BUDGET CONSIDERATIONS

Naval and Marine forces are an integral part of this Nation's defense team. As such, they provide the mobile seagoing forces required to support our national policy in peace and war.

Each year, the formulation of the Navy Department budget to support these forces becomes increasingly more complex and difficult. The selection of the most promising weapons systems has been tremendously complicated by advancing technology and increasing cost.

The budget must reflect a reasonable compromise between immediate readiness and future capability. Otherwise, future capability will be jeopardized if we do not make proper provisions for replacement of assets that wear out and for research and development leading to procurement of improved equipment.

As noted in the President's budget message, it became necessary early in this fiscal year to strengthen our readiness posture. Consequently, the Department of the Navy has deployed additional carriers to the 6th and 7th Fleets; embarked a battalion landing team in the 7th Fleet; increased fleet support by two oilers; and commissioned an additional carrier air group and two Marine Corps air attack squadrons. These actions increased the tempo of operations and created an additional requirement for personnel and for operation and maintenance funds.

BUDGET PREPARATION

Fiscal guidance received from the Secretary of Defense requested that the budget be submitted in four increments. The first three increments provided funding levels of 95, 100, and 105 percent of the fiscal year 1961 new obligational availability. The fourth increment consisted of the remaining important items and requirements which the Secretary of the Navy determined should be included in the budget request of the Department of the Navy. The initial estimates submitted to the Comptroller of the Navy by the Navy bureaus and offices and Headquarters Marine Corps totaled $19,805 million. Many items were eliminated in the Department of the Navy review process. In October 1960, the Department of the Navy made the required budget submission to the Secretary of Defense totaling $14,758 million. This amount was further reduced to the Department of the Navy budget which you are now considering. It includes new obligational authority of $12,237 million, direct obligations of $12,802 million and expenditures of $12,078 million. These funds are requested:

(a) To support 625,000 Navy military personnel and 175,000 Marines;

(b) To provide for the operation and maintenance of 817 active fleet ships and approximately 7,000 operating aircraft and the necessary supporting Shore Establishment;

(c) For the procurement of missiles, and 644 aircraft;

(d) For the construction of 30 new ships, including 5 POLARIS submarines, and in addition, 22 ship conversions; and (e) For a research, development, test, and evaluation program at approximately the fiscal year 1961 level.

NEW OBLIGATIONAL AVAILABILITY

Exhibit 1 compares new obligational availability, direct obligations and net expenditures of fiscal year 1960 and fiscal year 1961 with that included in the fiscal year 1962 request. Under the total amounts for operation and maintenance; procurement, research, and development; and revolving funds, adjustments are shown which permit year-to-year comparisons. The fiscal year 1961 new obligational availability figures have also been adjusted to include the fiscal year 1961 supplemental appropriation request totaling $95.4 million for requirements shown in exhibit 2 which is now before the Deficiencies Subcommittee.

Exhibit 1 indicates a total new obligational availability of $12,237 million for fiscal year 1962. This is $223 million less than the comparable fiscal year 1961 availability of $12,460 million.

SIGNIFICANT FACTORS IN 1962 REQUEST

I shall now discuss some of the most significant factors in the fiscal year 1962 request.

MILITARY PERSONNEL, NAVY

(a) Military personnel, Navy: The fiscal year 1962 program for "Military personnel, Navy," requires a total of $2,645 million to support a beginning, end, and average strength of 625,000. This compares with $2,598 million in fiscal year 1961.

The fiscal year 1962 estimate for this appropriation is $47 million more than the fiscal year 1961 availability. Although there is no significant increase in average strength, the number of career personnel, individuals in a married status, and the number of dependents. per individual are increasing. This results in an increase in longevity pay, quarters allowances, and travel. Permanent change of station travel is funded at $121 million, which is less than fiscal year 1961, (b) Military personnel, Marine Corps: The fiscal year 1962 estimate for "Military personnel, Marine Corps," is $620 million compared with $607 million for fiscal year 1961. This provides funds to support a beginning, end, and average strength of 175,000 compared with an average of 174,414 in fiscal year 1961. This will permit the Marine Corps to continue to man three divisions, three air wings, and essential supporting units. The $13 million increase over fiscal year 1961 is required to fund a higher average grade of enlisted personnel and an increase in quarters allowances resulting from both increased numbers of individuals in a married status and increases in the number of dependents per individual. Funds for "Permanent change of station" travel are held at the fiscal year 1961 level of $33 million.

(c) Reserve personnel, Navy.-$84.6 million is requested in fiscal year 1962, as compared with $87.6 million appropriated in fiscal year 1961. The funds requested for fiscal year 1962 will provide an average strength of 129,000 in a paid status compared to 127,000 in fiscal year 1961.

(d) Reserve personnel, Marine Corps.-The fiscal year 1962 request for $26.4 million is $1.6 million above fiscal year 1961 and provides for a modest increase in the average number of individuals in a paid

status.

IDENTIFICATION OF WITNESSES

Mr. MAHON. If I may interrupt you at this point, Admiral?

Admiral HIRSCH. Yes, sir.

Mr. MAHON. I think it would be well to identify the other people here with you. Of course we know Captain Montgomery who works closely with us. We have the names of the witnesses. Will you identify them for us?

Admiral HIRSCH. I will be happy to identify them, sir. On my left, Rear Admiral Holmes, representing the Office of the Chief of Naval Operations; and General Nickerson, representing the Commandant of the Marine Corps.

Mr. MAHON. General, how long have you been coming before the committee in connection with these matters?

General NICKERSON. This is my third year, sir.

Mr. MAHON. How long will you continue in this capacity?
General NICKERSON. I hope one more, sir, after this.

Mr. MAHON. A 4-year tour?

General NICKERSON. Yes. I will put in three complete budgets with a break in period with an overlap with my relief.

Mr. MAHON. It is good to have you back.

Admiral HIRSCH. Also we have Colonel Souder.

Mr. MAHON. You have been here before, I believe, sir?

Colonel SOUDER. Yes, sir.

Mr. MAHON. How long have you been appearing before this committee?

Colonel SOUDER. This will be my third year.

Mr. MAHON. Who are our civilians?

Admiral HIRSCH. I have on my right, Mr. Venn, who is head of the Office of Budget Estimates and Analysis.

Mr. MAHON. How long, Mr. Venn, have you been in this position? Mr. VENN. I have been in this position since 1953, sir.

Mr. MAHON. Is this the identical position you have held during these years?

Mr. VENN. Yes, sir.

Mr. MAHON. You are developing a great deal of familiarity with the subject, I would think. You are able to provide a continuity which might not be provided otherwise. Tell us a little bit about your background.

Mr. VENN. My background, prior to World War II, was principally in engineering work. Then when I was called on duty in 1941 in the Marine Corps, I was injected into the budget business through the position that I held with the Bureau of Ordnance, representing the Marine Corps there. Following my service with the Marine Corps, I was taken in as a budget analyst with Mr. McNeil, in the Navy Budget Office. I have been with that same organization since that time, sir. I was a budget analyst and branch head from 1946 until 1953, when I came into this position.

Admiral HIRSCH. Mr. Dick Jackson, who heads the Progress Reports and Statistics Division.

Mr. MAHON. How long have you been associated with the job?
Mr. JACKSON. I have been in this position for 4 years.

Mr. MAHON. Where were you before then?

Mr. JACKSON. Before that I was Director of Statistics and Analysis for the Military Sea Transportation Service, of which time I spent

6 years with them. Previous to that my experience was outside of Government in Utah Foundation, a tax research agency and with the Western Highway Institute as an analyst representing large trucking

concerns.

Mr. MAHON. Mr. Sheppard will conduct the hearing this afternoon. It is 12 o'clock. We will recess until 2. Thank you, gentlemen.

AFTERNOON SESSION

Mr. SHEPPARD. The committee will come to order.
You may take up your statement on the middle of page 6.

OPERATION AND MAINTENANCE, NAVY

Admiral HIRSCH. (e) Operation and maintenance, Navy: This appropriation supports the operating and maintenance costs of the ships and aircraft of the active fleet and the Shore Establishment required for logistic support. These funds have a direct and controlling influence on the operational readiness of the fleet.

The fiscal year 1962 request for $2,624 million is $27 million more than the fiscal year 1961 comparable figure of $2,597 million. The increase is required as a result of advances in military technology, new and essential programs such as POLARIS, and increased emphasis on combat readiness."

As in fiscal year 1961, the Navy plans to operate 817 active fleet ships and 88 Naval Reserve training ships. As you know, a significant portion of the active fleet ships and aircraft will continue to be deployed in major trouble spots throughout the world.

$100 million is included in this appropriation for the fleet rehabilitation and modernization program (FRAM) for modernization of World War II ships. This program, which was started in fiscal year 1960, is continued at approximately the fiscal year 1961 level. However, the mix of ships and the increased costs of more complex shipboard electronic equipment will reduce the number of ships being modernized from 27 in fiscal year 1961 to 21 in fiscal year 1962.

The maintenance of the Shore Establishment has been a matter of interest and concern to this committee. To achieve better control and better utilization of funds, separate budget projects for the maintenance and repair of real property were established in fiscal year 1961. This budget requests funds for the Shore Establishment maintenance and repair program at approximately the fiscal year 1961 level.

The operation and maintenance costs associated with the POLARIS program increase as additional POLARIS submarines join the fleet. By the end of fiscal year 1962 a total of nine POLARIS submarines will have been commissioned.

Departmental employment reductions directed by the Congress have been made in fiscal year 1961. The fiscal year 1962 budget estimate continues to fund departmental administration at the reduced fiscal year 1961 level.

(f) Operation and maintenance, Marine Corps: This appropriation has a direct and controlling influence on the combat readiness of Marine forces. The fiscal year 1962 request of $179 million is $2.3 million more than the amount appropriated in fiscal year 1961. The fiscal year 1962 budget request will support three Marine divisionMarine air wing teams, and the necessary supporting units. A major

portion of the increased funds are required for the initiation of a phased overhaul program for tracked vehicles.

PROCUREMENT OF AIRCRAFT AND MISSILES, NAVY

(g) Procurement of aircraft and missiles, Navy: The appropriation request in fiscal year 1962 totals $2 billion. This is $142 million less than the amount appropriated in fiscal year 1961.

The fiscal year 1962 request provides for procurement of 644 Navy and Marine Corps aircraft, comprised of 12 models, all of which are in current production; $473 million is requested in this appropriation for the procurement of missiles, drones, and related equipment, as compared with $544 million in fiscal year 1961. Of the $473 million, $193 million provides missiles in support of the POLARIS program.

SHIPBUILDING AND CONVERSION, NAVY

(h) Shipbuilding and conversion, Navy: This budget requests $1,825 million for fiscal year 1962 compared with $2,246 million in fiscal year 1961. The fiscal year 1962 shipbuilding request provides funds for 30 new ships, including 5 fleet ballistic missile submarines, and provides funds for 22 ship conversions. Also requested are funds for long leadtime components for five POLARIS submarines.

Twenty of the thirty new ships will have an antisubmarine capability. In addition, 19 of the 22 conversions are antisubmarine ships. In this budget, as in the fiscal year 1961 budget, ship construction and conversion costs represent the full amount required to complete the ships in the program.

OTHER PROCUREMENT, NAVY

(2) Other procurement, Navy: The request of $625 million in fiscal year 1962 will provide a balanced program for the procurement of modern equipment, improved weapons, and ammunition. This request represents an increase of $200 million over fiscal year 1961; $147 million of this increase is required for the POLARIS program.

(j) Procurement, Marine Corps: The fiscal year 1962 request is $140 million. In fiscal year 1961, $91 million was appropriated, and an additional $57 million was available from unprogramed prior year funds. This provided a total of $148 million in fiscal year 1961. Unprogramed prior year funds are not available for fiscal year 1962.

RESEARCH, DEVELOPMENT, TEST, AND EVALUATION, NAVY

(k) Research, development, test, and evaluation, Navy: The fiscal year 1962 request for $1,267 million is $32 million less than fiscal year

1961.

This year, as last year, the largest program in this appropriation is $396 million for POLARIS. Although the POLARIS system is now operational, a high level of development effort is essential in these early operational stages to extend the range of the missile and to upgrade other elements of the system.