Setting priorities for defense programs.

• Author: Farrell, Lawrence P., Jr.
• Position: President's Perspective - Brief Article

As we approach the beginning of a new budget cycle at the Defense Department--the president's fiscal 2003 budget--there is the usual talk about funding shortfalls and potential program terminations. It may be useful to review what we know about defense budget cycles and, in the process, remind ourselves what has and has not changed in the defense programming and budgeting business.

The intent here is not to hypothesize about the fate of any one weapon system. But I think that it's important for the defense industry to be aware of the issues that affect the Pentagon's decisions on what gets funded and what doesn't.

This is particularly relevant today, because, even though the defense budget is going up, modernization dollars are tight. As we have seen with recent program decisions, there are no sacred cows.

To begin with basics, it is difficult to remember when the nation has ever fielded the forces to fully underwrite any declared strategy. Except for a few years during the Reagan administration, the United States has not fully resourced the forces that it did field. That is the situation we face today. After years of under-funding, the service programmers and budgeteers face the same dilemmas each budget cycle--what to fund fully, what to fund partially and what to cancel.

This exercise in setting priorities, in most cases, puts the emphasis on near-term combat readiness. The upshot is that resources are directed to training activities (steaming days, tank miles and flying hours, for example). Other accounts are used to sustain the readiness of the fighting systems (depot maintenance and war-readiness spares). There are also some must-pay bills, such as salaries and medical benefits.

Other accounts are vulnerable, to a greater or lesser degree. While some major acquisition programs tend to get protected, others--such as procurement of munitions--rend to get stretched out with lower annual production runs. Other accounts get hit even harder. Base operating support, real-property maintenance and military construction often are funded at fractions of the real need.

The Pentagon's budget currently on the Hill is significantly higher than last year's, but is still under-funded. Most of the increase covers expenses associated with the current war on terrorism, past unpaid bills, increased health-care costs, inflation and program-cost growth. Even though the budget overall is $48 billion higher than last year's, only $10 billion of that is for...