CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE A CBO P A P E R JANUARY 2009 Long-Term Implications of the Fiscal Year 2009 Future Years Defense Program Report Documentation Page Form Approved OMB No. 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. 1. REPORT DATE 3. DATES COVERED 06 JAN 2009 2. REPORT TYPE 00-00-2009 to 00-00-2009 4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER Long-Term Implications of the Fiscal Year 2009 Future Years Defense 5b. GRANT NUMBER Program 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e. TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION Congress of the United States,Congressional Budget REPORT NUMBER Office,Washington,DC,20515 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES 14. ABSTRACT 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF ABSTRACT OF PAGES RESPONSIBLE PERSON a. REPORT b. ABSTRACT c. THIS PAGE Same as 44 unclassified unclassified unclassified Report (SAR) Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 A CBO P A P E R Long-Term Implications of the Fiscal Year 2009 Future Years Defense Program January 2009 The Congress of the United States O Congressional Budget Office Notes Unless otherwise indicated, all years referred to in this paper are fiscal years, and all dollar amounts are expressed in 2009 dollars of total obligational authority. The methodology used by the Congressional Budget Office for this update is based on that ofthe January 2003 study, The Long-Term Implications of Current Defense Plans. Readers may refer to that publication for a description of the analysis. The projections in this paper deal with resources for the Department of Defense (subfunction 051 of the federal budget) rather than for all defense activities (subfunction 050). On the cover, clockwise from the top left: A U.S. Air Force F-16 Fighting Falcon aircraft is refueled by a KC-135 Stratotanker en route from Kunsan Air Base, Korea, to Eielson Air Force Base, Alaska, January 2008, photo by Staff Sergeant Eric T. Sheler; U.S. Navy personnel aboard the USS Harry S Truman in the Persian Gulf, January 2008, photo by Petty Officer 3rd Class Ricardo J. Reyes; a member of the U.S. Marine Corps during live-fire training at the Udairi Range Complex, Kuwait, January 2008, photo by Sergeant Bryson K. Jones; flight operations aboard the Harry S Truman, January 2008, photo by Petty Officer 2nd Class Felecito Rustique; soldiers board a U.S. Army CH-47 Chinook helicopter in Bamyan Province, Afghanistan, November 2008, photo by Specialist Mary L. Gonzalez. Preface W hat amount of budgetary resources might be needed in the long term to carry out the Bush Administration’s current plans for defense? This Congressional Budget Office (CBO) paper—prepared at the request of the Chairman and the Ranking Member of the Senate Budget Committee—addresses that question. The paper updates the resource projec- tions contained in CBO’s December 2007 paper Long-Term Implications of Current Defense Plans: Summary Update for Fiscal Year 2008, reflecting changes that the Administration made to its defense plans in preparing the President’s budget request for fiscal year 2009. CBO will also publish supplementary data on its Web site (www.cbo.gov) that provide more details about specific programs. In keeping with CBO’s mandate to provide impartial analysis, the paper and supplementary materials make no recommendations. Adam Talaber of CBO’s National Security Division coordinated the preparation of this paper under the supervision of J. Michael Gilmore and Matthew S. Goldberg. David Arthur, Elizabeth Bass, Michael Bennett, Kevin Eveker, Daniel Frisk, Eric J. Labs, Frances Lussier, and Allison Percy of the National Security Division contributed to the analysis. Raymond Hall, DavidNewman, Dawn Sauter Regan, Matthew Schmit, and Jason Wheelock of CBO’s Defense, International Affairs, and Veterans’ Affairs Cost Estimates Unit also contributed tothe report, under the supervision of Sarah Jennings. Kate Kelly edited the paper. Cindy Cleveland produced drafts of the manuscript. Maureen Costantino designed the cover and prepared the report for publication with assis- tance from Allan Keaton and Leah Mazade. Christine Bogusz proofread the paper. Lenny Skutnik printed the initial copies, Linda Schimmel handled the print distribution, and Simone Thomas prepared the electronic versions for CBO’s Web site. Robert A. Sunshine Acting Director January 2009 Contents Summary and Introduction 1 Projections of Funding for Operationand Support, Military Construction, and Family Housing 4 Projections for Operation and Support 4 Projections for Military Construction and FamilyHousing 11 Potential Unbudgeted Costs for Operation and Support 12 Projections of Funding for Investment 13 Army Investment 13 Navy and Marine Corps Investment 17 Air Force Investment 20 Defense Agency Investment, Including MissileDefense 21 Appendix: Projections of Alternative Defense Programs 27 Tables 1. Past and Projected Resources for Defense in Selected Years 3 A-1. CBO’s Projection of Resources for an Evolutionary Alternative for Defense Compared with CBO’s Projection of the Implications of the 2009 FYDP 29 A-2. CBO’s Projection of Resources for a Transformational Alternative for Defense Compared with CBO’s Projection of the Implications of the 2009 FYDP 33 Figures 1. Past and Projected Resources for Defense 2 2. Defense Resources as a Percentage of Gross Domestic Product 4 3. Past and Projected Resources for Operation and Support 5 4. Operation and Support and Other Funding as a Share of the Defense Budget 6 5. Trends in Operation and Maintenance Funding per Active-Duty Service Member 7 CBO VI LONG-TERM IMPLICATIONS OF CURRENT DEFENSE PLANS: SUMMARY UPDATE FOR FISCAL YEAR 2009 Figures (Continued) 6. Past and Projected Resources for the Military Medical System 8 7. Cost of New Benefits for Military Retirees and Their Families and Other Military Personnel Funding 9 8. Past and Projected Resources for Defense Investment 14 9. Past and Projected Resources for Army Investment 15 10. Past and Projected Resources for Navy and Marine Corps Investment 18 11. Past and Projected Resources for Air Force Investment 20 12. Past and Projected Resources for Defense Agency Investment, Including Missile Defense 22 13. Past and Projected Resources for Missile Defense Investment 23 A-1. Past and Projected Resources for Defense (Evolutionary Alternative) 28 A-2. Past and Projected Resources for Defense (Transformational Alternative) 32 Box 1. Methods Used by CBO to Project Defense Investment on the Basisof Current Plans 16 CBO Long-Term Implications of the Fiscal Year 2009 Future Years Defense Program Summary and Introduction Overall, the budgetary implications of DoD’s current Decisions about national defense that are made today— plans remain similar to those described in CBO’s previ- whether they involve weapon systems, military compen- ous projections: Carrying out plans proposed in the sation, or numbers of personnel—can have long-lasting FYDP would require sustaining annual defense funding effects on the composition of the nation’s armed forces over the long term at higher real (inflation-adjusted) lev- and the budgetary resources needed to support them. els than those that occurred at the peak of the buildup in Over the past six years, the Congressional Budget Office the mid-1980s. Four factors in particular account for the (CBO) has published a series of reports about its projec- tions of the resources that might be needed over the long projected high level of defense spending under the FYDP: term to carry out the Bush Administration’s plans as B Plans to purchase more new military equipment over expressed in the Future Years Defense Program (FYDP). The FYDP is prepared by the Department of Defense the next several years and then to sustain that rate of (DoD) for each fiscal year and submitted to the Congress procurement over the longer term; as part of the President’s budget request. B Plans, as part of military transformation, to develop This paper, like CBO’s previous reports, provides long- and eventually produce weapon systems that provide term projections (in this case, through 2026) of the costs new capabilities—systems whose estimated costs are of DoD’s current plans—that is, the plans contained in also increasing; the 2009 FYDP, which specifically addresses fiscal years 2009 through 2013.1 The 2009 FYDP was transmitted B Plans to increase the size of military forces and the in April 2008, and it reflects changes to the department’s growing costs of pay and benefits for DoD’s military programs and priorities since February 2007. The 2009 and civilian personnel; and FYDP and CBO’s projections of its long-term implica- tions exclude potential future supplemental or emergency appropriations; CBO’s projections include additional 2. For 2008, four separate laws provided supplemental or emergency appropriations that have already been enacted.2 funding, most but not all for purposes related to the wars in Iraq and Afghanistan. The first three, Public Laws 110-92, 110-116, and 110-161, added $87 billion in 2008 dollars ($88 billion in 1. The first of those Congressional Budget Office reports, The Long- constant 2009 dollars) to DoD’s budget and were passed in time Term Implications of Current Defense Plans, appeared in January to be included in the 2009 FYDP. The fourth, P.L. 110-252, 2003. Each year since then, CBO has published summary and added $100 billion in 2008 dollars ($102 billion in constant 2009 detailed updates (in briefing format); all are available online at dollars) to DoD’s budget in 2008 and $66 billion to DoD’s www.cbo.gov. The FYDP is a database that comprises a historical budget in 2009. P.L. 110-252 was enacted after publication of the record of defense forces and funding as well as DoD’s plans for FYDP. Of the total of $187 billion in 2008 dollars ($190 billion future programs. The historical portion of the FYDP shows costs, in constant 2009 dollars) in additional funds for DoD in 2008, forces, and personnel levels since 1962. The plan portion presents $180 billion in 2008 dollars ($183 billion in constant 2009 DoD’s program budgets (estimates of funding needed for the next dollars) was for military operations in Iraq and Afghanistan five or six years, based on the department’s current plans for all of andother war-related activities, and $7 billion (in both 2008 and its programs). constant 2009 dollars) was for non-war-related activities. CBO 2 LONG-TERM IMPLICATIONS OF THE FISCAL YEAR 2009 FUTURE YEARS DEFENSE PROGRAM Figure 1. Past and Projected Resources for Defense (Billions of 2009 dollars) 800 Actual FYDP CBO Projection With Total With Contingency 700 2008 Supplemental Unbudgeted Costs Unbudgeted Costs Appropriations 600 500 December 2007 400 Projection 300 Investment 200 Operation and Support, 100 Military Construction, and Family Housing 0 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 Source: Congressional Budget Office. Note: FYDP = Future Years Defense Program. B Plans to meet the rising costs of operation and main- of long-term demand for defense funding to an annual aver- tenance (O&M) for aging equipment as well as for age of about $652 billion through 2026, or 26 percent more newer, more complex equipment. than the funding provided for 2009 (and the Bush Adminis- tration’s 2009 request). In CBO’s projection of DoD’s current plans, defense resources average about $549 billion annually (in 2009 CBO’s analysis of unbudgeted costs included several pos- dollars) from 2014 to 2026, or about 6 percent more sibilities: that the costs of weapon systems now under than the $517 billion in total obligational authority development would exceed early estimates, as they have (TOA) requested by the Administration and the in the past; that medical costs might rise more rapidly $515billion in TOA provided by the Congress for 2009 (see Figure1 and Table1).3,4 Consideration of potential than DoD has assumed; and that DoDwould continue to conduct military operations overseas as part of the war unbudgeted costs has the effect of increasing the projection on terrorism (also called contingency operations), albeit 3. All FYDP funding is calculated as total obligational authority, and the bulk of that funding is annual appropriations sought by the 4. A regular appropriations act for DoD for fiscal year 2009 has department. Another common measure of defense resources is already become law (P.L. 110-329); it provides $515 billion in budget authority, which is the authority provided by the Congress TOA. This report is based on the fiscal year 2009 FYDP, which to incur financial obligations. Both budget authority and TOA incorporates the President’s budget request for DoD for reflect annual appropriations; however, unlike TOA, budget $517billion, and not on those appropriations. Although DoD authority also includes the effects of certain receipts, permanent will update its plans to reflect Congressional actions, those spending in certain trust funds and other accounts, and certain changes will not be visible in its plans until submission of the payments to the military retirement fund. In most years covered 2010 FYDP. P.L.110-329 includes $102 billion for procurement; by the FYDP’s plans for the future, the difference between total $80 billion for research, development, testing, and evaluation; obligational authority and budget authority in subfunction 051 of $125 billion for military personnel; $179 billion for operation the federal budget (which funds the Department of Defense) is and maintenance; and $28 billion in other funding. Those about $2 billion or less. amounts do not add to $515 billion because of rounding. CBO