While both the MCAR and MCARNG appropriations will remain in existence, no new money is being requested for fiscal year 1966. The $16 million program for Army National Guard construction stems from a carryover from prior years to support requirements for the Reserve forces reorganization plan to include transfer of unobligated funds from MCAR to MCARNG. The above chart depicts the new obligational authority, by appropriation, needed in fiscal year 1966 to effect the budget plan. This authority totals $11,336.5 million. Excluding the construction request, the new obligational authority requested is $10,895.1 million. The above chart relates the fiscal year 1966 direct budget plan to new obligational authority. The direct budget plan, excluding construction, comes to $11,974.2 million. However, because of various financing arrangements, we are requesting new obligational authority for $10,895.1 million, or $1,079.1 million less than the total funds required to finance our fiscal year 1966 program. The resources required to support the total Army financial plan, excluding construction, are: Appropriations. Millions $10, 895. 1 Funds made available through reprograming (recoupments) of prior year budget plans--- 100.0 Unobligated balances brought forward into fiscal year 1966 to finance new budget plans----. 674.1 Proposed transfers from Army and Defense stock and industrial funds----- 240.0 Anticipated reimbursements for goods and services provided other 1, 626. 4 Less unobligated balances at end of fiscal year 1966 to finance future year budget plans---- Total financial plan.. -13. 1 13, 522.5 In summary, the fiscal year 1966 Army budget and the programed force structure provides effective forces in a high state of readiness for the defense of the vital interests of the United States. This budget, as it now stands, is tight but will enable us to accomplish our assigned missions during fiscal year 1966 at minimum costs. Senator STENNIS. Well, General, I know that we do not have any fatal deficiencies, and there is time to make up for the existing deficiencies, but I do not see how the Army says that everything is in a high state of readiness for the defense of the vital interests of the United States. The high state of readiness is a very broad term, but it seems to me that the Army needs many things which you do not have at the regimental and division levels. We shall not go into that again at this time. FINANCIAL PLAN-UNOBLIGATED BALANCES On the table facing page 15 of your budget statement, General Taylor, the financial plan shows unobligated balances at the start of fiscal year 1964 as $149.6 million; 1965 as $658.2 million, and 1966 as $674.1 million. Your financial plan shows a marked increase in unobligated balances at the start of the year, rising from $149.6 million for 1964 to $674.1 million for 1966. Would you explain this in the record? General TAYLOR. I shall be glad to. (The information requested follows:) DECREASE IN ALL APPROPRIATIONS BUT PEMA The unobligated balance at the start of the year for new budget plan is reflected in the following table which reflects a decrease in all appropriations except procurement of equipment and missiles, Army: The principal factors which accounted for the increase in the appropriation for procurement of equipment and missiles are sale of Army stock to customers in excess of estimates, savings due to improved procurement and refined fund requirements, and deletions and reductions in programed items. These three factors are explained in more detail below. SALES OF STOCK Customer requirements for materiel, when supplied from Army stocks without replacement, generate funds which can be applied to the Army program. During fiscal year 1964 and fiscal year 1965 a greater proportion of customer programs could be supplied from stock than originally estimated. SAVINGS The second general source of additional funds are savings, which are generated in three ways. First, there are the savings accomplished through improved procurement practices. This includes such things as more price competition, use of more firm fixed-price and incentive contracts as opposed to cost-plus-fixed-fee contracts, value engineering or the elimination of unnecessary frills and gold plating, and the innovation of multiyear buys. Second, there are the savings resulting from decommitment of funds held against prior year contracts. Certain amounts must be set aside as reservations or actual commitments to provide for contractual target to ceiling payments, escalation contingencies, incentive earning, engineering change orders and other engineering support, quality assurance, and possible termination charges against multiyear procurements. Because of our full funding concept, funds for these purposes must be included in our programed amount. When they are no longer required for the intended purpose, they are released as available. The third savings category of deobligations is somewhat similar to the one I just described. Such funds may be returned as available funds whenever the actual cost of the work or service performed turns out to cost less than the amount specified in the contracts. A simple example of this is the funds deobligated when a contract is terminated for cause. PROGRAM REDUCTIONS AND DELETIONS Program reductions and deletions are the third source of funds. This represents items which we had in our program at the time of budget presentation to the Congress and which were subsequently deleted from the program. There are three major reasons for reduction in program. First, revisions in requirements are made as a result of changes in our force structure or in logistics guidance. These changes are to be expected, and are the principal reason for the necessary authority to reprogram funds. Second, there are new items in our program which are subjected to constant scrutiny. If they fail to meet tests on schedule and slip to a point in time which is too late for procurement during the fiscal year, they are deleted from the program. In some cases, the existing item of equipment is procured in their stead. In some instances, late discoveries in the research and development phase determine that improvements for a follow-on item can be made which are advantageous; therefore the programed item is deleted or slipped until a determination can be made regarding the improved item. Third, there are other costs in our program related to end items which are directly influenced by any actions taken on those end items. These are costs of PEMA funded spare parts and first destination transportation. As the program for end items is reduced, these costs are also reduced. Senator STENNIS. Is there anything else you wish to say, General? General TAYLOR. No, sir; Mr. Chairman. MILITARY PERSONNEL, ARMY STATEMENT OF LT. GEN. JAMES L. RICHARDSON, JR., DEPUTY |