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Secretary of Defense Testimony

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Opening Summary -- Senate Appropriations Committee-Defense (Budget Request)

As Delivered by Secretary of Defense Chuck Hagel, Washington, DC, Wednesday, June 18, 2014

Mr. Chairman, thank you, good morning. Members of the committee, good morning. And thank you for the opportunity to talk about our FY 2015 budget.  And as you have noted, the other issues that are before us in the world today and this country, we are prepared to respond to questions regarding those specific issues.

I also, on behalf of the Defense Department, want to thank this subcommittee in particular for your continued support of our troops and what is required in order to keep our troops modern, ready, capable. And that is much the focus of this budget and much of what we’ll be talking about this morning, and why we’ve presented the budget we have, and why we need the budget that we will present.

Mr. Chairman, I particularly appreciate being here, as always, when I’m with the Chairman of the Joint Chiefs, General Marty Dempsey. This country is very fortunate to have General Dempsey’s leadership, as well as all the Chiefs that not only represent our services so well, but are very effective in their leadership and very wise in their advice they give to the President and give to me.

I also want to note that Bob Hale, as you have recognized already, our comptroller, DoD, the last five years, is – I believe will be his last budget hearing. I know he’s greatly distressed by that, but he’s a great admirer of the Congress and never gets enough time with all of you. And I want to particularly acknowledge Bob Hale because he has really been particularly important to DoD and this country over the last year, two years, when we have had government shutdowns, abrupt, steep cuts, sequestration, which you mentioned. He has been the architect and the chief operating officer to guide us through that. So Bob, we will miss you, your leadership and what you’ve contributed, but you deserve to escape. And you all know very well his successor, Mike McCord, who served for many years as a senior staff member on the Armed Services Committee. This body confirmed him recently, and we appreciate that. So he will replace Bob.

Mr. Chairman, you have noted, and I just recognized, that recent crises in Iraq, Ukraine, remind us all how quickly things can change in the world, and not for the better. And they underscore why we must assure the readiness and the agility and the capability of our military. That’s what we will address today.

My lengthier submitted statement, Mr. Chairman, describes our budget in detail and the rationale behind the decisions that we have come forward with, presented in our budget.

You mentioned our Overseas Contingency Operations budget, OCO, for FY 2015. It is being finalized now. I know it’s late. There are some reasons for that. This OCO presentation will reflect the President’s decision on a couple of new initiatives that he has announced that he’s taken, and certainly the continuation of our enduring presence in Afghanistan as well. The President, as you know, recently announced a $5 billion Counterterrorism Partnerships Fund which would be funded through OCO, and a $1 billion European Reassurance Initiative also funded out of OCO. I strongly support both of these, for the reasons that we will define more clearly this morning.

This budget reflects, I believe, the threats, the uncertainties, and the opportunities facing our country today, but also, probably as important, in the future. Everyone on this committee knows that decisions made today have immense impact on what kind of a military we’re going to have down the road. You mentioned science and technology. That is one of the foundational dynamics of keeping our technological aid to our capability and our modernization ahead of what’s out there. It also, Mr. Chairman, reflects the tough fiscal realities facing us here today. And you mentioned one, of course, sequestration.

The tremendous uncertainty that DoD has had to deal with the last 12 months – but really the last 24 months – do we have a budget, we don’t have a budget, what kind of a budget? That kind of uncertainty, when you’re trying to put together and operate – in the interest of our national security – an enterprise this big, has been difficult. But because of the kind of leadership in people like Bob Hale and Marty Dempsey, we’ve been able to do it.

Last year, DoD’s budget was cut $37 billion. It was cut $37 billion because of sequestration. And I might remind this committee, as you all know, that’s in addition to the $487 billion 10-year reduction under the Budget Control Act of 2011 that DoD was already implementing. December’s Bipartisan Budget Act gave DoD some temporary relief from sequestration for Fiscal Years ‘14 and ‘15. But it still imposes more than $75 billion in cuts over the Fiscal Year this year and Fiscal Year of 2015. And Mr. Chairman, unless Congress changes the law, as you all know, before FY 2016, sequestration will be back as the law and that will take another $50 billion from our budget each year through FY 2021, damaging the military’s readiness, undercutting our defense strategy and our capabilities.

The President’s five-year budget plan provides a realistic alternative to sequestration projecting, as you note, $115 billion more than current law allows from 2016 to 2019. This is the minimum amount of additional spending our military and our civilian [leadership] believe is needed to successfully execute the defense strategy.

Since my submitted statement explains in details our budget request and the rationale behind those key decisions, I want to focus on two critical areas.

First, our decision to reduce the size of the military’s force structure and retire older platforms in order to invest in training and modernization.

Under the strict budget limits being imposed on DoD, we cannot keep our current force structure adequately ready and modernized. Readiness is our main concern – I know it’s the concern of this committee – readiness is our main concern, as it must be for anyone who cares about our national security and the men and women who defend it.

We cannot place our men and women in situations if they are not ready. It would be a failure, the worst failure leadership could make. So we made a strategic decision to reduce the size of our force, to ensure our troops are trained, ready, capable.

These decisions were based on strategic priorities and detailed analysis and agreed to by all the Service Chiefs.

After 13 years of long, large stability operations, we must shift our focus onto to future requirements shaped by enduring and emerging threats, much like we’re seeing today. We must be able to defeat terrorist threats and cyber attacks, and deter adversaries with increasingly modern weapons and technological capabilities. That’s why we protected funding for cyber and special operations.

For the active duty Army, we proposed drawing down by 13% over the next five years to about 440,000 to 450,000 soldiers, which we believe is adequate for future demand; Chief of Staff of the Army, General Odierno, believes is adequate for future demand. Army National Guard and Reserve units will remain and have to remain a vibrant part of our national defense. We have proposed drawing the Reserves and the National Guard down by 5%. We will continue investing in high-end ground capabilities to keep our soldiers the most advanced, ready, and capable in the world.

The Navy will have 11 carrier strike groups under the President’s budget plan, keeping our carrier force at the level approved by Congress. We protected investments in submarines, afloat staging bases, and guided missile destroyers, and other lethal, survivable platforms – ensuring our technological edge and enabling our naval forces to operate effectively, regardless of other nations’ capabilities.

But we had to make some tradeoffs, Mr. Chairman. We had to make some realistic tradeoffs. To help keep its ships and inventory ready and modern at reduced budget levels, the Navy will set aside 11 cruisers for modernization and retrofitting, and then return them to service with greater capability and longer lifespans. This will also support a strong defense industrial base – itself a national strategic asset.

The Marine Corps will continue its planned drawdown to 182,000, and will devote about 900 more Marines to increase embassy security.

The Air Force will continue investing in advanced capabilities that are most relevant to maintaining our aerial dominance and confronting new threats, including the F-35 Joint Strike Fighter, the new Long-Range Bomber, and the KC-4[6] refueling tanker. But we chose to replace the 50-year-old U-2 with the unmanned Global Hawk, and phase out the 40-year-old A-10, which lacks the multi-mission capabilities of more advanced, survivable aircraft.

Let me address compensation reform as the second issue. Taking care of our people, as everyone on this committee knows, means providing them with fair compensation, as well as the training and tools they need to succeed in battle and return home safely. To meet those obligations under constrained budgets, we need some modest reforms and structural adjustments. We need these to slow the growth in pay and certain in-kind benefits.

Let me clarify what these adjustments are, and are not.

First, we’ll keep recommending pay increases. But the rate of growth of those increases would be slowed.

Second, off-basing housing subsidies – they will continue. Today’s 100% benefit would gradually reduced, but only 95%, phasing in over several years. And I would remind us that in the 1990s, the housing allowance was about 80%.

Third, we’re not closing commissaries. We recommended gradually phasing out some subsidies, but only for domestic commissaries in large metropolitan areas. We’ll continue fully subsidizing all commissaries overseas and in remote locations.

Fourth, we recommend simplifying and modernizing our three TRICARE systems by merging them into one system, phasing in modest increases in co-pays and deductibles for retirees and family members to encourage the most affordable means of care. Active duty personnel’s health care will remain free. We will not compromise on access and quality of health care.

Under our plan, 100% of the savings from compensation reform will go toward enduring that our troops have the training and tools they need to accomplish their missions – readiness.

If Congress blocks these changes without adjusting current budget caps, or if sequestration remains the law, it will jeopardize the readiness and capability of our armed forces, and short- change America’s ability to effectively and decisively respond when global events demand it. My submitted statement, Mr. Chairman, details how sequestration would compromise our national security.

Mr. Chairman, the President’s budget supports our defense strategy, it defends this country, and keeps our commitment – all of our commitments – to our people. The Chairman, the Chiefs, and I strongly support it.

I look forward to your questions.

Thank you, Mr. Chairman.

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