Mr. Chairman and members of the Committee.  

Army leaders at all levels are striving to meet expanding requirements with diminishing resources. Our commanders are struggling to balance operational readiness  training, equipment and facilities maintenance, and quality of life  with base operations expenses. At the Department of the Army, we recognize those challenges and face the additional task of modernizing the force. Resource constraints demand that we carefully allocate each dollar to ensure that our soldiers and units are ready today while concurrently marching the Total Army into the 21^st century. 

In the past, we had a simpler measure of readiness and a singular focus we trained principally to respond to threats from the Warsaw Pact. But how we measured readiness in the Cold War no longer applies. Today, our National Military Strategy is based on three pillars: shape, respond and prepare now. We must shape the international environment  setting the conditions that support Americas global interests, peace, and prosperity. We must remain ready to respond to crises worldwide and at home, while sustaining increased troop commitments that have become the central element of our Nations engagement strategy. While continuing to ensure adequate capabilities in our shaping and responding roles, we must prepare now for the future by investing in longer-term capabilities through modernization and force development. In keeping with the needs of our new strategy, we have to manage and measure readiness against all three pillars. That is a much more complex task than the readiness challenge we faced during the Cold War, particularly today, as events in the world around us are more volatile and uncertain than ever.

Let me assure you, we report what the field tells us. For example, the major readiness concern for most units during the past year has been personnel shortages. That was a clear message from our commanders. Personnel shortfalls were having an adverse impact on current readiness, and these concerns were clearly reflected in their Unit Status Reports (USRs). I addressed that issue when I testified before you on February 10th of this year. As we drew the Army down by nearly 650,000 personnel, we created a significant gap between the size of the force structure and the number of soldiers in the force. The stress created by this gap was exacerbated by our increased concerns for the readiness of our Total Army  Active, Army National Guard, and U.S. Army Reserve. Today, the Reserve Components comprise 54 percent of the Total Army. By doing the right thing in committing more than 5,000 Active Component officers and noncommissioned officers to support Reserve Component training and readiness enhancements, additional stress has been added to personnel readiness. The net effect of the drawdown and change process has been too few soldiers to fill too many requirements. That left us with too many undermanned and unmanned squads and crews, and shortages in officer and noncommissioned officer positions. I described to you how we are working to close that gap through greater integration of the Total Army and, in fact, USRs over the last few months indicate that overall unit manning levels are getting better.

Today, funding concerns have replaced manning as the number one issue for commanders. Recently, for example, as you have seen in the letter read into the Congressional Record on September 10^th by Senator McCain, the Commander of the U.S. Army Forces Command (FORSCOM) reported that commanders at Fort Bragg, North Carolina; Fort Stewart, Georgia; and Fort Lewis, Washington, have reported a drop in readiness and have projected that the readiness ratings of their units will decline in the fourth quarter of FY99. That degradation results from having insufficient funds to meet all our essential quality of life, infrastructure and training requirements, and from the required migration of Operating Tempo (OPTEMPO) funds to keep our bases operational. Those shortfalls are valid and well-documented, and we recently detailed them in response to a series of Senator McCains questions concerning readiness.

These kinds of issues and the resulting degradation in current readiness are not unexpected. As I testified before you in February, we are experiencing the 13^th year of declining buying power, and this is the most finely crafted budget we have ever brought forward, striking a very difficult balance between current and future readiness. To achieve that balance, to recapture the momentum of modernizing the force so it will be prepared for the future, we had to shift more risk into the area of current readiness. Our commanders in the field are seeing the result of that shift. Fiscal year 1997 and the decisions made during the Quadrennial Defense Review represented a crossover point in our thinking  a recognition that we could wait no longer to increase our investments in modernization. So we began to shift, for the first time since the end of the Cold War, a greater percentage of our resources into that area. The Quadrennial Defense Review personnel reductions, savings from better business practices, and congressional supplemental contingency operations appropriations have offset somewhat the drain on Army modernization, but those initiatives alone are not sufficient to maintain the momentum of modernization. We recognize the impact of this balancing effort, and we have done our best to keep the leadership of the Department of Defense, the President, and the Congress fully informed of our efforts to ensure that our forces remained trained and ready  today and well into the 21^st century.

 Understanding the Challenge of Change

Simply acknowledging the concerns of commanders in the field, however, does not give an adequate appreciation for the scope of the Armys readiness challenge. Understanding readiness requires understanding how the Army is changing, and must continue to change, to meet the needs of the National Military Strategy.  

In the uncertainty of the post-Cold War eras first years, our primary concern was preserving our ability to respond to the challenges of an unpredictable world and, at the same time, taking care of our soldiers and their families during a period of unprecedented transition. The Army relied on modernization accounts as the primary bill payer to resource this effort. At the time, it was the right thing to do. As a result, we maintained current readiness throughout the drawdown and demonstrated our ability to execute the full range of military operations from Desert Storm in Southwest Asia to aiding the victims of a domestic crisis in the United States. Mortgaging our modernization accounts did not come without cost. By FY98, Army procurement had declined 73 percent, reaching its lowest level since 1959. We funded only the highest priority programs, extended others to stretch our limited resources, and cancelled those programs we considered important, but simply could not afford.

We know, however, as we shift risk that we must maintain an acceptable balance between near-term readiness, preparing to meet future missions and threats, and an acceptable quality of life for our soldiers and their families. As the Commander of the 25^th Infantry Division at Schofield Barracks, Hawaii, reported, our challenge is to maintain quality of life without allowing readiness to degrade further. This is a difficult task  and there is no acceptable alternative to getting it right. We have used two major means to achieve this balance in the past  garnering additional dollars through efficiencies and better business practices or shifting dollars to meet competing demands. Each of these courses has significant limitations, and I want to discuss those briefly. They speak directly to the seriousness of our resourcing challenge and the need for clear, decisive leadership from both the Congress and the senior leaders in the Department of Defense and the Total Army. 

The impact of shifting resources was further exacerbated by an already ongoing migration of funds from OPTEMPO to BASOPS and RPM accounts. We have, for example, had to limit FY99 funding of BASOPS at 84 percent and RPM at 58 percent of requirements  while we provided minimum essential funding to resource adequately training for our first-to-fight units. This level of resourcing, however, has made it extremely difficult to run our bases in a way that provides our soldiers and families with an adequate quality of life. Over the past few years, commanders have resourced BASOPS and RPM at the absolute minimum in order to protect training. They could not, however, allow infrastructure and quality of life programs to continue to deteriorate indefinitely. They have to take care of soldiers and their families. As a result, our commanders have been forced to migrate funds from training accounts to base support. This migration of funds  necessary to ensure minimum quality of life standards at our installations  has reduced home station training. Commands across our Army are experiencing difficulty in funding battalion and brigade level home station training that was once common in our Army  and was a key ingredient of the highly trained units that won the Gulf War. Commanders in the 3^rd Infantry Division at Fort Stewart, Georgia, for example, report that they have conducted no battalion-level field training over the last two years. This degradation of both soldier and unit training levels has been evident when units arrive for their rotations at our Combat Training Centers.

The fact that we have assumed risk is not new. Providing for the common defense has always required tough choices. Even during the height of World War II, when we committed more resources to defense than at any other time in our Nations history (more than 40 percent of GDP), our leaders faced difficult decisions with serious consequences. At times during the Cold War, we estimated that our warfighting needs were short by as many as 40 divisions. Risk has always been with us. There are no easy answers. We must, as leaders have always done, continue to reassess our risks, ensuring that they are reasonable and manageable. Today, however, with a much smaller force and far tighter budgets there is far less room for error, and shortfalls have a proportionally far greater impact on the force. As the examples I have offered about garnering efficiencies and shifting resources demonstrate, we are leaving commanders in the field with few options and very difficult leadership and management decisions  a daunting challenge. These examples also illustrate that we all share the responsibility for posturing our commanders for success in this endeavor. If we allow these conditions to continue over time, the result will be a continuous and significant erosion of readiness. We must prevent this. 

The factors that I have outlined here comprise the challenge of change. They have made life for our soldiers and their families busier than ever  and while our soldiers continue to perform magnificently and the Army stands ready to serve the Nation, there is no question that this performance has demanded great service and sacrifice  and this stress is beginning to show on the force. Though we expected a decline in near-term readiness as we shifted the balance of our resourcing effort, the degradation has been faster and more widespread than we anticipated  and this decline is clearly affecting our soldiers. With declining resources and far fewer soldiers, FORSCOM reports that over the last 12 years their number of annual deployments has increased from 26 to 68. Increased deployments coupled with the drawdown have created a feeling of uncertainty within our soldiers. Soldiers are asking, When is it going to stop? When will the downsizing end? When will our leaders stop asking us to do more with less? Our soldiers are smart, hard working, and dedicated. They are also very tired. I am absolutely convinced that quality soldiers are the single, most important factor in achieving both current and future readiness. Today, our principal readiness concern must be recruiting, retaining and taking care of our soldiers.

In terms of recruiting, the situation is much the same as I reported to you a few months ago. We continue to recruit the quality soldiers we need, though I am concerned that this year there will be some shortfalls in recruiting for both the Active and Reserve Components. Likewise, retention of both officers and soldiers remains strong. Nevertheless, I have very serious concerns for the future. The continued strength of the economy, the growing concerns of our soldiers about military pay and benefits (particularly with regard to retirement, health, housing, and base facilities) has the potential to undercut recruiting and retaining quality soldiers. The propensity to serve is declining. Competition with other career opportunities is increasing. The key trend lines are headed in the wrong direction. In particular, our soldiers are concerned that if they commit to a career of service to the Nation, when they retire their retirement pay and medical benefits will be inadequate. In fact, since 1992 satisfaction with retirement benefits fell from 61.8 percent to 39 percent for officers and 44.8 percent to 28.1 percent for enlisted soldiers. The value of the retirements benefit package we have offered soldiers entering the Army since 1986 has declined by 25 percent compared with the previous system. Nothing we do could serve more to bolster the confidence of our people than to demonstrate that their military and civilian leadership is concerned about and diligently working to enhance both the readiness and the welfare of the soldiers and families of Americas Army.  

So where do we stand today? As I reported in my testimony before you last February, I remain confident that our soldiers can continue to fulfill their responsibilities under the National Military Strategy. Results, not rhetoric, are the ultimate measure of readiness. At the same time, I stated that to balance current and future readiness we assumed much greater risk in the near term. That risk does not call into question the Armys ability to fight and win, but it does acknowledge a greater potential for casualties in the event of armed conflict and the increased difficulty of maintaining a trained and ready force as the pressures of high operational and personnel tempo continue. Most important, it recognizes that the wear and tear on our soldiers and their families has risen considerably. In dollar terms, I quantified this risk at about $3 to $5 billion in our annual budget, in addition to any supplemental funding for increased pay or unprogrammed contingency operations. I also testified that the budget we presented this year was as finely tuned as we could possibly make it. Shifting funds and readjusting priorities would only threaten the very fine balance we have sought to achieve. I still believe these assessments to be accurate.

I would like to close by reiterating that understanding the needs and concerns of Americas Army means understanding change. History is a great teacher, and the Armys history is one of change. For 223 years, the United States Army has faithfully served this Nation. We have not, however, won every battle or been prepared for every challenge. The difference has, in large part, always been knowing when to change, what to change and how to change  and we have not always gotten it right. On those occasions, we have paid a very high price indeed.

Today, we still have the best army in the world, but the fabric of that army is stretched very thin. Our task is to make sure it doesnt tear.

Thank you for the opportunity to speak today, and I appreciate your continued support of Americas Army and the magnificent soldiers who proudly serve our Nation.