S.

ysts of my office and the staff agencies responsible for the particular proThe estimates were adjusted as necessary upon the basis of past exnce and other available data, and matters of disagreement or issues of were determined and noted for presentation to the budget advisory mittee.

e budget advisory committee is formed of senior representatives from the es of each of the deputies with the Director of Budget as chairman. This mittee met in continuous session as soon as the panel reviews were comed, resolved such issues as were within its competence, referred others to er levels for resolution and concentrated on an exhaustive and searching sideration of all estimates to assure full justification and maximum economy. he screening process through this stage assures a balanced dollar program. ond this point major changes in the budget can be made only if the ground -s for the basic program are changed. A case in point is the modification the aircraft procurement schedule which will later be explained in detail. s change has been a basic one and has affected the projected availability of raft, unit activations, base activation, personnel phasing, aircraft flying rs, and the like. This and similar program changes permitted us to make mendous reduction below initial estimates. Without these program changes, ustments by reviewing agencies are usually minor and result primarily from ferences of opinion or disagreements as to facts.

The tabulation which you have been furnished indicates the Air Force approation requests for fiscal year 1953 as originally incorporated in the Presiat's estimate, the budget cuts recommended by the House, restoration requested the Air Force and the revised fiscal year 1953 estimates. Shown but not luded in amount of the new obligating authority requested are certain ounts requested for liquidation of prior years' contract authority still financed. The liquidation feature applies only to two appropriations Aircraft and related procurement" in the amount of $1,685,044,000 and "Acquition and construction of real property" in the amount of $45,334,770. In the tter appropriation, no new obligational requirement is shown since new legistive authority must be initiated before any request for appropriations can be ibmitted against this authority. The appropriation of the funds requested or the liquidation of prior years' contract authority will place the Department f the Air Force on a straight cash basis since these two sums represent the otal unfinanced contract authority remaining.

You have before you a tabulation which indicates the relationship between he programs of which General Odom has spoken and the financing of these rograms. In fiscal year 1951 the new obligating authority available to the Air Force amounted to $15.9 billion which was approximately $4.5 billion short of the requirement for financing the program for that fiscal year. This financing vas accomplished without detriment to the program, however, through the ncorporation in the fourth supplemental for fiscal year 1951 of the technique of partial financing with which you are familiar.

This technique allowed the initiation of contracts on a down-payment basis with the balance to be funded from appropriations of fiscal year 1952. The partial financing was authorized only in three appropriations-"Aircraft and related procurement," "Major procurement other than aircraft," and "Maintenance and operations." It is shown only under the first two appropriations because the 1-year applicability of the "Maintenance and operations" appropriation introduced a complication. To avoid excessive administration, it was necessary in converting letter contracts to definitive contracts to finance these letter contracts in full from either 1951 or 1952 funds. Partial financing in fiscal year 1951 meant that actual funding was short of program requirements and that this shortage had to be made up in fiscal year 1952.

Had we continued on the production program originally scheduled for fiscal year 1952 there would have been required a supplemental fiscal year 1952 appropriation because of the deferment of certain fund requirements in our initial request pending determination at a period of decision toward the end of calendar year 1951 of the future course of action. That determination has been described to you in the modification of military procurement schedules to accommodate to the limitations of the national economy and other factors. It has led to a recognition of the necessity for funding to actual lead times, a procedure which has been accepted by reviewing authorities as a logical basis for development of funding requirements. Not to have made this adjustment in a program which is otherwise well within production capabilities would have been to ignore

reality and to build gaps in the production line. The time for providing for the increase in lead time is not, however, fiscal year 1953. It is 1952 because 1952 is the year in which the aircraft production program is being modified. Under these circumstances the funds now available to the Department of the Air Force are insufficient and partial financing is again required to the extent of approximately $2,645,000,000. In this instance the requirement is restricted to the "Aircraft and related procurement" appropriation and is further restricted to aircraft, initial spares, and the heavy-press program. This partial financing is in lieu of the supplemental appropriation in fiscal year 1952 that would otherwise be required to prevent delays in the program. It affords an opportunity to accomplish the required funding by means of one appropriation action rather than two.

The revised fiscal year 1953 estimates are summarized in the next tabulation which shows, by appropriation, the actual obligations for fiscal year 1951, the estimated obligations for fiscal year 1952 and the revised budget estimates for fiscal year 1953. The appropriation request for "Aircraft and related procurement" is shown as $12,685,044,000. Of this sum, $11,000,000,000 is for new obligating authority and $1,685,044,000 cash for the liquidation of prior years' contract authority. Whereas no provision is made at this time in the Air Force estimates for new obligating authority for the appropriation “Acquisition and construction of real property," provision has been made for $45,334,700 cash for the liquidation of prior years' contract authority. In each instance the obligations reflected in the upper portion of the table are against the sums appropriated for that particular year. Funds for liquidation of prior years' contract authorization are footnoted at the bottom of the tabulation as an additive item.

With due allowance for the adjustments for partial financing necessary to compare program requirements, the appropriation for "Aircraft and related procurement" reflects an immediate and maximum acceleration following Korea with particular emphasis on aircraft facility expansion and the placement of contracts on aircraft to build first to 80 combat wings and now to 126. Also built into this program is overtooling, which provides insurance against emergency in a base from which production could rapidly be accelerated in the event of need. Aircraft will probably cost more on the average in fiscal year 1953 due to a number of factors-the growing proportion of heavy versus light aircraft, the leveling-off of production rates and known labor and material cost increases. The guided-missiles program shows an increased requirement in keeping with the phasing of this program. On the other hand, industrial mobilization has decreased to the point where only minimum activities are being carried on and these are related primarily to studies on conservation of critical materials and on improved manufacturing methods.

In the appropriation “Major procurement other than aircraft," provision is made for the procurement of vehicles, ammunition, electronics, training aids, photographic tests, and shop equipment. In fiscal years 1951 and 1952, the programs of ground-powered and marine equipment, training aids, and other major equipment were directly related to the increases in major program components such as wings, installations, aircraft, and manpower. The satisfaction of the incremental requirement of fiscal year 1953 reflects a reduction due to the phase-in of units and a determined and conscientious effort by the Air Force to reduce requirements to a minimum. In the other program areas of this appropriation, ammunition and electronics and communications equipment, the situa tion is somewhat different in that production and ability to engineer new items has been a limiting factor. The net results of this is that the estimates before you reflect programs which are phased over a period of several years.

In the maintenance and operations appropriation there is a continuing increase in requirements which is a natural development in the expansion of the Air Force because it is from this appropriation that the Air Force supports its dayto-day operations. These requirements are, for the most part, for operating or recurrent expenses as opposed to capital purchases. It must be expected. therefore, that requirements in this appropriation will continue to increase until the Air Force has achieved its approved ultimate strength. The increase in flying hours means an increased requirement for spare parts and for fuels, the latter of which is further accentuated by the increased ratio of heavy and medium aircraft total inventory. The increase in bases, and the fact that many bases will be operated for a full year for the first time in fiscal year 1953, means that requirements deriving from this cause are increasing.

Other program elements show comparable increases. Efforts have been made to reduce total fund requirements, however, by assuming improved utilization and increased productivity of civilian manpower. The Air Force thus runs the risk of having been unduly optimistic in disregard of proven workload factors. The end year military strength for fiscal year 1952 in the "Military personnel requirements" appropriation has been adjusted downward to a planned goal of 973,350 rather than 1,061,000 which was originally planned and provided for in this appropriation for fiscal year 1952. The lower end strength is in consonance with availability of facilities and equipment. Because of changes in many factors of this appropriation, such as increased ration costs, increased costs for initial clothing allowances, change in phasing, and the increased pay costs which will result due to the Armed Forces Pay Raise Act, the savings reflected are not in direct proportion to the reductions in the number of man-years. Our latest net saving in fiscal year 1952 is $78,285,000. The estimates for fiscal year 1953 as incorporated in the President's budget totaled $3,300,000,000. As a result of currently revised subsistence and clothing rates, established by the Department of Defense, the estimates have been revised downward to $3,269,000,000—a reduction of $31,000,000. These estimates are predicated upon a beginning position of 973,350 military personnel and an end position of 1,061,000. No provision has been made in the fiscal year 1953 estimates for any increases in military pay. The trend of increase in the "Research and development" appropriation has enabled increasing effort toward matching or outstripping the technological progress of any potential enemy. We know that efforts of other nations are directed toward the same end with respect to us and also appreciate the fact that it is the desire of this committee that all reasonable progress be made in his area.

This

The table shows the requirement for fiscal year 1953 for the appropriation "Reserve personnel requirements" to be $26,196,000. It does not show, however, that savings anticipated for fiscal year 1952 in the amount of $7,016,000 have been applied as a credit against a total requirement of $33,212,000. carry-over is made possible by virtue of the 2-year applicability of funds in this appropriation. It is evident both in this appropriation and in the appropriation Air National Guard that major variations in requirements were caused by calling to active duty units and individuals, the financing of whose requirements thereupon became the responsibility of other appropriations. This is the financial reflection of the use of these reserve components for the purposes for which they were created. In the discharge of these responsibilities they have justified themselves beyond all expectation.

In the contingencies appropriation every effort has been exerted to hold requirements to a minimum. The success of this effort is demonstrated by a comparison of these entries.

Other than what has been covered in the presentation, there will be forthcoming, as you know, a requirement for funding of construction requirements in the appropriation "Acquisition and construction of real property." The fiscal year 1953 budget estimate as presented also does not include provision for consumption requirements in fiscal year 1952 attributable to Korean operations and the assumption of certain costs of our military forces which have heretofore been financed from the Japanese economy. Such requirements are included in a fiscal year 1952 supplemental estimate which has been approved by the House in the amount of $235,000,000.

Representatives of the Air Force will discuss in detail the effect of the restorations requested in line with the information already submitted to you in summary form. Since the effects of the Smith-Coudert amendment have been discussed at length in previous testimony, our presentations will be concentrated on the requests for restoration of specific cuts or elimination of proposed actions other than expenditure limitations. The reasons for committee action which resulted in recommended reductions are shown in the committee report in almost every case to be very general in nature. In treating with the appropriation "Aircraft and related procurement," for example, it is stated in part, "It is not the purpose of the committee in recommending this reduction that the number of aircraft to be procured shall be reduced; rather it is hoped that from the funds appropriated for the procurement of aircraft that by efficiencies and reductions in cost, additional aircraft may be procured for the same money." And again, with regard to the appropriation "Military personnel requirements." "In recommending a reduction of $150 million from the $3,300,000,000 requested

for military personnel requirements, the committee does not intend to reduce by one single person the military strength requested."

The fiscal year 1953 budget estimates, which we are about to discuss, do not include provision for consumption requirements attributable to Korean operations. The estimates also exclude consideration of the increased cost of military pay as a result of the Armed Forces Pay Raise Act. It is estimated that an additional $140 million will be required for pay of military personnel during fiscal year 1953 as a result of such legislation.

With such general terms as the background for the imposition of reductions it has been necessary for the Department of the Air Force to make arbitrary distribution of these reductions to maintain a general balance between the various programs of the separate appropriations. The word "arbitrary" has been used to indicate that there has not been time to develop complete operating programs in consonance with the reductions and thus to achieve the best balance possible. The Air Force is prepared to proceed, appropriation by appropriation, with its presentation of requests for restoration of funds which were eliminated by House action.