of Eight Defense Mission
                                                Categories




                                                years 1989 and 2001, retirees and their dependents increase by
                                                16.7 percent, whereas active duty military personnel and their dependents
                                                decrease by 26.5 percent.



Figure II.6: Defense Health Program Beneficiaries for Fiscal Years 1989-2001

Beneficiaries
6,000,000


5,000,000


4,000,000


3,000,000


2,000,000


1,000,000


         0
             1989                     1993                      1997                        2001
                        1991                      1995                        1999
                                               Fiscal year
                       Active duty personnel/their dependents       Retirees/their dependents




                                                Note: Beneficiary information is based on Office of Secretary of Defense (Health Affairs) data from
                                                the fiscal year 1997 President’s Budget.

                                                Source: Our analysis of DOD FYDP data.



                                                The naval forces defense mission category consists of mission forces
Naval Forces                                    (submarines, surface combat ships, amphibious forces, service forces,
                                                mine warfare forces, maritime patrol, undersea surveillance forces, and



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Analysis of Eight Defense Mission
Categories




sea based anti-submarine warfare air forces); fleet support (combat and
logistics support, ordnance disposal forces, tactical communications,
shore intermediate maintenance, and aircraft support squadrons); other
operational support (command activities; sea control operational
headquarters; and intelligence, communications, command, and control
activities); and base operations and management headquarters.

Annual O&M funding levels for naval forces is projected to decline by
45 percent between fiscal years 1985 and 2001, as shown in figure II.7. This
decline was primarily caused by a 48-percent reduction in O&M funds for
mission activities. Although mission activities funds have decreased,
figure II.8 shows that mission activities still receive about 60 percent of
O&M funding.




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                                            Analysis of Eight Defense Mission
                                            Categories




Figure II.7: Annual O&M Funding for Naval Forces for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)
Dollars

16


14


12


10


 8


 6


 4


 2


 0
     1985    1987     1989     1991     1993        1995    1997      1999      2001
                                      Fiscal year



                                            Source: Our analysis of DOD FYDP data.




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                                       Appendix II
                                       Analysis of Eight Defense Mission
                                       Categories




Figure II.8: Percentage of DOD’s
Annual O&M Funding Allocated by                                                                             61.2%
                                        66.9%
Naval Forces Activities for Selected
Fiscal Years




                                                                      17.3%
                                                                                                                               26.2%
                                                                                                          7.9%
                                                              2.8%                                               4.8%
                                                 13.0%

                                                    1985                                                                1996
                                                                          63.2%




                                                                                                    24.5%
                                                                          7.6%
                                                                                  4.7%

                                                                                     2001

                                                         Mission     Fleet support       Other support      Base operations




                                       Note: Annual percentages may not add to 100 due to rounding.

                                       Source: Our analysis of DOD FYDP data.




                                       Almost all of the O&M funding for this category is for the active forces and,
                                       within active naval forces, the majority of O&M funding is for mission force
                                       activities. As shown in figure II.9, most of the decrease between fiscal
                                       years 1985 and 1996 in active naval forces O&M funds was for mission




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                                                     Appendix II
                                                     Analysis of Eight Defense Mission
                                                     Categories




                                                     activities, although the fleet support programs’ O&M funding levels have
                                                     declined as well over the same period.



Figure II.9: Annual O&M Funding for Active Naval Forces Allocated by Activity for Fiscal Years 1985-2001 (Constant 1997
dollars in billions)

Dollars
10




 8




 6




 4




 2




 0
     1985   1987       1989          1991     1993        1995        1997      1999   2001
                                            Fiscal year
                Mission activities                    Fleet support


                Other operational support             Navy base operations/support




                                                     Source: Our analysis of DOD FYDP data.




                                                     The level of O&M funding per person associated with active naval force
                                                     mission activities has decreased from its 1985 value, as shown in
                                                     figure II.10, but most of this decline occurred by fiscal year 1990. Between
                                                     fiscal years 1996 and 2001, the O&M funds per person is expected to decline
                                                     by only 5 percent. The level of O&M funding per person for base operations



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                                               Analysis of Eight Defense Mission
                                               Categories




                                               activities (the second largest activity within the naval forces mission)
                                               remains relatively stable throughout the fiscal year 1985-2001 period.



Figure II.10: Per Person Annual O&M Funding for Selected Active Naval Force Activities for Fiscal Years 1985-2001
(Constant 1997 dollars in thousands)
Dollars
50




40




30




20




10




  0
      1985   1987    1989      1991        1993     1995      1997       1999       2001
                                        Fiscal year
                       Mission activities            Base operations/support




                                               Note: Per person costs for mission programs are for all personnel (active military, civilians,
                                               full-time reserve) associated with the active force mission activity DMCs. Per person costs for
                                               base operations is for all personnel (active military, civilians, full-time reserve) associated with all
                                               active naval force activities.

                                               Source: Our analysis of DOD FYDP data.



                                               O&M funds for the tactical air forces category consists of air-to-air combat
Tactical Air Forces                            squadrons; air-to-ground combat squadrons; defense suppression forces;
                                               tactical reconnaissance squadrons; tactical command, control, and



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Analysis of Eight Defense Mission
Categories




communications; tanker/cargo squadrons; other tactical air warfare forces;
non-strategic nuclear tactical forces; operations support; and base
operations and management headquarters support activities.

Like aggregate O&M trends, total tactical air forces O&M funds decrease at a
slower rate than military and civilian personnel assigned to this category
between fiscal years 1985 and 2001. (See fig. II.11.) During the fiscal year
1985-2001 period, O&M funds decrease by 11.6 percent, with most of the
decline projected to occur between fiscal years 1996 and 2001. In contrast,
most of the decline in both military and civilian personnel levels occurs
between fiscal years 1985 and 1996, a respective 34.4-percent and
24.6-percent decrease. Further, projections show that the fiscal year 2001
level of $7.8 billion slightly exceeds the fiscal year 1997 level. Annual per
person costs increase from $29,911 in fiscal year 1985 to $41,211 in fiscal
year 2001, a 37.8-percent increase.




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                                             Analysis of Eight Defense Mission
                                             Categories




Figure II.11: Annual Tactical Air Forces O&M Funds and Personnel Levels for Fiscal Years 1985-2001 (Constant 1997
dollars in billions)

Dollars                                                                             Personnel

10                                                                                  300,000



                                                                                    250,000
 8


                                                                                    200,000
 6

                                                                                    150,000

 4
                                                                                    100,000


 2
                                                                                    50,000



 0                                                                                0
     1985   1987    1989     1991      1993     1995      1997      1999      2001
                                    Fiscal year

            Total O&M tactical air forces dollars        Military personnel

            Civilian personnel


                                             Note: Personnel levels are active military, full-time Guard and Reserve, and civilians assigned to
                                             the tactical air forces category. Civilian levels reflect those paid with O&M funds.

                                             Source: Our analysis of DOD FYDP data.




                                             When funds are grouped by service missions within the tactical air forces
                                             category, as shown in figure II.12, from fiscal years 1985 to 2001, the Air
                                             Force is the largest category and experiences the smallest percentage
                                             change in funding, a 5.9-percent decrease, when compared with the Navy




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                                          Analysis of Eight Defense Mission
                                          Categories




                                          and Marine Corps categories.3 The Navy tactical air forces category
                                          experiences the largest decline, a 35.9-percent decrease between fiscal
                                          years 1985 and 2001. Most of the decline occurs between fiscal years 1985
                                          and 1996.



Figure II.12: Annual Tactical Air Forces O&M Funds by Service Missions for Fiscal Years 1985-2001 (Constant 1997 dollars
in billions)

Dollars
8




6




4




2




0
    1985     1987     1989     1991      1993 1995            1997       1999        2001
                                      Fiscal year

                      Air Force        Navy                 Marine

                                          Source: Our analysis of DOD FYDP data.




                                          3
                                           The service missions include funds for their respective Guard and Reserve components.



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Analysis of Eight Defense Mission
Categories




In the tactical air forces mission category, when funds are grouped by
primary mission, other tactical support, and base operations and
management headquarters, funds for each category decline between fiscal
years 1985 and 2001. (See fig. II.13.) However, these overall trends are not
consistent over the 17-year period. Between fiscal years 1985 and 1996,
base operations and management headquarters is the only mission activity
that grows, a 5.5-percent increase.4 However, projections show that the
base operations and management headquarters category will experience a
19.4-percent decrease in funds between fiscal years 1996 and 2001. For the
other tactical support category,5 funds decrease by 6.7 percent between
fiscal years 1985 and 1996; however, this decrease is nearly canceled by
the projected growth between fiscal years 1996 and 2001, a 5.3-percent
increase. Funding levels for primary missions decrease in both periods6 by
5.3 percent between fiscal years 1985 and 1996 and by 8.7 percent between
fiscal years 1996 and 2001.




4
 Base operations and management headquarters fund real property maintenance, base
communications, base operations and management headquarters at installations with a primary
mission of supporting tactical air forces and management headquarters at major commands
worldwide.
5
 Examples of other tactical support mission activities are airwing staff flying, readiness (training)
squadrons, and aviation support.
6
 Examples of primary mission activities are air-to-air combat, air-to-ground combat, and defense
suppression (tactical electronic warfare).



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                                                       Analysis of Eight Defense Mission
                                                       Categories




Figure II.13: Annual Tactical Air Forces O&M Funds by Mission Activities for Fiscal Years 1985-2001 (Constant 1997 dollars
in billions)

Dollars
10



 8



 6



 4



 2



 0
     1985    1987        1989        1991 1993 1995                       1997         1999     2001
                                         Fiscal year
               Total O&M tactical air forces dollars                 Primary mission


               Base operations/management headquarter                Other tactical support




                                                       Source: Our analysis of DOD FYDP data.



                                                       The other logistics support mission includes the following activities:
Other Logistics                                        logistics base operations and management headquarters, and
Support                                                miscellaneous logistics support activities such as industrial preparedness,
                                                       second destination transportation, administrative support, printing plants
                                                       and laundries, and information automation.

                                                       Annual O&M funding for other logistics support mission activities fell to
                                                       $5.3 billion in fiscal year 1996 from its peak of $8.7 billion in fiscal




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Analysis of Eight Defense Mission
Categories




year 1987, as shown in figure II.14. (The surge in fiscal year 1991 O&M
funding for this mission was an anomaly caused by a $2.3 billion infusion
of funds for Army and Air Force second destination transportation
programs most probably for Persian Gulf War efforts.7 The following year,
fiscal year 1992, O&M funding for these programs decreased by more than
$2.7 billion and is projected to continue to decline at a slow steady rate
through fiscal year 2000.) The other decreases are due to consistent annual
declines in O&M funding of logistics base operations and headquarters
activities. The declines in base operations had a significant impact on
other logistics support O&M funding because base operations activities
account for about 35 percent of total annual other logistics support funds.
Overall, other logistics support O&M funds fell by 34 percent between fiscal
years 1985 and 1996 but are expected to remain relatively stable through
fiscal year 2001.




7
 Second destination transportation programs include costs for commercial land, sea, or air
transportation, including contract service, movements by through bills of lading and the rental and
lease of transportation equipment and service not available on a tariff basis from common carriers,
and funds for reimbursement of continental U.S. port terminals.



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Figure II.14: Annual O&M Funding for Selected Other Logistics Support Activities for Fiscal Years 1985-2001 (Constant
1997 dollars in billions)
Dollars
12




10



 8



 6



 4



 2



 0
     1985    1987     1989      1991     1993        1995      1997       1999       2001
                                       Fiscal year




                                           Note: Our analysis excludes funding of Defense Environmental Restoration Program; logistics
                                           support to research and development, procurement, and military construction; Defense Logistics
                                           Agency; and stock fund revenue offsets.

                                           Source: Our analysis of DOD FYDP data.




                                           By fiscal year 2001, O&M funding per person for other logistics support
                                           activities is expected to be at about the same level as it was in fiscal
                                           year 1985, as shown in figure II.15. If the surge in fiscal year 1991 funding
                                           is ignored, O&M funding per person is planned to remain between $2,330
                                           and $2,660 per person for the entire fiscal year 1985-2001 period.




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Figure II.15: Per Person Annual Operation and Maintenance Funding for Selected Other Logistics Support Activities
(Constant 1997 dollars in thousands)
Dollars
  4




  3




  2




  1




  0
      1985     1987     1989      1991      1993        1995       1997        1999        2001
                                          Fiscal year



                                          Note: Per person costs are per all active military, full-time Guard and Reserve, and DOD civilians.
                                          Our analysis of the other logistics support mission excludes funding of Defense Environmental
                                          Restoration Program; logistics support to research and development, procurement, and military
                                          construction; Defense Logistics Agency; and stock fund revenue offsets.

                                          Source: Our analysis of DOD FYDP data.



                                          The departmental mission includes a wide range of department-wide
Departmental                              service support activities such as the Army’s Adjutant General,
                                          publications centers, and postal service agency; the Navy’s accounting and
                                          finance center and its petroleum reserve; and the Air Force’s audit agency,
                                          Intelligence Service, and its finance and accounting center. The mission
                                          also includes department-wide activities such as public affairs, personnel
                                          administration, service support to the Office of the Secretary of Defense




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and other defense agencies, Washington Headquarters Services, and the
Office of Economic Adjustment.8

O&M funding levels for the departmental mission have grown since fiscal
year 1985. Between fiscal years 1985 and 1996, O&M funding for
departmental activities grew by 16 percent, and most of this growth
occurred after fiscal year 1991. Much of the growth between fiscal
years 1991 and 1996 was due to significant fluctuations in funding for
programs assigned to this mission. For example, Washington Headquarters
Services’ annual O&M funding level grew almost threefold between fiscal
years 1994 and 1995 from $169 million to $498 million, remained at this
high level in fiscal year 1996, but is projected to decline to $185 million in
fiscal year 1997, where its annual funding level is expected to remain
through fiscal year 2001.9 Other programs in the departmental mission
only have had O&M funding in selected years, such as the Defense-wide
administrative maintenance and repair program. O&M funding for this
program appears only in fiscal years 1992 and 1993 for $563 million and
$1.9 billion, respectively.

O&M funding for the departmental mission decreases by 5 percent between
fiscal years 1996 and 2001. This slight decline in the mission’s funding
levels reflects the relative stability in annual O&M funding levels for most of
the large programs contained in this mission, such as service-wide support
(not otherwise accounted for),10 Office of the Secretary of Defense
management headquarters, and Defense Contract Audit Agency activities.
Figure II.16 shows the trend in O&M funding for departmental mission
activities during the fiscal year 1985-2001 period.




8
 The program elements for Foreign Currency Fluctuations, although categorized by DOD as a part of
this mission, were excluded from this analysis. These are resources for a transfer fund account that
was established to maintain the budgeted level of operations and thereby eliminate substantial gains
and losses caused by fluctuations in foreign currency exchange rates that vary substantially from those
used in preparing budget submissions. The O&M values contained in these program elements vary
significantly from year to year. These changes are not a result of a variation in the level of resources
that support a departmental activity and therefore were excluded from the analysis.
9
 The Washington Headquarters Services program includes funding for the equipment, facilities and
other associated costs for the functions, which provide administrative and operating support to the
Office of the Secretary of Defense and other DOD activities.
10
 This program is a compilation of numerous miscellaneous support programs such as the Army’s
Legal Services Agency, Naval History Center, and the Air Force Safety Agency.



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Figure II.16: Annual O&M Funding for Departmental Mission Activities for Fiscal Years 1985-2001 (Constant 1997 dollars in
billions)

Dollars
8




6




4




2




0
    1985     1987      1989      1991       1993       1995       1997        1999        2001
                                         Fiscal year




                                           Note: Does not include funds for foreign currency fluctuation program elements.

                                           Source: Our analysis of DOD FYDP data.




                                           Seventy-five percent of O&M funds for the departmental mission support
                                           the active military, and the remaining 25 percent of O&M funds for this
                                           mission are for departmental activities that support the National Guard
                                           and Reserve. Figure II.17 shows that O&M funding for departmental
                                           activities that support the active military generally remained between
                                           $4.0 billion and $4.5 billion prior to fiscal year 1993 and are projected to
                                           remain between $4.5 billion and $5.0 billion for the fiscal year 1996-2001




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                                           period. Since the programs that caused the fluctuations in the overall
                                           departmental mission’s O&M funding levels between fiscal years 1991 and
                                           1996, such as the Washington Headquarters Service, support the active
                                           military, these same programs caused the fluctuations shown in figure
                                           II.17. O&M funding for departmental missions that support the active
                                           military are projected to decline between fiscal years 1996 and 2001 by
                                           about 4 percent, only slightly less than the 5-percent decline in the overall
                                           departmental mission’s O&M funding level during the same period.



Figure II.17: Annual O&M Funding for Departmental Mission Activities That Support the Active Military for Fiscal Years
1985-2001 (Constant 1997 dollars in billions)
Dollars

 7



 6



 5



 4



 3



 2



 1



 0
     1985     1987      1989       1991      1993        1995        1997        1999         2001
                                           Fiscal year




                                           Note: Does not include funds for foreign currency fluctuation program elements.

                                           Source: Our analysis of DOD FYDP data.




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O&M funding per person for departmental missions that support the active
military has grown by over 50 percent between fiscal years 1985 and 1996
as shown in figure II.18.11 As the amount of O&M funds provided to the
large departmental programs grew between fiscal years 1991 and 1996, the
number of active military personnel fell and the civilians associated with
the departmental activities that support the active military declined. After
fiscal year 1996, the level of O&M funds allocated to each person for this
mission is projected to remain virtually unchanged through fiscal
year 2001.




11
 Per person values are per all active military and the full-time Guard and Reserve and DOD civilian
personnel associated with active military departmental mission programs.



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Figure II.18: Per Person Annual O&M Funding for Departmental Mission Activities That Support the Active Military
(Constant 1997 dollars in thousands)
Dollars
4.0


3.5


3.0


2.5


2.0


1.5


1.0


0.5


0.0
          1985   1987   1989      1991     1993        1995       1997        1999        2001
                                         Fiscal year




                                          Note: Per person values are per all active military and the full-time Guard and Reserve and DOD
                                          civilian personnel associated with active military departmental mission programs.

                                          Source: Our analysis of DOD FYDP data.



                                          O&M funds for the mobility forces category consist of programs and
Mobility Forces                           activities for multimode and intermodal lift forces,12 airlift forces, sealift
                                          forces, and land mobility forces. As shown in figure II.19, between fiscal
                                          years 1985 and 2001, total O&M funds for the mobility forces category
                                          increase from almost $3.8 billion to $5.5 billion, or by 45.5 percent. Most of
                                          the increase occurs between fiscal years 1985 and 1996, a 54.6-percent
                                          increase. Among the eight categories in our analysis, this category has the

                                          12
                                            During the fiscal year 1985-2001 period, multi- and intermodal lift forces have O&M funds only in
                                          fiscal year 1986.



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                                           second largest percentage change in funding during the fiscal
                                           year 1985-2001 period.



Figure II.19: Annual Mobility Forces O&M Funds for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars
8




6




4




2




0
    1985    1987      1989      1991      1993 1995           1997       1999       2001
                                       Fiscal year


                                           Source: Our analysis of DOD FYDP data.




                                           When funds are grouped by missions within mobility forces, between
                                           fiscal years 1985 and 2001, airlift forces is the largest category funded by
                                           direct O&M appropriations. (See fig. II.20.) The surge in fiscal year 1994 O&M
                                           funds was for airlift base operations. Throughout the 17-year period, land




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                                             mobility forces O&M funds increase from $871 thousand in fiscal year 1985
                                             to almost $653 million in fiscal year 2001 and have the largest percentage
                                             change in funding when compared with sealift and airlift forces.



Figure II.20: Annual Mobility Forces O&M Funds by Mission for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars
 7

 6

 5

 4

 3

 2

 1

 0
     1985    1987       1989      1991      1993 1995            1997      1999       2001
                                         Fiscal year
              Airlift forces                            Sealift forces

              Land mobility/multi-intermodal lift



                                             Source: Our analysis of DOD FYDP data.




                                             When funds are grouped by missions within airlift forces, during the fiscal
                                             year 1985-2001 period, military intertheater airlift has the largest
                                             percentage change in funding (225.6 percent) when compared with other




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                                                          airlift forces missions. Moreover, starting in fiscal year 1996, military
                                                          intertheater airlift is projected to have the largest share of annual airlift
                                                          forces O&M funds. Military intertheater airlift is comprised of active,
                                                          National Guard, and Reserve airlift squadrons and support activities.
                                                          Figure II.21 shows the distribution of total fiscal year 1996 O&M funds by
                                                          mission within airlift forces. Projections show that, for the fiscal
                                                          year 1997-2001 period, each airlift forces category share of annual O&M
                                                          funding closely mirror the fiscal year 1996 share.



Figure II.21: Percentage of Fiscal Year 1996 Airlift Forces O&M Funds Allocated by Mission


                                        Aeromedical airlift (0.31%)
             Airlift command, control, communications (0.72%)
                          Airlift rescue and recovery (2.78%)

Base ops/management headquarters (13.89%)



                                                                                                  Military intertheater airlift (37.78%)




  Airlift operational support (21.18%)




                                                                      Military intratheater airlift (23.34%)
                                                          Source: Our analysis of DOD FYDP data.



                                                          The training defense mission category consists of all military personnel
Training                                                  training, civilian personnel training, flight training, intelligence skill
                                                          training, health personnel training, and training base operations and
                                                          management headquarters.

                                                          Figure II.22 shows that the O&M funding level for the training mission
                                                          decreased by 22 percent between fiscal years 1985 and 1993 and is
                                                          projected to remain fairly level through fiscal year 2001. If O&M funding for
                                                          training base operations and management headquarters is removed from
                                                          the overall O&M funding level of the training mission as shown in




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                                               figure II.22, the amount of O&M funds provided to this mission is projected
                                               to decrease by only 14 percent between fiscal years 1985 and 2001. Military
                                               personnel training and flight training activities receive over 85 percent of
                                               the remaining annual O&M funds for this mission.



Figure II.22: Annual O&M Funding for Training for Fiscal Years 1985-2001 (Constant 1997 dollars in billions)

Dollars

8




6




4




2




0
    1985     1987       1989           1991     1993            1995         1997          1999   2001
                                              Fiscal year

                    Training mission                        Training without base operations




                                               Source: Our analysis of DOD FYDP data.




                                               Much of the decline through fiscal year 1993 was for training base
                                               operations and management headquarters activities. Base operations and
                                               management headquarters activities have received and are planned to
                                               continue to receive the largest portion of annual O&M funds for this mission



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                                               category, although its portion of the training mission’s O&M funds has
                                               declined.

                                               Figure II.23 shows that military personnel training (mostly general skills
                                               training and support of the training establishment) has declined as the
                                               active force declined, and funding for this activity is planned to remain
                                               fairly constant from fiscal year 1996 to 2001 when military personnel levels
                                               are projected to stabilize. O&M funding for flight training activities (mostly
                                               undergraduate pilot training), though, has not changed much over the 17
                                               years covered by this report.



Figure II.23: Annual O&M Funding for Selected Training Mission Activities for Fiscal Years 1985-2001 (Constant 1997
dollars in billions)
Dollars
4




3




2




1




0
    1985     1987         1989    1991        1993         1995     1997        1999    2001
                                           Fiscal year

             Military personnel          Training base operations    Flight
               training                     and management           training




                                               Source: Our analysis of DOD FYDP data.




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Since civilian and Guard and Reserve personnel training accounts for a
very small portion of the total training mission, we focused our analysis of
O&M funding for the mission by service on active military personnel
training only. As displayed in figure II.24, the Army has received and plans
to continue to receive more annual training mission O&M funds than either
the Air Force or the Navy/Marine Corps, although the Army’s share of
annual O&M funds for this mission has decreased along with its force
structure. The Army is projected to receive 35 percent fewer annual
training O&M funds in fiscal year 2001 than it received in fiscal year 1985.
This decline is due mostly to planned declines in military personnel
training (general skills training) and training base operations and
management headquarters. The only Army training area that received an
infusion of O&M funds in the fiscal year 1985 to 1996 period was flight
training, but after fiscal year 1996, funds for this training are projected to
decline by almost 7 percent. For the projected period through fiscal
year 2001, only the military personnel training area is expected to receive
an increase in O&M funds.




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Figure II.24: Annual O&M Funding by Service for Active Military Training Mission Activities for Fiscal Years 1985-2001
(Constant 1997 dollars in billions)

Dollars

4




3




2




1




0
     1985     1987      1989      1991      1993        1995      1997         1999   2001
                                          Fiscal year

                      Army                 Air Force             Navy/Marine Corps




                                           Source: Our analysis of DOD FYDP data.




                                           Figure II.24 also shows that O&M training funds for the Navy/Marine Corps
                                           and the Air Force have declined between fiscal years 1985 and 1996 in
                                           concert with declines in their force structure, but similar to the Army,
                                           funding levels are expected to remain fairly stable in the out-years.
                                           Between fiscal years 1985 and 1996, the Navy/Marine Corps O&M training
                                           mission funds decreased by 24 percent and the Air Force’s funding level
                                           decreased by 16 percent. After fiscal year 1996, O&M funding for the
                                           Navy/Marine Corps training base operations is projected to continue to
                                           decrease. However, O&M funding for Navy/Marine Corps military




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personnel, flight, and intelligence skill training is expected to grow. Flight
training is the only area that is planned to receive an increase (12 percent)
in O&M funds for the Air Force during the fiscal year 1996 through 2001
period.

O&M funding for the training mission per full-time military and DOD civilians
declined by 8 percent between fiscal years 1985 and 1993, but after fiscal
year 1993 grew annually through fiscal year 1996, as presented in
figure II.25. It is projected to remain stable after fiscal year 1996 until fiscal
years 2000 and 2001 when funding per person will increase by
approximately 2 percent per year.

If base operations and management headquarters is removed from overall
O&M funding of the training mission, the O&M funding per full-time military
and DOD civilians remained fairly stable at about $1,200 per year through
fiscal year 1993, when it began to increase annually. The level of O&M
funding per person is projected to increase to over $1,400 by fiscal
year 2001.




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Figure II.25: Per Person Annual O&M Funding for Training Activities for Fiscal Years 1985-2001 (Constant 1997 dollars in
thousands)

Dollars

3.0



2.5



2.0



1.5



1.0



0.5



0.0
      1985    1987        1989        1991     1993           1995         1997         1999   2001
                                             Fiscal year

                     Total training                        Training without base operations




                                              Note: Per person funding levels are per all active military, full-time Guard and Reserve, and DOD
                                              civilians.

                                              Source: Our analysis of DOD FYDP data.




                                              Figure II.26 shows that the pattern of O&M funding per person for the
                                              training mission for each service’s active military differs. The O&M funding
                                              level per person for active Air Force training grew the most (over
                                              30 percent) between fiscal years 1985 and 1996 and peaked at $3,300 per
                                              person by fiscal year 1996. Our analysis of FYDP data shows that this level
                                              of funding per person is projected to be reached again in fiscal years 1998
                                              and 2001. Although the O&M funding for training per active Army military



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                                           person fell to its lowest level in fiscal year 1994, it increased annually
                                           during fiscal years 1995 and 1996, and will increase annually again in fiscal
                                           years 2000 and 2001, when it will peak at $4,500 per person. The
                                           Navy/Marine Corps O&M funding per person for active military training fell
                                           by 15 percent between fiscal years 1985 and 1993 but is projected to
                                           increase annually through fiscal year 1997, and fall slightly in fiscal
                                           year 1998, when it will increase about 1 percent per year again until it
                                           reaches $2,600 per year in fiscal year 2000.



Figure II.26: Per Person Annual O&M Funding by Service for Active Military Training Activities for Fiscal Years 1985-2001
(Constant 1997 dollars in thousands)

Dollars
5




4




3




2




1




0
    1985     1987      1989      1991      1993        1995         1997        1999         2001
                                         Fiscal year

                      Army                Air Force                Navy/Marine Corps


                                           Note: Per person funding levels are per all active military in the specified service and the civilians
                                           and full-time Guard and Reserve personnel associated with the active military training DMCs.

                                           Source: Our analysis of DOD FYDP data.




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(701094)   Page 79                             GAO/NSIAD-97-73 Defense Budget
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