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The original documents are located in Box 8, folder "FY 1976 - 12/9/74, Defense, Small
Agencies" of the White House Special Files Unit Files at the Gerald R. Ford Presidential
Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 8 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
1976 Budget
Session With The
-
President
12/9/74
MEETING WITH
ROY L. ASH
Monday, December 9, 1974
2:00 P. M.
LIBRARY 0891 .t BERALD
1
1976 Budget
Session With The
President
12/9/74
THE WHITE HOUSE
WASHINGTON
December 6, 1974
MEETING WITH ROY L. ASH
EBRO
Monday, December 9, 1974
2:00 p.m. (60 minutes)
CHALD
Oval Office
From: Ref.Ash
I. PURPOSE
To review the FY 76 budget for the Department of Defense.
II. BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background: The anticipated FY 76 budget requests of
the Department of Defense and some alternative budget
amounts are attached for your review. In that the
joint Defense/OMB review of the Department of Defense
budget is not completely finished yet, the agency
request and the issue papers set out in the attachment
represent our best estimate of the final Defense sub-
mission at this time. Eight issues raised by the DOD
budget have been identified for your consideration at
this meeting.
I have also requested a meeting on December 12 or 13
with you and Secretaries Kissinger and Schlesinger
to further discuss these issues and to make final
decisions on the FY 76 budget.
B. Participants: Roy L. Ash, Paul O'Neill, Don Ogilvie,
and Dale McOmber
C. Press Plan: David Kennerly photo.
III. TALKING POINTS
Don Ogilvie, would you describe the first issue we should
discuss for the Department of Defense?
Defense
THE WHITE HOUSE
WASHINGTON
December 6, 1974
FORD
MEMORANDUM FOR:
THE PRESIDENT
FROM:
ROY L. ASH
SUBJECT:
197'6 Budget Decisions: Department
of Defense
The anticipated agency request and some alternatives
with respect to 1976 budget amounts for the Department
of Defense are attached. Because the joint Defense/OMB
review of the DOD budget is not yet completed, the
anticipated agency request and the attached issue
papers represent our best estimate of the final Defense
submission.
I have requested a meeting with you, Secretary Kissinger
and Secretary Schlesinger on December 12 or 13 to review
these issues and reach final decisions on the Defense
budget. Eight key issues have been identified for your
consideration.
I.
Level of Defense Budget
The most important issue is the overall level of the
Defense budget. Secretary Schlesinger has indicated that
he will request $94.6 billion in outlays. However, on
the basis of decisions already made, his final request
will probably be closer to $95 billion, and we have used
$95 billion in preparing the attached issue papers. This
is an increase of $10 billion over our revised 1975 outlay
estimate of $84.5 billion. It would provide for major in-
creases (above last year) in procurement, R&D, and readi-
ness levels, and would require no major force changes or
significant reductions in personnel strengths and benefits.
Three lower alternatives have been prepared for your
consideration:
$94 billion in outlays would cover estimated
inflation and provide $1 billion in real program
growth over 1975.
- 2 -
$93 billion in outlays would cover estimated
inflation and maintain the 1975 real program
level.
$92 billion in outlays represents a fiscally
constrained budget. After inflation, it would
require a real program reduction of about $1
billion below 1975.
A11 of the alternatives provide for substantial in-
creases in budget authority over 1975. The Defense request
is for budget authority of $106 billion, 20 percent above
1975. In each of the lower alternatives, budget authority
is reduced from the Defense request by an increment of
$2 billion. At the lowest level, budget authority would
be $100 billion, an increase of $11.5 billion over 1975.
II.
Pay and Benefits
CREZO FORD
Pay-related costs have been the fastest growing
portion of the Defense budget in recent years. Defense
recommends no substantial changes in military salaries
or benefits.
The alternatives recognize that, while pay in-
creases have brought military salaries in line with
those of civilians in the public and private sectors,
little has been done to scale back special military pay-
related benefits which were initiated when military
salaries were relatively low. Candidates for reduction
or elimination include the commissary subsidy from ap-
propriated funds, leave payments at reenlistment, travel
entitlements for junior enlisted men and the annualiza-
tion of reenlistment bonuses. The fiscal constraint
alternative would also reduce the anticipated October 1975
pay raise.
III. Manpower
Military manpower is now about 20 percent below the
1964 pre-Vietnam level while civilian manpower has de-
clined by four percent. The current 1976 Defense budget
includes a one percent reduction in military manning and
no reduction in civilian manpower from 1975 levels.
- 3 -
The alternatives propose further manpower reductions,
particularly civilians, without adversely affecting forces
or readiness levels. Specific candidates include a man-
power drawdown at Pacific bases, an accelerated phasedown
in Thailand, an anticipated 1.5 percent improvement in
civilian productivity, and a reduction in the number of
military officers enrolled fulltime in graduate schools.
The fiscal constraint alternative imposes a larger civilian
productivity reduction and further reductions in military
manpower.
IV.
Force Modernization
The largest increase in 1976 budget authority occurs
in force modernization. The current Defense forecast for
R&D and procurement calls for an increase of about $10
FORD
billion in 1976 over last year. This increase recognizes
the impact of inflation and includes over $4 billion in
RALD
real program growth.
The alternatives address several areas which have a
large impact on 1976 budget authority, including: the
impact of shipyard capacity limitations and Congressional
legislation stipulating nuclear propulsion for all major
combatant ships; the Defense proposal in 1975 to suspend
full funding procedures to finance higher shipbuilding
costs; the level of program growth in other procurement
programs; and the size of the 1976 R&D program. An
Administration decision on whether to request initial
production funds for the B-1 in 1976 is also required.
V.
Administrative Action
A range of administrative activities within the
Department of Defense are proposed to be included in
the budget at current or increased levels.
The alternatives propose that, while very large
reductions in these programs would ultimately affect
military readiness, minor reductions in travel, real
property maintenance and selected inventory levels
could be made with only limited adverse effects.
- 4 -
VI.
Force Structure
The Department of Defense proposes to increase the
number of Army Divisions from 14 to 16 in 1976 and to
reduce the number of Navy aircraft carriers from 13 to
12 in 1977. No plans are included for any reductions in
reserve forces.
The alternatives propose to slow down the plan to
reach a level of 16 Army Divisions by 1978, accelerate
the reduction to 12 aircraft carriers from 1977 into
1976; and eliminate 60,000 marginal reservists and re-
serve program add-ons which do not contribute to readi-
ness.
VII. Intelligence
FORD
These issues will be presented for your review
separately.
VIII. Naval Petroleum Reserves
The Department of Defense proposes to request
appropriations of $270 million to increase fuel pur-
chases so that all available fuel storage will be kept
at full capacity to meet emergency requirements.
One alternative would seek authority to increase
production from Naval Petroleum Reserve #1 to generate
sufficient revenues to finance this additional Defense
fuel requirement. The other alternative would seek
authority to increase production to 160,000 barrels per
day to generate sufficient resources to procure the ad-
ditional fuel and further exploration and development
of NPR #1 and NPR #4.
Attachments
Table 1
DEFENSE PROGRAM LEVELS
1976 Budget
Actual
DOD Forecast
1964
1968
1974
1975
1976
OUTLAYS ($ billions) :
50.8
78.0
78.4
84.9
95.0
Constant 1976 $
109.7
148.0
101.0
93.0
95.0
% of GNP
8.3
9.4
5.8
5.8
5.9
PERSONNEL (000) (end of year) :
Civilian (Direct Hire)
1,035
1,287
1,015
995
995
Active Military
2,685
3,547
2,161
2,137
2,113
Reserve Military
953
922
924
917
900
FORCES (end of year) :
Strategic forces
Intercontinental ballistic
missiles:
Minuteman
600
1,000
1,000
1,000
1,000
Titan II
54
54
54
54
54
Polaris-Poseidon missiles
336
656
656
656
656
Strategic bombers
1,277
588
438
396
396
General purpose forces
Land forces:
Army divisions
16-1/3
18
13
14
16
Marine Corps divisions
3
4
3
3
3
Tactical air forces:
Air Force wings
22
23
22
22
22
Navy attack wings
15
15
14
14
13
Marine Corps wings
3
3
3
3
3
Naval forces:
Attack and antisubmarine
carriers
24
23
14
15
13
Nuclear attack submarines
19
33
61
65
68
Other warships
265
298
161
164
168
Amphibious assault ships.
139
157
65
65
64
December 6, 1974
GERNLOR FORD LIBRARY
BACKGROUND
DEPARTMENT OF DEFENSE
1976 BUDGET
BACKGROUND AND STRATEGY
Background
Defense Department (military and military assistance) outlays were held about level at $78-80 billion
between 1968 and 1974 because inflation and increasing personnel costs were offset by manpower and force
reductions resulting from phasedown from the Vietnam war and strategy change from 2-1/2 to 1-1/2 war readi-
ness posture. During this period military manpower was reduced by 40% from the Vietnam peak of 3.5 million
to 2.2 million and major reductions were made in the general purpose forces.
The 1975 budget request represented a major increase in spending -- up $6 billion from the 1968-74
level to $85.8 billion. The reason for the increase was that force and manpower reductions were no longer
possible to mask inflation and certain required program increases.
Context for Decision
No official Defense request has been received, since the joint OMB-Defense review is still in progress.
We now estimate a request of about $95 billion in outlays (up 12% from 1975) ; and $106 billion in budget
authority (up 20% from 1975).
The anticipated Defense request: makes no major change in force structure; provides increased levels
of readiness; provides major increases in procurement and research and development; and includes no significant
reductions in personnel strengths and benefits.
The planning ceiling established for Defense spending last July was $93 billion in outlays in the context
of a total budget in nearbalance at $329 billion. Because it is so large and important a part of the total
Federal budget, the defense total should be arrived at in the context of that total.
Varying levels of defense spending can be projected, depending upon fiscal policy objectives and the role
assigned the defense budget in achieving any particular fiscal objective. Assuming a starting point of $95
billion in outlays (the estimated Defense request) lower alternatives can be arrived at by application of
specific decisions on a number of issues, as shown in the following table.
GERALD ? FORD
FY 1976 Defense Issues
2.
($ millons)
Limited Real
Constant Program
Fiscal Constraint
Program Growth 1/
Level 2/
Level 3/
BA
Outlays
BA
Outlays
BA
Outlays
ESTIMATED DEFENSE REQUEST
106,000
95,000
106,000
95,000
106,000
95,000
Possible Reductions:
Pay and Benefits
428
406
428
406
1,108
1,086
Manpower
102
92
247
237
402
392
Force Modernization
1,255
220
2,471
607
3,311
777
Administrative Actions
50
45
330
300
360
330
Force Structure
125
120
201
190
201
190
Intelligence Programs
113
30
235
92
400
200
Naval Petroleum Reserve
270
270
270
400
270
400
TOTAL REDUCTIONS
2,343
1,183
4,182
2,232
6,082
3,375
ADJUSTED DEFENSE FORECAST
104,000
94,000
102,000
93,000
100,000
92,000
1/ Provides a 17% increase in budget authority over 1975. Assuming purchases inflation of 10%, it
permits program growth of $1 billion above the projected increased level of 1975 outlays.
21 Provides a 15% increase in budget authority over 1975. Assuming purchases inflation of 10%, it
provides the same program level as the projected increased level of 1975 outlays.
3/ Provides a 13% increase in budget authority over 1975. It is, in our view, the least painful way of
reaching a fiscally constrained reduced level of defense spending.
December 6, 1974
GERALD
FORD
#1 Level of
Defense Budget
Department of Defense
1976 Budget
Issue #1: Level of the Defense Budget
Statement of Issue
What should be the level of the Defense budget (including military functions and military assistance)
in outlays as well as budget authority?
Background
The Defense budget level must be considered in the context of the total Federal budget, and in rela-
tion to the Defense spending rates in prior years. Total Federal budget outlays for 1976 are currently
projected at $343 billion with Defense included at $93 billion. Defense outlays grew by $4.6billion in
1974. The current Defense forecast shows a $6.1 billion outlay increase in 1975 and a further growth of
$10.5 billion in 1976 to reach the $95 billion level.
In our 1975 budget restraint message we reduced Defense outlays by $.4 billion to a level of $83.2
billion. Review of the latest available actual 1975 outlay data has caused us to reestimate 1975 outlays
upward to $84.5 billion.
The Defense budget authority request of $106 billion is about $18 billion above the Congressionally-
approved 1975 level. This will be the first time Defense budget authority has exceeded $100 billion, and
the percentage rate of increase is the largest since the Vietnam war.
Alternatives
Agency request - $106 billion in budget authority and $95 billion in outlays. This reflects
a growth of 20% in budget authority above 1975. The outlays will cover the full costs of
inflation plus $2 billion in program growth.
GERALD FORD
2
Limited real program growth - $104 billion in budget authority and $94 billion in outlays.
This reflects a growth of 17% in budget authority above 1975. The outlays will cover the
full costs of inflation plus $1 billion in program growth. Reductions to reach this level
reflect actions to improve Defense operating efficiency, such as eliminating marginal pay-
related benefits and manpower.
Constant program level - $102 billion in budget authority and $93 billion in outlays.
This reflects a growth of 15% in budget authority above 1975. The outlays will cover
the full costs of inflation. Reductions to reach this level include lower priority
operating and force modernization programs, which have a minimal impact upon force
capability and readiness. Some issues will encounter congressional opposition.
Fiscal constraint level - $100 billion in budget authority and $92 billion in outlays.
This reflects a growth of 13% in budget authority above 1975. The outlays will cover
inflation but will require a $1 billion reduction in real program. Reductions to reach
this level include further reductions in Defense manpower and possible adjustments to the
anticipated October 1975 pay raise. Reduced Defense capabilities would result.
The table on the following page summarizes the reductions from the Defense forecast to reach each of
the alternative Defense budget levels.
GERALD
R.
December 6, 1974
FORD
FY 1976
use Issues
($ millions)
Limited Real
Constant
Fiscal Constraint
Program Growth
Program Level
Level
BA
Outlays
BA
Outlays
BA
Outlays
CURRENT DEFENSE FORECAST
106,000
95,000
106,000
95,000
106,000
95,000
Possible Reductions:
2. Pay & Benefits
(428)
(406)
(428)
(406)
(1,108)
(1,086)
A. Commissary subsidy
208
190
208
190
208
190
B. Reenlistment leave payments
40
36
40
36
40
36
C. Junior enlisted travel entitlement
60
60
60
60
60
60
D. Reenlistment bonuses
120
120
120
120
200
200
E. Government pay raise - 6%
600
600
3. Manpower
(102)
(92)
(247)
(237)
(402)
(392)
A. Pacific manpower
90
80
140
130
140
130
B. Civilian employment
95
95
190
190
C. Officer graduate education
12
12
12
12
12
12
D. Military personnel
60
60
4. Force Modernization
(1255)
(220)
(2471)
(607)
(3311)
(777)
A.
Shipbuilding
455
60
571
67
571
67
B. Procurement level (excl. shipbuilding)
800
160
1500
300
2200
440
C. R&D level
400
240
400
240
D. B-1
140
30
5. Administrative Actions
50
45
330
300
360
330
6. Force Structure
(125)
(120)
(201)
(190)
(201)
(190)
A. Army 16 Division schedule
75
70
75
70
75
70
B. Navy carriers
50
50
50
50
50
50
C. Reserve forces
GERALD
76
70
76
70
7. Intelligence Programs
FORD
113
30
235
92
400
200
8.
Navy Petroleum Reserve
270
270
270
400
270
400
TOTAL REDUCTIONS
2343
1183
4182
2232
6052
3375
ADJUSTED DEFENSE FORECAST
104,000
94,000
102,000
93,000
100,000
92,000
December 6, 1974
wis
Pay and Benefits
DEPARTMENT OF DEFENSE
1976 Budget
Issue #2: Pay and Benefits
In recent years the most significant Defense growth area has been in personnel-related costs. This
category has grown from 42% of the defense budget in 1968 to a level of 55% by 1974, even though total
manpower declined by about one-third over the same period.
A large element of that growth has been accounted for by major pay increases associated with the now
successful effort to achieve an all volunteer armed force. In addition, pay costs have been boosted by
automatic annual increases in military and civilian pay, both active and retired, and the frequent longevity
increases in both systems.
As a result of these changes, military pay scales are now comparable with those of civilians in both
the public and private sectors. While salaries have been brought in line, little has been done to scale
back the plethora of military pay benefits which were initiated when military salaries were quite low. A
review is also called for in the comparability linkage between civilian salaries in the public and private
sectors. None of these actions would adversely affect military capabilities or readiness. Potential
actions include:
($ millions)
FY 1976 Savings
Terminate the direct subsidy to commissaries from appropriated fund and
pass the costs directly on to the commissary patrons.
-190
Limit reenlistment leave payments to enlisted personnel to thos currently
enjoyed by officers and civilian personnel.
-36
Continue the existing policy of no travel entitlements to junior enlisted
personnel with less than four years' service.
-60
Go to a permanent policy of paying reenlistment bonuses in annual increments.
-120
Initiate a major review of salary comparability between the public and private
--
sectors.
GERALD TORD
Total
406
December 4, 1974
Department of Defense
1976 Budget
Issue # 2A: Commissary Subsidy
Statement of Issue
Should the direct subsidy to commissaries from appropriated funds be terminated and the costs passed
directly on to the commissary patrons?
Background
The Defense commissary system was initiated to meet the needs of military personnel stationed at remote
locations and evolved into an economic benefit to offset low military salaries. Today the military salaries
are comparable with civilians, but the Defense subsidy remains unchanged.
Alternatives
#1. Continue the present program (DOD recommendation).
#2. Terminate the existing subsidy on October 1, 1975 and submit legislation in January to implement
this change (OMB recommendation).
Analysis
July 1-Sept.
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
o
($ Millions)
Alt. #1 (DOD req.)
272
270
287
285
72
72
287
287
Alt. #2 (OMB rec.)
272
245
79
95
0
10
0
0
Termination of the $287 million annual subsidy for 27,000 civilian and military direct labor personnel employed
in DOD commissaries would reduce the average commissary savings from 22% to about 10-12% over commercial stores.
Implementing this change in connection with the October 1, 1975 pay raise is suggested to offset partially the
adverse impact of the higher prices upon commissary patrons. Legislation will be required to implement this
proposal.
CERALO
FORD
2
Agency Request: Defense believes no action should be taken at this time because of potential adverse
impacts upon the all-volunteer force (AVF) and military morale.
OMB Recommendation. The commissary direct labor subsidy is no longer warranted by either the conditions of
remote locations or inadequate pay levels and it should be eliminated. This subsidy is not needed for the
AVF because the primary target group for first term enlistment of 17-20 year olds has little interest in
commissary privileges.
December 4, 1974
GERALD 1980
Department of Defense
1976 Budget
Issue #2B: Reenlistment Leave Payments
Statement of Issue
Should legislation be submitted limiting reenlistment leave payments for enlisted personnel to those
of officers and civilians?
Background
Enlisted personnel under existing legislation are entitled to a cash payment of up to 60 days unused
leave at each reenlistment. Officers and civilians, however, are entitled to a maximum 60-day payment only
once at the end of a career.
Alternatives
#1. Attempt to reduce leave payments administratively by directing people to use their leave.
#2. Submit legislation to limit enlisted member cash payments for unused leave to a career total of
60 days.
Analysis
GERALD
July 1 - Sept.
1976
30, 1976
1977
Budget Authority/Outlays
($ Millions)
FORD
BA
0
BA
0
BA
0
Alt. #1 (Agency req.)
301
306
73
97
285
264
Alt. #2 (OMB rec.)
261
270
53
75
205
190
Annual leave is provided for rest and recreation purposes but has become a vehicle for large cash
bonuses for enlisted men. Historically, career enlisted personnel have converted about ten days leave
annually to cash payments at the end of each enlistment. Defense has decided upon administrative action
to encourage greater use of leave, but they do not propose to effect permanent changes in the law. The 1976
budget currently reflects a $40 million savings from greater utilization of unused leave, but these funds
may be restored by reclama action. A surer, permanent way to correct this situation is a statutory change
limiting payment for unused leave to a career maximum of 60 days - the same benefit currently applicable
to officers and civilians.
Agency Request: Alternative 1. Defense has issued a directive encouraging personnel to use more of their
leave. Implementation is anticipated to reduce cash payments for unused leave by up to 50%.
OMB Recommendation. Alternative #2. Enactment of a statutory change would provide a permanent upper limit
on cash payments and would bring the enlisted entitlement in line with those of officers and civilian
personnel.
GERALO
and
Department of Defense
1976 Budget
Issue #2C: Junior Enlisted Travel Entitlements
Statement of Issue
Should existing entitlements for travel and transportation allowances be extended to certain junior
enlisted personnel?
Background
The FY 1975 budget provided for the extension to all junior enlisted personnel of entitlement to
travel and transportation allowances now available only to senior enlisted personnel at a cost of
$239 million. The Congress denied these funds for reasons that included high program cost, the potential
increase in the number of dependents overseas, removal of a reenlistment incentive and rejection of the
equity argument when so many entitlements are differentiated by rank. The FY 1976 budget would again
request these funds but only for a smaller group of junior enlisted personnel who have agreed to an active
duty commitment of at least four years.
Alternatives
#1. Extend travel and transportation allowances to junior enlisted personnel who have a four-year
active duty commitment (Agency req.).
#2. Extend travel and transportation allowances to all junior enlisted personnel.
#3. Retain the current policy of providing travel and transportation allowances only to enlisted
careerists (OMB rec.).
GERALD FORD
Analysis
July 1-Sept.
1974
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1 (Agency req.)
0
0
0
0
60
60
15
15
60
60
Alt. #2
0
0
0
0
184
184
46
46
184
184
Alt. #3 (OMB rec.)
0
0
0
0
0
0
0
0
0
0
2
Equity alone should not be the basis for extending the entitlement to junior enlisted personnel
inasmuch as the entire military pay structure is based on different allowances for individuals of
different grade and officer/enlisted status. Providing these entitlements in the first term of
service would remove an inducement for a junior enlisted service member to reenlist since he will
already be eligible for full benefits before he reaches his first reenlistment. On the other hand,
by not providing these new allowances, it can prove an incentive for him to seek both promotion and
reenlistment. An equity argument is significantly less compelling in an all-volunteer force than in
a draft situation where draftees have no choices.
Agency Request: Alternative #1. The Department believes that extending the entitlement to junior
enlisted personnel who have a four-year commitment would be equitable and would encourage longer
terms of service.
OMB Recommendation: Alternative #3. Both enlistments and reenlistments are generally exceeding
expectations, thus the existing compensation structure appears adequate.
BERALD
?
December 4, 1974
FORO
Department of Defense
1976 Budget
Issue #2D: Reenlistment Bonuses
Statement of Issue
Should attraction and retention incentives be reduced in view of the favorable enlistment and
reenlistment situation?
Background
Current law provides authority for an enlistment bonus of up to $3,000 and for a Selective
Reenlistment Bonus (SRB) of up to $15,000. These provisions are designed to attract and retain
members with special qualifications and skills and to avoid chronic shortages. They were designed
to be readily started, stopped or modified to reflect changing needs of the armed forces for quantity,
quality and experience levels. The SRB can be paid in a lump sum or in annual installments. A recent
decision was made that only annual installments would be authorized for the future. The Agency request
is based on annual installments only in FY 1975 with lump sum bonuses included in all other years.
Alternatives
#1. Maintain attraction and retention incentives at currently planned levels and reverse the
approved conversion of lump sum bonuses to annual payments (Agency req.).
#2. Maintain attraction and retention incentives at currently planned levels but continue the
conversion of lump sum bonuses to annual payments (OMB rec.).
#3. Suspend use of the enlistment bonus, fund the Selective Reenlistment Bonus program at one-half
of the Defense request and continue the conversion of lump sum bonuses to annual payments
(Fiscal constraint level).
GERALD FORD
2
Analysis
July 1-Sept.
1974
1975
1976
30, 1976
1977
1978
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
-
($ Millions)
Alt. #1 (Agency req.)
0
0
0
0
0
0
0
0
0
0
0
0
Alt. #2 (OMB rec.)
0
0
0
0
-120
-120
-35
-35
-77
-77
-57
-57
Alt. #3
0
0
0
0
-200
-200
-55
-55
-156
-156
-136
-136
Actual experience through 31 October 1974 indicates that enlistments and reenlistments are running
substantially ahead of those programmed in the Service budget estimates. In particular, Army is
currently above its planned strength and has exceeded its recruiting quotas for FY 1975 to date.
Recruit quotas for the next few months have been reduced. In light of recent economic forecasts, DOD
should continue to exceed its attraction and retention goals through FY 1977 even without skill
differential pays.
While the Services are facing less and less difficulty in meeting their numerical strengths, they
continue to experience significant skill mismatch problems. Roughly 90,000 military personnel are
surplus to requirements in skills better than 120% manned. A comparable deficit exists in skills less
than 80% manned. Traditionally, Defense has resorted to bonus payments in its attempts to channel
manpower into shortage skills. The Services, however, have recently initiated retraining, promotion
and retention policy changes designed to shift personnel from overmanned to undermanned skills. This
approach to specialty imbalance problems may prove to be less costly and more effective than bonus
payments.
Agency Request: Alternative #1. The Department believes that converting lump sum bonuses to annual
payments will reduce the incentive value of these bonuses significantly for what are primarily short-
term savings. For both qualitative reasons and for avoiding skill imbalances, the Department believes
the planned programs should be maintained.
OMB Recommendation: Alternative #2. The current favorable reenlistment situation, combined with recent
policy incentives to manage the skill shortage problem, provides an ideal climate to reduce these costs.
A change can be made in later years if there is an adverse impact on retention.
GERALD
December 4, 1974
Department of Defense
1976 Budget
Issue #2E: Government Pay Raise
Statement of Issue
Should a Presidential commission be established to conduct a comprehensive review of possible
changes in Federal compensation practices and should the FY 1976 Budget plan for a maximum increase
of 6% in Federal pay?
Background
A strong case can be made that the current method of setting Federal pay rates is resulting in
comparability plus, particularly in the context of total compensation. This case alleges that the
combination of the virtually automatic within grade increases, the fact of grade escalation, the
exclusion of large numbers of lower paid groups from pay surveys, the extremely generous retirement
formula, and other fringe benefits have resulted, over the years since the comparability principle
was set, in Federal total compensation that is excessive and highly inflationary. These questions
pertain not only to G.S. rates but also the wage board system and retired pay. On the wage board
system, the "Monroney Amendment" has resulted in wages more than 10% ahead of the locality prevailing
rate in many areas and added costs to Defense of over $50 million. The appropriateness of the CPI,
and particularly the 1% "kicker," as a device to adjust Federal retirement annuities can also be
questioned in that Federal retirees may be somewhat cushioned from the effects of CPI increases by
health insurance and home ownership.
Alternatives
#1. Retain the current policies for adjusting military and civilian pay and retirement annuities
and plan on a major pay increase October 1, 1975 (Agency req.).
#2. Appoint a Presidential commission to conduct a comprehensive review of possible changes in
Federal compensation practices (OMB rec.).
#3. Appoint a Presidential commission and plan on only a 6% pay increase on October 1, 1975
(Fiscal constraint level).
2
Analysis
July 1-Sept.
1974
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
o
BA
o
BA
0
-
($ Millions)
Alt. #1 (Agency req.)
-
-
-
-
1975
1915
663
702
2664
2604
Alt. #2 (OMB rec.)
-
-
-
-
1975
1915
663
702
2664
2604
Alt. #3 (Fiscal constraint level)
-
-
-
-
1375
1315
460
488
1854
1817
There are a series of ongoing studies and proposals for change in the area of Federal pay practices.
Civil Service Commission has started a major study of a total compensation survey process and
methodology. The Commission is also studying the feasibility of using locality rates for lower graded
General Schedule employees. The Department of Defense will soon begin the Third Quadrennial Review of
Military Compensation. Recent decisions have been made to push for an increase in the employee's
contribution to retirement and insurance programs and to change slightly the retirement adjustment
mechanism. Defense has also decided to request legislation repealing the "Monroney Amendment" which
has resulted in unwarranted increases in wage board pay rates. A Presidential commission could
possibly serve to assure that these various efforts result in a coherent whole and could serve to
mobilize Congressional and public support for change.
It should be noted that basing the FY 1976 budget on only a 6% increase would possibly prematurely
signal a Presidential intention to submit an alternative plan under the Federal Salary Comparability
Act.
Agency Request: Alternative #1. The Defense budget is based on the existing system. However, we
believe Secretary Schlesinger would support a major review of current policies.
OMB Recommendation: Alternative #2. Current policies appear to be highly inflationary. It has been
over 10 years since a comprehensive review was made. A new look would be timely.
DERALO
December 4, 1974
FORD
#3 Manpower
Department of Defense
1976 Budget
Issue #3: Manpower Levels
Defense military and civilian manning levels have varied significantly in recent years. The following
table reflects the buildup from the Vietnam War (1968) and the impact of the Vietnam phasedown and the shift
to a 1 1/2 war strategy after 1970.
Actual Manning
Defense Request
Personnel (000)
1964
1968
1974
1975
1976
Military
2,685
3,547
2,161
2,137
2,113
Civilians
1,035
1,287
1,015
995
995
Total
3,720
4,834
3,176
3,132
3,108
Military manpower is now about 20% below the 1964 pre-Vietnam level while civilian manpower has declined
by 4%. The major increases in personnel related costs in recent years place a high premium on a more rigorous
review of personnel requirements. While some improvement has occurred, opportunities exist for further man-
power reductions through productivity improvements and more efficient deployment and basing patterns overseas
and at home.
The following manpower reductions are recommended:
1976
Savings
Personnel
($ millions)
Military
Civilian
Adjust Pacific manpower levels and
$140
5,300
2,000*
accelerate Thailand withdrawals
Impose a 1.5% productivity savings
95
15,000
upon civilian manpower
15% cutback in the number of officers
12
500
GERALD
in full time graduate degree programs
$247
5,800
17,000
FORD
*Does not include an additional 8,200 reductions in indirect hire personnel.
LIGRARY
Dec ember 4, 1974
Department of Defense
1976 Budget
Issue #3A: Pacific Manpower
Statement of Issue
Should military and civilian support manpower in the Pacific be reduced, and should withdrawals from
Thailand be accelerated?
Background
Throughout the Pacific, base structure and manning levels have been generated as an historical legacy
of World War II and the Korean and Vietnam wars. Bases established to support combat forces continue to
exist even though sponsoring units have been withdrawn or redeployed. While some reductions in support
personnel are being planned by DOD, the additional reductions can be accomplished without loss of combat
capabilities or combat strengths.
In addition to support personnel reductions, Thailand force redeployments currently planned for 1976
can be accelerated into 1975 without loss of contingency combat capability.
Alternatives
#1. Continue with the current defense plan which includes some reductions in Japan, Okinawa and
Taiwan, Air Force headquarters reductions in Hawaii, and 1976 force redeployments from Thailand.
#2. In addition to the reductions provided by Alternative 1, reduce support manpower in the Pacific
by 5,300 military and 10,200 direct and indirect civilian spaces by end FY 1976.
#3. Same support manpower reductions as Alternative 2 and accelerate force redeployments from Thailand.
Analysis
July 1 - Sept.
1976
30, 1976
1977
Budget Authority/Outlays
BA(A)
0(A)
BA(A)
0(A)
BA (A)
0(A)
($ Millions)
Alt. #1 (Agency req.)
--
--
--
--
--
--
Alt. #2
-90
-80
-40
-40
-160
-160
Alt. #3 (OMB rec.)
-140
-130
-40
-40
-160
-160
The additional support manpower reductions proposed in alternative #2 would result from the
following actions:
Hawaii: Consolidate Pearl Harbor base support functions with those at Hickam Air Force Base
(600 military and 400 civilians).
Japan and Okinawa:
Close Sasebo Naval Base and transfer functions to Yokosuka and Subic Bay (200 military and
600 civilians)
Phase-out Army Corps headquarters in Japan and logistics complex on Okinawa (2,700 military
reassigned to combat units, 6,100 civilian reduction).
Reduce support manpower at Yakota and Kadena Air Force bases to levels comparable to other
Air Force installations of similar size (2,200 military, 1,800 civilians).
Philippines: Support manpower reductions at Clark Air Force Base (1,700 military, 1,100 civilians).
Korea: Reduce Air Force support personnel at Osan Air Force Base (350 military, 150 civilians).
Taiwan: Reductions in support functions at Taipei and Tainan Air Force Base (280 military, 120
civilians).
Alternative #3 would, in addition, redeploy Air Force units in Thailand as follows:
GERALD
?
Withdraw all B-52 units to Guam by June, 1975.
FORD
Consolidate all remaining forces in Thailand at U-Tapao Air Force Base by June, 1975.
These actions would reduce Air Force end-strength by 5,500 military and 1,300 civilian spaces
by the end of FY 1975 instead of end FY 1976 as currently planned. Contingency combat capabilities,
as specified in NSC guidance, would still be maintained. However, NSC may object to a reduction of
U.S. presence in Thailand earlier than planned.
Agency Request: Alternative #1. Defense believes that currently planned support reductions are
sufficient. DOD and Air Force would support accelerated Thailand force withdrawal but NSC is likely
to oppose.
OMB Recommendation: Alternative #3. Proposed actions can be accomplished without affecting
military capabilities. Visible U.S. presence in each allied nation in the Pacific is retained.
HALD
P.
FORO
December 4, 1974
Department of Defense
1976 Budget
Issue #3B: Civilian Employment
Statement of Issue
Should Defense civilian employment be further reduced in FY 1976 in recognition of anticipated
productivity improvements?
Background
Defense civilians constitute over half the Federal work force. Despite large reductions in force
structure and facilities over the past ten years, there has been only a 4 percent reduction in civilian
employment while military manpower levels are 20 percent below those of 1964. Civilianization of some
military positions accounts for a portion of this difference.
Alternatives
#1. Hold Defense civilian employment to current levels (Agency req.).
#2. Reduce Defense civilian employment by 1.5 percent from the levels requested (OMB rec.).
#3. Reduce Defense civilian employment by 3 percent from the levels requested.
2
Analysis
July 1-Sept.
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
($ millions)
Alt. #1 (Agency req.)
0
0
0
0
0
0
Alt. #2 (OMB rec.)
-95
-95
-48
-48
-190
-190
Alt. #3
-190
-190
-95
-95
-380
-380
July 1-Sept.
1974
1975
1976
30, 1976
1977
End/Year Full Time Permanent
Civilian Employment
Alt. #1 (Agency req.)
973,814
963,600
963,600
967,600
967,600
Alt. #2 (OMB rec.)
973,814
963,600
947,000
953,000
953,000
Alt. #3
973,814
963,600
935,000
939,000
939,000
For several years, a joint interagency task force has been developing and refining productivity
measures for the Federal Sector. Some 60 percent of the Federal Sector work force has been covered
by output per manyear measures. Productivity for the total measured sample rose at an average annual
rate of 1.6 percent a year from FY 1967 to FY 1973. If the Department of Defense could achieve an
overall productivity improvement of this magnitude, a minimum of 15,000 spaces in one year or up to
30,000 spaces in two years (1974-1976) could be saved.
Agency Request: Alternative #1. Defense believes that FY 1975 congressional action has accounted for
near term productivity savings and that no further productivity increases should be anticipated at this
time.
OMB Recommendation. Alternative #2. Civilian manpower is one of the "softest" areas in Defense.
Numerous opportunities for productivity efficiencies exist at bases, depots, shipyards and in-house
laboratories,
GERALD
December 6 1974
Department of Defense
1976 Budget
Issue #3C: Officer Graduate Education
Statement of Issue
Should the number of military officers receiving full-time free graduate education be reduced?
Background
Defense has a variety of programs to provide officers with the opportunity to obtain a graduate degree.
These range from part-time programs where the individual may receive no support or as much as 75% of tuition,
to full-time programs with Defense paying all costs (including pay and allowances). Presently, over 3900
officer manyears are devoted to the full-cost program.
Alternatives
1. Continue full cost program at a slightly reduced level in FY 1976 pending completion of DOD study
(Agency request).
2. Reduce the proposed FY 1976 program by 521 manyears on the strength of OMB study now available
(OMB recommendation).
Analysis
7/1 -
1974
1975
1976
9/30/76
1977
1978
1979
1980
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Graduate Education:
Agency request
88.9 88.9
89.4 89.4
87.1 87.1
24.2 24.2
83.1 83.1
80.3 80.3
80.3 80.3
76.1 76.1
OMB recommendation
88.9 88.9
89.4 89.4
74.6 74.6
20.3 20.3
61.9 61.9
61.9 61.9
61.9 61.9
61.9 61.9
Manyears
Agency request
4114
3906
3671
3674
3505
3385
3385
3210
OMB recommendation
4114
GERAL
906
3150
3045
2610
2610
2610
2610
Proposed reduction
-521
-629
-895
-775
-775
-600
FORD
An OMB study entitled Military Officer Graduate Education (September 1974) indicated that the inventory
of officers with graduate degrees exceeds requirements, that greater usage could be obtained from those
personnel already having degrees, that less costly methods exist to obtain officers with degrees, that
requirements methodology results in excessive graduate production, and that the Defense graduate schools
are too costly. Furthermore, despite a 10% decline in requirements since FY 1974 the number of degrees
is projected to increase by 10%. Thus, over 20% of all non-medical and non-legal officers will have a
graduate degree.
Agency Request. Defense believes the program should continue on its present course until its own study
is completed in the Spring of 1975. Any reduction now would provoke a highly emotional reaction from
the military services.
OMB recommendation. This would provide enough graduates to meet shortages in principal scientific
and technical disciplines, and many other fields, but contemplates a tightening up of requirements, greater
use of in-house military training and part-time educational programs, and closer screening of on-board
officers already having degrees.
GERALD LIBRARY FORD
December 4, 1974
Department of Defense
1976 Budget
Issue #3D: Military Personnel
Statement of Issue
Should military end strength be reduced by decreasing transient manpower authorizations?
Background
To prevent unit undermanning and thereby maintain readiness in peacetime, the Military Services
assert that transient manpower authorizations are needed. These authorizations offset the personnel
not available to a unit due to their traveling between assignments. However, leave taken by individuals
in units is not considered. Of the 2,100,000 end strength requested by the Services in FY 1976 and
FY 1977, approximately 96,000 (or 4.6%) are for transient authorizations.
Alternatives
#1. Maintain the current system of transient authorization (Agency req.).
#2. Reduce transients by 20,000 (about one-fourth of the transient requirement). This would
mean that some units, primarily support activities, would be undermanned during peacetime,
but would be fully manned in a time of mobilization (fiscal constraint level).
Analysis
July 1-Sept.
1974
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
o
BA
0
BA
0
BA
o
($ Millions)
Alt. #1 (Agency req.)
0
0
0
0
0
0
0
0
0
0
Alt. #2 (Fiscal constraint level)
0
0
0
0
-60
-60
-56
-56
-224
-224
GERALD FORD
2
The impact of transient manpower on readiness and mobilization is unclear. If a war or an alert were
declared, leave would be cancelled and transients would report to their units. Inasmuch as both combat
and support activities are currently programmed at near 100%, mobilization would cause these activities
to be manned in excess of 100%.
Agency Request: Alternative #1. The agency will maintain that the total transient authorization is
necessary in order to preclude an undermanning of units and a consequent reduction in unit effectiveness.
Fiscal Constraint Level: Alternative #2. Leave taken in units is not a factor in developing transient
requirement; while conversely leave taken in route is a factor. To reduce the transient requirement by
20,000 could mean that these activities would more nearly approximate the number of personnel required to
respond to mobilization requirements.
December 4, 1974
GERALO LISBALL FORD
#4 Force Modernization
Department of Defense
1976 Budget
Issue #4: Force Modernization
Funding of R&D and procurement of new Defense equipment has been substantial, but relatively
constant over the past several years at a level of about $26 billion in BA. In 1976, however,
Defense is requesting a $10 billion increase to a level of $36 billion. It is unlikely that this
37% increase will be acceptable to Congress.
Of the $10 billion increase in 1976, Defense has budgeted an estimated $6 billion for inflation
and cost growth (particularly in shipbuilding programs), and $ 4 billion for real program increases.
The attached issues reduce the 1976 and 1977 modernization levels by:
Denying $0.8 billion of an additional request of $1.1 billion for greater than anticipated
inflation.
Identifying deferrals and cancellations in R&D and procurement programs that can be accomplished
with minimal impact on force capabilities or readiness.
A modernization level of $33 billion is recommended, a reduction of $2.5 billion from the Defense
request but an increase of $7 billion from 1975. This increase will provide real program growth even
after anticipated Congressional cuts.
In addition, we have identified two issues, which apart from 1976 funding considerations, require
special attention:
Shipbuilding Programs: What actions to take in response to (1) perceived shipyard capacity
limitations; (2) Defense plans to break established "full-funding" procedures in 1975; (3)
Title VIII requirements for an all nuclear Navy.
B-1 Production: Whether to request initial production funding in 1976 with the prospect of
strong congressional opposition, or to defer initial funding to 1977 and major procurement
to 1978.
CERALD
+
1080
December 6, 1974
LIBRARY
Department of Defense
1976 Budget
Issue #4A: Shipbuilding
Statement of Issues
There are three issues: (1) should DOD adhere to the policy of full funding shipbuilding in FY 1975?
(2) should the level of shipbuilding be reduced on the basis of schedule and capacity considerations? (3) should
DOD comply with Congress's desire for surface nuclear ships even though these ships may be too expensive?
Background
Full Funding. DOD procurement programs are financed under the principle of full funding meaning that funds
to cover the total estimated cost of an item are available at the time procurement action is initiated. Congress
has insisted that this policy be followed and OMB Circular A-11 prescribes it as overall government policy. The
FY 1975 shipbuilding budget was requested and defended to the Congress on a fully funded basis. Subsequently,
the estimates for escalation and cost growth in this program increased by $.9B, thereby precluding award of the
entire program. Recently, the Secretary of Defense decided to award the FY 1975 program even though funds are
not in hand to complete it and request $.9B in the FY 1976 budget. In waiving full funding the Secretary of Defense
will present Congress with a "fait accompli" since the $.9B for the FY 1975 escalation and cost growth will be
committed before Congress provides the funds.
Attack Submarines. In FY 1975 the Navy plans to award five SSN's on an option contract (three with FY 1975
funds and two in FY 1976). There are currently only two builders of nuclear attack submarines. Electric Boat has
a backlog of SSN's and does not need award of additional ships until FY 1977 to maintain a continuing production
line. Newport News, on the other hand, has already broken its SSN production line because it has been unable to
compete with Electric Boat's prices in the past and no change in their price competitiveness is anticipated. On
the basis of the Navy's most optimistic schedule, Newport News would require only four submarines prior to a
second award scheduled for FY 1977. However, due to capacity limitations three submarines would be sufficient
until FY 1977. In FY 1977 both Electric Boat and Newport News will need additional submarines and, therefore,
competition should be keener.
Nuclear Cruiser/Title VIII. The Navy is requesting $116M in advance procurement funds for a new ship, the
14817
Nuclear Strike Cruiser (CSGN), planned for authorization in FY 1977. The first ship is estimated to cost $1.1B
and will be equipped with the first AEGIS anti-missile defense system. The CSGN concept appears to stem from
Title VIII of the FY 1975 authorization act which directs that future major combatant vessels be nuclear powered
unless the President indicates that it is not in the national interest to do so. OMB has supported nuclear power
for submarines; however, we do not feel that the additional capabilities of nuclear ships is worth their additional
2
procurement and operating costs. We have particular concern with CSGN since it is not only nuclear powered, but
also because it sets forth a major new capital ship with a signficantly different mission. Since the Navy has
just recently introduced this idea, there are many questions which have not been adequately addressed within DOD
and further analysis is required before embarking on this expensive program.
Alternatives
#1. Agency request, which provides for incremental funding and includes the 5 SSN program and the nuclear
cruises.
#2. Full funding. Adhere to full funding principle in FY 1975 on a line item basis. Defer award of
FY 1975 ships which cannot be full funded until Congress provides the funding.
#3. Nuclear attack submarines. Reduce the Navy's FY 1975 and FY 1976 five boat program by two submarines.
#4. Nuclear cruiser/Title VIII. Build non-nuclear AGEIS ship in FY 1977 and defer decision on CSGN until
FY 1978. Inform Congress that nuclear surface ships are not in the national interest at this time due
to their high cost.
#5. All of the above.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1
Agency request
3,129
187
5,806
973
547
456
6,337
2,196
Alt. #2
Full funding
-
-
-
-
-
-
-
-
Alt. #3
Attack submarines
-455
-60*
-37
-22
+34
-90
Alt. #4
CSGN/Title VIII
-116
-7
-61
-7
-278
-44
Alt. #5 All of the above
-571
-67
-98
-29
-244
-134
*
Based on deleting one SSN from the 1975 (167K) and 1976 (288K) programs.
GERALD
?
FORD
LIBRARY
3
Agency Request: Alternative #1. DOD prefers to waive full funding to expedite award of the 1975 program.
They wish to provide a competitive SSN production capability and are more optimistic about capacity constraints.
Although Secretary Schlesinger may agree that nuclear surface ships are too expensive, Congressional pressure
for such ships would lead him to support the CSGN.
OMB Recommendation. Alternative #5. Full funding should be continued to avoid loss of management visibility,
possible contractual difficulties, and potential Congressional adverse reaction. The attack submarine program
would not suffer and a non-nuclear AEGIS ship is cost effective and would enter the fleet earlier than a CSGN.
December 4, 1974
GERALD 1940
Department of Defense
1976 Budget
Issue #4B: Procurement Level (excluding shipbuilding)
Statement of Issue
What should be the level of defense non-shipbuilding procurement in total obligational authority and
outlays?
Background
Non-shipbuilding procurement is budgeted at $14.5 billion in 1975 TOA. The same level of real resources
in 1976 would require an increase for inflation of 16 percent, or $2.3 billion, for a total of $16.8 billion
in 1976. The Defense request provides for $19.3 billion, an increase of $4.8 billion. This increase includes
the full $2.3 billion inflation allowance, an additional $1.1 billion inflation allowance, and additional
increases of $1.4 billion in such areas as aircraft modifications and spares, communications and electronics
equipment, tank procurement and tactical aircraft procurement (e.g., A-10 and F-15 aircraft).
Alternatives
#1. Approve a level of $19.3 billion in 1976 BA.
#2. Approve a level of $18.5 billion in 1976 BA, a real program increase of $1.7 billion.
#3. Approve a level of $17.8 billion in 1976 BA, a real program increase of $1.0 billion.
#4. Approve a level of $17.1 billion in 1976 BA, a real program increase of $.3 billion.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
BA/Out lays ($ billions)
BA
0(4)
BA
0(A)
BA
0(A)
BA
0(A)
Alt. #1 (Agency req.)
14.5
19.3
4.2
23.6
GERALE
Alt. #2
14.5
18.5
-.16
4.2
-.32
23.6
-.24
Alt. #3 (OMB rec.)
14.5
17.8
-.30
3.7
-.70
22.5
-.87
Alt. #4
14.5
17.1
-.44
3.7
-.98
22.0
-1.2
FORD
778817
Inflation: The additional $1.1 billion request represents an unnecessary hedge against a much greater
than anticipated rate of inflation. Alternatives 2-4 deny $.8 billion of this additional request.
Program Adjustments: Alternatives 3 and 4 assume additional program reductions of $.7 billion and
$1.4 billion respectively. These reductions can be selected from the following list of candidate adjust-
ments which total about $2 billion in 1976 BA.
(1) Aircraft Modifications: Defense has requested an increase of about $400 million in Air Force
and Navy programs, up about 50 percent from 1975. An increase of this magnitude probably could not be
spent in view of large existing installations backlogs ($-200 million).
(2) Tactical Aircraft Procurement:
Defer procurement of AWACS aircraft pending U.S./NATO agreements and completion of AWACS
improvement program. This action has strong support in the Office of the Secretary
because the current versions of AWACS is probably not suitable for NATO deployment. However,
the deferral would be resisted by the Air Force and by Senators Magnuson and Jackson
($-600 million).
Limit F-15 aircraft production to a rate of 72 per year versus the request of 90 aircraft
in 1976 and 108 aircraft in 1977. The lower production rate permits the achievement of
a less costly force mix with the introduction of the new Air Combat Fighter in late FY 1978
($-250 million).
Defer production of Navy CH-53E helicopter procurement in view of development and testing
problems and R&D schedule slippages ($-50 million).
Terminate the production line of the E-2C and A-6 Navy aircraft and the CH-47 and UH-1H
Army helicopters. Requirements for these aircraft are marginal ($-350 million).
(3) Missile Procurement
Provide half of the requested increase for Navy and Air Force air-to-air and air-to-ground
tactical missile procurement, delaying the attainment of inventory objectives ($-240 million).
Defer Trident missile initial procurement funding to FY 1977, recognizing the acknowledged
slip in the Trident missile development program. This deferral would still provide for
deployment of the Trident system in FY 1979 as currently scheduled ($-370 million).
Agency Request: Alternative #1. Defense believes that the requested level provides a good hedge against
congressional reductions.
OMB Recommendation. Alternative #3 provides a realistic increase for inflation and a real program increase
even after anticipated congressional cuts.
GERALD 444018 FORD
December 4, 1974
Department of Defense
1976 Budget
Issue #4C: R&D Level
Statement of Issue
What should be the 1976 level of Defense R&D?
Background
The Defense request of $10.4B in BA represents an increase of $1.9B from 1975. About $1.0B of the
increase is due to inflation and to transfers of programs from other appropriations, as mandated by Congress.
The remaining $0.9B represents program increases in strategic systems (e.g., B-1, Trident), tactical systems
(e.g., Air Force and Navy lightweight fighter aircraft, Army Air Defense systems), and technology base pro-
grams (e.g., lasers, advanced guidance systems, electron devices).
Alternatives
#1. Provide a level of $10.4 billion in 1976 BA (agency req.).
#2. Provide a level of $10.0 billion in 1976 BA (OMB rec.).
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
BA/Outlays ($ billions)
BA
0(D)
BA
0(A)
BA
0(D)
BA
0(A)
Alt. #1 (Agency req.)
8.5
10.4
2.7
11.0
Alt. #2 (OMB rec.)
8.5
10.0
-.24
2.7
-.12
11.0
-.04
The alternative level of $10.0 billion would still provide a $1.5B increase from 1975 including a real
increase of about $.5B and would:
Provide a full range of strategic program options.
Protect high priority general purpose and technology programs.
Slow down or terminate several programs of marginal value.
Illustrative program reductions to reach a $10.0B level are provided in the attached table.
Agency Request: Alternative #1. The Department believes that the requested level will provide a cushion
against congressional cuts.
OMB Recommendation. Alternative #2. This provides an increase of $1.5 billion from 1975 which is sufficient
to cover inflation, provide for some congressional cut and allow some real program growth.
GERALD
R.
FORD
4817
December 4, 1974
Candidate RDT&E Program Reductions
(In $ millions)
Possible
1976 Request
Reduction
Comments
Possible Cancellations
Advanced Medium STOL Transport
55
-55
)
Navy Carrier-on-board-delivery
)
aircraft
25
-25
)
Marginal program requirements
EF-111 Aircraft
35
-35
)
Subtotal
-115
Possible slow-down and deferrals
Cruise Missile Programs
193
-70
Consolidates parallel Navy and A.F. programs.
Lightweight Fighter Programs
383
-30
Two month delay in Navy program.
Surface Effect Ship
79
-40
Limits program to technology effort.
UTTAS Transport Helicopter
85
-25
Recognizes 1975 program slip.
Site Defense of Minuteman
160
-20
Recognizes reorientation of program to development
Improvements
of sub-systems and components.
Fleet Ballistic Missile Accuracy /
70
-50
Slow-down because of marginal requirement.
Miscellaneous minor reductions
-150
Subtotal
-385
TOTAL
-500
GERALD
FORD
kwain
December 4, 1974
Department of Defense
1976 Budget
Issue #4D: B-1
Statement of Issue
Should B-1 initial production funding be delayed by one year?
Background
Current DOD plans call for a November, 1976 B-1 production decision with major development to begin
in FY 1977. In anticipation of a go-ahead decision, initial production funds are included in the FY 1976
budget request with major procurement funding in FY 1977. Inflation and cost growth have already
increased the investment cost for the full 244 aircraft program from $11 billion in June 1970 to
$18.6 billion today. Aircraft unit costs have increased from $46 million to $76 million over the same
period.
Alternatives
#1. Provide initial funding for advanced procurement in the FY 1976 budget, planning for full-scale
production in FY 1977.
#2. Delay initial procurement funding until FY 1977 and full-scale production until FY 1978.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0( )
BA
0()
BA
0( )
BA
0()
($ Millions)
Alt. #1 (Agency req.)
445
749
199
1,499
Procurement
--
141
79
1,117
R&D
445
608
120
382
Alt. #2
445
672
-15
168
-40
491
-200
Procurement
--
--
--
109
R&D
445
GERALD
672
168
382
FORD
The following considerations argue for a production delay:
Congressional opposition. Requesting production funds in the FY 1976 budget, in advance of the
completion of critical development milestones, will be strongly criticized as premature and may
create an adverse congressional climate for the $20 billion B-1 program.
Resolve technical uncertainties. With first flight planned for December 1974, a one year delay
would allow additional time for more complete systems testing and for possible redesigns to
overcome already identified technical problems such as airframe overweight. Congressional
reductions to the FY 1975 R&D program have increased the risk associated with a November 1976
decision date.
Military need. There is no military urgency for the current B-1 production date in view of the
capabilities of the B-52 and FB-111 strategic aircraft which have structural lifetimes extending
beyond 1990.
It should be recognized, however, that SALT considerations may argue against any program delay.
Agency Request: Alternative #1. A delay would be strongly resisted by the Air Force and would appear
inconsistent with public support of the program by Secretary Schlesinger. In addition, the principal
contractors, particularly Rockwell, would experience an employment dip from a schedule delay. NSC is
likely to oppose any program slip because of SALT impact.
Fiscal/Constraint/Level: Alternative #2. Delaying production by one year would avoid a congressional
battle over the program in 1976 and would allow time for more complete systems testing before a major
commitment to production.
CERALD FORD
December 4, 1974
#5 Administrative
Action
Department of Defense
1976 Budget
Issue #5: Administrative Action
Statement of Issue
What kinds of administrative actions can be taken to reduce costs in the Department of Defense?
Background
DOD estimates include funds to continue, at current or increased levels, a number of non-force related
actions such as temporary duty travel, real property maintenance and supply inventories. While these relate
ultimately to military readiness, they can be reduced without noticeable impact on military capabilities.
Alternatives
1. Continue activities and maintain stock levels at the current rate.
2. Direct belt tightening and reduce travel and real property maintenance.
3. Direct belt tightening and reduce travel, real property maintenance and stock levels.
4. Same as #3 but with a greater reduction in real property maintenance.
Analysis
7/1 -
1976
9/30/76
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
($ Millions)
Alternative #1 (Agy request) --
--
--
--
--
--
Alternative #2
-50
-45
-10
-50
-45
Alternative #3 (OMB recom.) -330
-300
-30
-330 -300
Alternative #4
-360 -330
-30
-360 -330
GERALD
Alt. #1
Alt. #2
Alt. #3
Alt. 4
R.
Travel
---
-20
-60
--60
FORD
Real Property Maintenance
---
-30
-70
-100
LIBRARY
Inventories
---
-200
-200
-50
-330
-360
- Travel. Congress is proposing a 10% reduction to federal travel programs in 1975. This proposal
would continue the new limitation into 1976 and 1977.
- Real Property Maintenance. The OMB preferred alternative is 60% of a similar reduction proposed in
the President's Budget Restraint message of November 26, 1974 for a six-month period.
- Inventories. As contractor backlogs decrease and deliveries accelerate the inventory required to be
on hand during the reorder period can be reduced. The alternatives provide for a 15-day reduction in each
year based on average production time of 9 months. Defense prefers not to anticipate but to reflect after
the fact reductions.
Agency request. Alternative #1 - The DOD would prefer not making these adjustments to provide a hedge
against inflation and because of possible, potential impact on readiness.
OMB Recommendation. Alternative #3 -
GERALD FORD
#6 Force Structure
Department of Defense
1976 Budget
Issue #6: Force Structure Overview
There have been significant reductions since 1968 in our force structure and active military personnel, as
shown in Table 1. These result from the termination of U.S. combat operations in Southeast Asia and revision
of our ready defense posture from a 2-1/2 to a 1-1/2 war fighting capability. Reduction of the active forces
has been accompanied by greater emphasis on Reserve training and readiness.
Few adjustments are planned for the relatively stable force structure and strength levels of recent years,
and it is to these areas that the issues which follow - principally issues of timing - are addressed. The
alternatives and resultant 1976 savings are listed below.
($ Millions)
Retain the Army's original plan for achieving a 16 division force -
in FY 1978 rather than 1976 as now proposed.
-70
Advance from FY 1977 to 1976 the Navy plan for reducing its aircraft
carrier force from 13 to 12.
-50
Eliminate 60,000 marginal Reserve spaces (mostly support) and some
recent program add-ons that make only a limited contribution to
readiness.
-70
Total
-190
GERALD
FORD
LIBRARY
December 4, 1974
Department of Defense
1976 Budget
Issue #6A: Army 16 Division Force
Statement of Issue
Should the plan for achieving a 16 division force within a military strength of 785,000 be accelerated from
FY 1978 to 1976 as proposed by Army?
Background
The Secretary of Defense is strongly committed to a 16 division Army force as an integral part of the
tail-to-teeth concept, and OMB has also supported the idea. Although Congress approved the requested end
strength of 785,000 for FY 1975, support was not overwhelming and continued approval for future budgets
cannot be assumed.
The formation of new divisions constitutes a major change in U. S. force structure and as such should
have specific Administration approval. A positive Administration commitment to the 785,000 strength needed
to achieve a 16 division force is essential to win Congressional approval.
Alternatives
#1 Increase the Army divisions from 14 to 16 in FY 1976 (Agency request).
#2 Increase to 15 divisions in FY 1977 and 16 in FY 1978 (Recommendation).
Analysis
GERALD
July 1 - Sept. 30, 1976
1974
1975
1976
197T
1977
1978
Budget Authority/Outlays
FORD
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Agency Request
--
--
43
311
115
19
35
130
:
60
Proposed reduction
--
--
--
-75
-70
--
+40
+40
+35
+35
Number of active Army divisions
Agency Request
13
14
16
16
16
16
Alternative
13
14
14
14
15
16
2
In early 1974 the Army initiated a plan to convert support structure to combat forces by creating three
additional divisions by FY 1978. One new division was added in 1975, with Administration approval, and
two more were planned for 1977 and 1978. The plan is based on maintaining 785,000 military end strength.
The FY 1975 Procurement Authorization Act (Nunn Amendment) directed the Army to reduce support structure
in Europe by end FY 1976, with permission to substitute combat units.
Agency request: The Army decided to use the Nunn Amendment as a building block and accelerate by two
years the achievement of a 16 division force. While recognizing that the accelerated buildup will be
attended by key equipment shortages, delayed modernization of the Reserves, extensive billeting of
troops in inadequate housing, and compressed recruiting for the enlarged combat arms requirement; never-
theless, the Army is confident it can contain these difficulties and achieve a 16 division force of
acceptable readiness.
OMB Recommendation. Alternative #2. Reversion to the original plan would place the activation of new divisions
in a feasible time frame consistent with production availability of weapons, completion of buildings, and
spreading the increased combat arms requirements over a longer period. However, Congressional support for
a 785,000 strength level will be more difficult to sustain without the additional divisions to show for it.
GERALD
FORD
LIBRARY
Department of Defense
1976 Budget
Issue #6B: Navy Carriers
Statement of Issue
Should the planned reduction from 13 to 12 aircraft carriers be advanced from 1977 to 1976?
Background
The Navy has been directed to reduce its aircraft carrier deployments to the Pacific by one in 1977. This
would leave two carriers deployed at all times in the Pacific and two in the Atlantic. These deployments
would be supported by a total force of 12 aircraft carriers, down from 13 in 1976.
Decommissioning of the carrier also would entail the decommissioning of five escort ships and deactivation
of five fighter/attack squadrons plus supporting search and rescue, early warning, tanker and reconnaissance
aircraft.
Alternatives
#1. Reduce carrier deployments in the Pacific by one in FY 1977 (Agency request).
#2. Advance the reduction to FY 1976 (OMB recommendation).
Analysis
7/1 -
1974
1975
1976
9/30/76
1977
1978
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
o
($ Millions)
Agency request
0
0
0
0
0
0
0
0
-52
-42
-99
-79
OMB recommendation
0
0
0
0
-50
-50
-15
-15
-99
-79
-99
-99
Military End Strength (000)
Agency request
0
0
0
0
-6
-6
OMB recommendation
0
0
-6
-6
-6
-6
Agency request. For each of the past several years the budget plan has anticipated a reduction of one Pacific
carrier in the following year. Each year the reduction has been postponed. A repetition of this pattern can
be expected in the FY 1977 budget request.
OMB recommendation. The 13th carrier and supporting units are marginal and should be phased out as originally
planned; however, strong objection can be expected from the Secretary of Defense.
December 4, 1974
Department of Defense
1976 Budget
Issue #6C: Reserve Forces
Statement of Issue
Can portions of the Selected Reserve program beyond identified Defense force requirements be eliminated?
Background
Selected Reserve strengths show a decline from 924,000 to 900,000 during the FY 1974-1976 time period.
Options for lower strength levels and reduced support funding are possible without degrading the capability
to meet assigned missions.
Alternatives
#1. Continue the Reserve Forces strength and funding programs as requested by Department of Defense.
#2. Reduce the Selected Reserve strength by 60,000 and deny large funding increases in areas where
the incremental readiness improvement is marginal.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
($ millions)
10RD
Alt. #1 (Agency req.)
0
0
0
0
0
0
0
0
Alt. #2 (OMB rec.)
-8
-7
-76
-70
-19
-17
-149
-141
The recently completed Defense study of reserve requirements identified 45,000 Navy reserve spaces within
currently planned levels which are not required to meet currently planned contingencies.
Readiness objectives could be met while reducing the training required for these 45,000 headquarters
and support Naval Reservists from regular monthly paid drills plus two weeks active duty for training to only
two weeks active duty for training only. In addition, it is likely the Army Reserve Strength will be programmed
to attain an end strength of 226,000 in FY 1976 in lieu of an earlier approved level of 212,400 because of
a strong reclama from the Reserve community. The desirability of the increase appears questionable in that
the level of 212,400 satisfies current readiness objectives. Large proposed budget increases for increased
readiness levels actually are of marginal value and can be eliminated.
Agency Request: Alternative #1. Defense feels that lower strength levels will be reversed by the Congress
and might lead to further Congressional legislative initiatives to manage the Reserves. They feel that
support funding levels, especially those related to civilian technician manning, are "key" to combat readi-
ness.
OMB Recommendation. Alternative #2. Forwe requirements and readiness levels can be fully satisfied by drawing
down the Navy and Army Reserve strengths to the suggested levels.
December 4, 1974
LIBRARY GERALD FORD 8.
#7 Intelligence
#8 Navy Petroleum Reserves
Department of Defense
1976 Budget
Issue #8 : Naval Petroleum Reserves (NPR)
Statement of Issue
Should oil be extracted from Naval Petroleum Reserves #1 (Elk Hills, California) for use by DOD or to reduce
dependence on oil imports?
Background
The Navy administers four reserves of crude oil. Only NPR #1 is sufficiently developed to enable quick
production. Proven reserves at NPR #1 far exceed military requirements under current "worst case" scenarios.
Production from the NPR could help alleviate our dependence on oil imports; however, past efforts to obtain
Congressional authorization for production have failed in the HASC. The most recent effort has been pending
in that committee for a year. No action is anticipated during this session. Because of DOD concern regarding
another Arab oil embargo, they plan to "top-off" all tanks with 18 million barrels of POL at a projected cost
of $270 million. Fuel reserves would then exceed the additional usage projected for wartime.
Alternatives
#1. Request appropriation of $270 million to "top off" fuel tanks and continue to restrict oil production
from NPR #1.
#2. Seek authority to increase production from NPR #1 to cover "topping off" requirements (up to 67,000
barrels per day).
#3. Seek authority to produce up to 160,000 barrels per day from NPR #1 with proceeds to cover costs of
"topping off" and further exploration and development of NPRs #1 and #4.
Analysis
1974
1975
1976
197T
1977
Budget Authority/Outlays
BA
O
BA
0
BA
0
BA
o
BA
O
($ Millions)
Alt. #1 (Agency Request)
270
270
SERALD
Alt. #2
-270
-270
R.FORD
A.
-270
Alt. #3 (OMB Rec.)
-400
FORD
2
The Energy Council (Morton/Zarb) are reviewing alternatives for use of all petroleum reserves. They will
probably recommend production from the Naval Petroleum Reserves but probably not under the auspices of the
Navy.
OSD would probably support increased production. but the NPR office would be opposed. The HASC, which has
jurisdiction for legislation related to NPRs, is opposed to any peacetime use of these reserves.
Agency Request
Alternative #1. DOD believes the positive way to get funding for "topping off" is by direct appropriation.
OMB Recommendation
Alternative #3. This would satisfy two requirements: "topping off" and increased domestic availability.
Wartime requirements would be adequately covered. Continued production in subsequent years would generate
$.4B in revenues annually.
SERALD
FORD
December 4, 1974
Small Agencies
NATIONAL SECURITY COUNCIL
LIBRATT BERALD CORD
Comments
OMB recommendation is based on projection
that the NSC workload will remain
essentially constant. A modest increase
which largely covers space and salary
costs is recommended.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
2,802
2,531
69
1975 current estimate
2,900
2,913
72
1976 agency request
3,118
3,130
75
1976 OMB recommendation.
3,000
3,002
72
Effect of OMB recom-
mendation on agency
request
-118
-128
-3
Transition period
650
750
72
1977 estimate
3,000
3,000
72
U.S. SOLDIERS' AND AIRMEN'S HOME
FORD
Comments
OMB recommendation reflects reduced
funding needs due to stabilization of
Home membership, reduced employment levels,
and reduced usage of the Home hospital.
There are no major outstanding issues.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
14,152
14,125
1,078
1975 current estimate
15,361
17,180
1,031
1976 agency request
15,840
15,853
1,014
1976 OMB recommendation.
15,700
15,705
1,014
Effect of OMB recom-
mendation on agency
request
-140
-148
---
Transition period
3,915
-3,920
1,014
1977 estimate
15,700
15,700
1,014
AMERICAN BATTLE MONUMENTS COMMISSION
GERALD FORD LIBA.
Comments
OMB recommendation allows for the
continuation of the current level
of operations, with modest in-
creases to cover certain rising
uncontrollable costs.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
4,147
4,199
384
1975 current estimate
4,827
4,740
392
1976 agency request
6,240
5,595
392
1976 OMB recommendation.
5,060
4,950
392
Effect of OMB recom-
mendation on agency
request
-1,180
-645
---
Transition period
1,460
1,400
392
1977 estimate
6,135
5,200
392
DEFENSE MANPOWER COMMISSION
FORD
Comments
No Change from Agency Request.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
400
28
4
1975 current estimate
800
1,052
26
1976 agency request
1,300
1,260
1976 OMB recommendation.
1,300
1,260
Effect of OMB recom-
mendation on agency
request
Transition period
160
1977 estimate
CEMETERIAL EXPENSES - ARMY
GERALD R. FORD
Comments
The Secretary of Defense concurs
in the recommendation, which
sharply reduces the Army request.
Full-time
Budget
permanent
authority
Outlays
employment
(in thousands of dollars)
1974 actual
7,898
11,104
197
1975 current estimate
258
7,350
220
1976 agency request
21,011
9,146
252
1976 OMB recommendation
5,617
5,500
235
Effect of OMB recommenda-
tion on agency request
-15,394
-3,646
-17
Transition period
966
1,200
225
1977 estimate
5,400
5,800
225