The National Defense Authorization Act of 1991, 1992 and 1993 authorized or expanded several programs to induce voluntary separation, minimize the adverse impact on individuals affected by the military drawdown, and helped shape the remaining force.

Two financial incentive programs were also authorized: the Voluntary Separation Incentive (VSI) and the Special Separation Benefit (SSB) programs. VSI provides an annual payment for double the number of years of service, while SSB provides for a lump sum payment.

Each year the military services lose large numbers of personnel voluntarily and involuntarily for a variety of reasons, ranging from normal end of enlistment, retirement, denied reenlistment or involuntary separation based on performance or other reasons.

[Slide.]

This slide, which is shown on page 11 of my statement, summarizes the projected losses for fiscal years 1992 and 1993 by various separation categories. If you were to add the losses, that is the total losses it would show that about 11 percent of the total service losses during the 2 year period are through VSI and SSB.

Of the 218,000 net reduction, about 37 percent will be attributed to VSI and SSB as projected by DOD during fiscal year 1992 and 1993.

[Slide.]

This slide, which is shown on page 12 shows the number of officers and enlisted personnel from each service who have requested separation on a VSI or a SSB program as of March 1992. As of March 23, 1992, and we add 23 because that number is always changing right now, DOD reports that about 40,000 persons have requested separation under either the VSI or SSB programs.

Approximately 85 percent of those persons elected separation under these programs have opted for a lump sum SSB, and the remaining 14 percent have chosen VSI. This reflects a somewhat greater preference for the SSB program at this point than DOD had expected.

DOD had projected that of those persons electing a voluntary separation incentive pay, 62 percent would have selected SSB and 38 percent would have selected VSI.

In approving legislation for the VSI program, the Congress mandated accrual funding rather than a pay as you go approach. The legislation charged the Defense Retirement Board of Actuaries with establishing a fixed period of time for amortizing the funded liability, the unfunded liability.

The Secretary of Defense then is required by legislation to make deposit to the fund in accordance with that amortization schedule, but the defense authorization legislation also stipulates that amounts paid into the Voluntary Separation Incentive Fund will be paid from funds available from the pay of members of the armed forces under the jurisdiction of the secretary of each military department.

DOD action on these provisions of the legislation is pending. Mr. Chairman, this concludes my prepared remarks. We are prepared to respond to any questions you may have.

[The prepared statement of Mr. Jones follows:]

PREPARED STATEMENT BY PAUL L. JONES, DIRECTOR, DEFENSE FORCE MANAGEMENT ISSUES, NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION, GENERAL ACCOUNTING OFFICE

Mr. Chairman and members of the subcommittee: I am pleased to be here today to provide preliminary information on our ongoing review of the Department of Defense's (DOD) military strength management during this time of military force reductions. By strength management I am referring both to accessions and losses and how the effects of the two achieve an overall goal referred to as the net reduction goal. In order to provide an overview of individual service and aggregate strength management, my comments will be more in the form of a briefing.

Today, I want to (1) focus on the magnitude of force reductions now underway and where DOD stands both in relation to its long-term reduction plans and to congressionally authorized strength levels; (2) outline programs designed to foster force reductions and minimize the adverse impact on individuals; (3) show the extent of reductions by various separation categories; and (4) discuss funding for two special separation incentive programs authorized by the Congress.

MAGNITUDE OF THE DRAWDOWN

Defense authorization legislation for fiscal year 1991 authorized strength levels totaling 1.6 million for active duty personnel as of September 30, 1995, a reduction of 561,000 positions, or nearly 26 percent, from the post-Vietnam peak strength level of 2,174,100 positions reached at the end of fiscal year 1987. Table 1 contrasts DOD's currently planned fiscal year 1995 end-strength levels with those authorized by the Congress as part of the fiscal year 1991 defense authorization legislation.

Sources: National Defense Authorization Act for Fiscal Year 1991, Office of the Secretary of Defense, and individual services as of March 23, 1992.

This table shows that for each service, other than the Marine Corps, current planned end strengths for fiscal year 1995, will exceed the congressionally authorized levels by a few percentage points. Service officials recognize this difference but indicate they believe the conference committee report permits them some flexibility. The Conference Committee Report to the National Defense Authorization Act for fiscal year 1991 states that ". . . the conferees agree that these end-strengths are prescribed for planning purposes and may be revised in the future as the Department of Defense makes force structure and force mix decisions based on threat and military strategy assessments." Questions still exist regarding force mix issues and structure under a revised threat; given DOD's perception of flexibility regarding end-strength numbers, DOD has not proposed any legislation to date to change the authorized fiscal year 1995 end strength levels. DOD's currently planned reductions represent a 24-percent decrease in end-strength from the end of fiscal year 1987 to the end of fiscal year 1995; additional reductions planned between fiscal year 1995 and fiscal year 1997 produce a 25-percent net reduction from fiscal years 1987 to 1997. (See appendix I for a broader overview of currently planned changes in DOD force strength levels from fiscal years 1980 through 1997.)

As of the end of fiscal year 1991, active military force levels have been reduced by about 189,000 from the high of 2,174,100 at the end of fiscal year 1987. Table 2

This number excludes the effects of 17,059 mobilized reserves still on active duty as of September 30, 1991.

shows the magnitude of the force reductions made through the end of fiscal year 1991 in relation to those remaining to meet DOD plans for the end of fiscal year 1995.

Note: Numbers may vary slightly from other data arrays from published source cited due to rounding, and updating of data.

Sources: Department of Defense Manpower Requirements Report, FY 1993--Officer Flow Annex, Feb. 1992, Office of the Secretary of Defense, and supplemental data from the Office of the Secretary of Defense and the military services as of March 23, 1992.

The Air Force, which began to make sizable reductions to its force in fiscal year 1988, is more than half way toward its force reduction goal. The Navy reached and maintained its peak strength in fiscal years 1988 and 1989 and began its reductions in fiscal year 1990. The Army has the largest number of reductions remaining; its overall force reductions are the largest of all the services, comprising 46 percent of the approximately 530,000 DOD military force reductions planned from the end of fiscal year 1987 through the end of fiscal year 1995.

DOĎ plans a net force reduction (after adjusting for gains and losses) of just over 218,000 positions within the current 2-year budget period. Table 3 contrasts current service end-strength plans for these 2 years in relation to strength levels authorized by the National Defense Authorization Act for fiscal years 1992 and 1993.

1. Authorized numbers pertain to officers and total and strength; enlisted numbers (including cadets) represent the difference between authorized and strength and authorized officer personnel.

2. Numbers may not add due to rounding. Also, numbers may vary slightly from other data arrays from the published source cited due to rounding, and updating of data.

3. DOD's fiscal year 1991 and strength excludes the effects of 17,059 mobilized reserves still on active duty as of September 30, 1991.

4. The Secretary of Defense is authorized by the National Defense Authorization Act for Fiscal Years 1992 and 1993 to waive up to 2 percent of the active duty and strength authorized for fiscal year 1992 in order to avoid any involuntary separations.

Sources: National Defense Authorization Act for Fiscal Years 1992 and 1993, Department of Defense Manpower Requirements Report, FY 1993--Officer Flow Annex, Feb. 1992, and OSD and military service provided data as of March 23, 1992.

The Army's planned force reductions during fiscal years 1992 and 1993 are 3 perrent greater than they would be if the reductions were being made to meet just the gressionally authorized level. Army officials indicated they have accelerated

their drawdown due to budget constraints. Differences between authorized and planned reductions for the other services are less than 2 percent each.

Legislative Guidance And DOD Actions Affecting Strength Management

The fiscal year 1991 defense authorization legislation provided some guiding principles for DOD and the services to follow as they draw down the military forces. The legislation stipulated that the services could not involuntarily separate military personnel without first having implemented procedures to: (1) limit accessions, (2) increase retirements among those eligible to do so, and (3) limit the number of personnel with more than 2 but less than 6 years of service. In emphasizing this, the conference report to the 1991 Defense Authorization Act stated that:

"the conferees expect the Secretary of Defense to exercise prudent judgment in approving accession levels and force profiles by grade and years of service to guide the personnel strength reduction process in the military services as forces draw down over the next 5 years."~2

The conferees also stated their expectation that the military services would maintain the same relationship between officer and enlisted strengths as existed at the end of fiscal year 1990 in making active duty end-strength reductions in the future. DOD and the services are pursuing a policy of trying to achieve and maintain a degree of balance between their accessions and losses in order to "shape" the military force in terms of rank, years of service, and specialties. Thus, the services have taken actions to: (1) reduce, yet maintain needed accessions; (2) encourage retirements among those eligible to do so; (3) reduce force levels by providing for voluntary selected early release of officer and enlisted personnel before the expiration of normal obligation or enlistment periods; (4) tighten quality controls over reenlistees; and (5) reduce the maximum amount of time persons may remain on active duty from the time they were last promoted. DOD recognizes that without this multi-faceted approach, the services would be faced with skill imbalances, promotion and career stagnation; a more senior work force with higher personnel costs; and many senior persons doing lower level work. Shaping the force to avoid these problems requires a larger number of attritions than would be the case if the focus was primarily on limiting the intake of personnel to achieve end strength reduction goals. Table 4 shows the extent of accessions and losses projected by each of the services for fiscal years 1992 and 1993 in meeting their end-of-fiscal-year reduction targets.

Note: Numbers may vary from other data arrays because DOD source documents we used had slight differences between them; however, the net effect in terms of total numbers and net reductions is relatively minor.

Sources: From budget justification data submitted to the Congress by the military services in conjunction with their Amended FY 1992/FY 1993 Biennial Budget Estimates and other data provided by the individual military services as of March 23, 1992.

During the 2-year period, DOD expects net reductions (gains minus losses) totaling about 218,000 positions. Total losses during that same period are much higher, totaling about 716,000. However, even during normal times, without downsizing, there would be losses on the order of 330,000 per year or 660,000 for 2 years. According to OSD officials, of the 218,000 net reduction, approximately 140,000 are additional reductions over what would have occurred without a drawdown, plus approximately 80,000 fewer accessions.

Proportion of Officers to Enlisted Personnel

As indicated earlier the conferees to the fiscal year 1991 defense authorization legislation set the expectation that, in making active duty end-strength reductions,

2 We are planning a more detailed assessment of planned accessions in relation to future force requirements.

the services would maintain the same relationship between officer and enlisted strengths as existed at the end of fiscal year 1990. Table 5 presents those officer-toenlisted ratios for each service as of the end of each fiscal year represented.

Source: Derived using data contained in the Department of Defense Manpower Requirements Revort FY 1993--Officer Flow Annex, February 1992, and from budget justification data submitted to the Congress in conjunction with Amended FY 1992/FY 1993 Biennial Budget Estimates.

The data shows fluctuating changes in the proportion of officers to enlisted personnel within the services but an increase of less than 1 percent for all services, except for the Army; the Army shows a 1.4 percent increase between the end of fiscal year 1990 and fiscal year 1995. However, all of the services are under their authorized ceilings for officers in fiscal years 1992 and 1993 (see table 3 for officer authorization levels). The Army attributes some of its higher officer levels to congressional mandates such as the requirement for increased support to Reserve components, and a mandate not to reduce medical support, etc.

PROGRAMS TO FOSTER FORCE REDUCTIONS AND MINIMIZE IMPACT ON INDIVIDUALS The National Defense Authorization Act for Fiscal Year 1991 as well as fiscal years 1992 and 1993 authorized or expanded several programs to induce voluntary separations, minimize the adverse impact on individuals affected by the military drawdown, and help shape the remaining force. These included:

expanded authority for selected early retirement, reduction in force, and reduced time in grade/service requirements pertaining to officers;

- expanded provision of lump sum separation pay for officer and enlisted personnel involuntarily separated; and

- authority for two special financial incentive programs to induce voluntary separation of personnel having between 6 and 20 years of service.

One of the financial incentive programs is the Voluntary Separation Incentive (VSI) and the other is the Special Separation Benefit (SSB) program. VSI provides an annual payment for double the number of years of service while SSB provides for a lump sum payment. (See appendix II for comparative examples of separation pay between these programs and involuntary separation pay for selected pay grades.) The National Defense Authorization Act for Fiscal Year 1991 expanded authority for transition benefits and services including counseling and job placement assistance for persons involuntarily separated; this authority was further expanded by the fiscal years 1992 and 1993 authorization act to include persons who voluntarily separate under the lump-sum SSB program (see appendix III for the range of transition benefits available to military personnel).

Each year the military services lose large numbers of personnel voluntarily and involuntarily for a variety of reasons ranging from normal end of enlistment, retirement, denied reenlistment, or involuntary separations based on performance or other reasons. These losses continue during this time of force drawdown with some increases due to tightened retention quality standards and use of other special programs designed to induce or facilitate additional separations. Table 6 summarizes the projected losses for fiscal years 1992 and 1993 by various separation categories.