Army leaders weigh tactics to protect prized program

The Army is staring at a $160 billion bill for its sprawling Future Combat Systems, the most ambitious program in the force's history. Combined with rising manpower costs and combat operations in Iraq and Afghanistan that have consumed lives and equipment, the service stands on the edge of a deep, deep hole.

Budget shortfalls could exceed $20 billion annually, a staggering figure that is compelling service officials to play hardball with the Pentagon in an attempt to keep afloat financially while also safeguarding their prized modernization program.

Faced with one of its toughest funding challenges in years, top Army officers are reviewing several options and negotiating tactics, including the possibility of submitting a budget proposal for fiscal 2008 and beyond that exceeds the guidance issued by senior defense officials, according to several sources familiar with Army budget deliberations.

Defying department guidance would amount to an act of rebellion by Army leaders, including Chief of Staff Peter Schoomaker, usually a reliable ally of Defense Secretary Donald Rumsfeld's. Indeed, Rumsfeld chose Schoomaker in 2003 to lead a service that the secretary had found increasingly combative.

But one senior Army officer, who denied a rebellion was looming, said the service would follow the department's budget guidance.

"Where we end up is the result of a long series of reviews and approvals between now and next year by ... the Department of Defense, [the Office of Management and Budget] and the Congress," Lt. Gen. David Melcher, director of Army programs, said in an interview. "If we have shortfalls in resources, we will have to deal with them accordingly."

Melcher acknowledged the Army is in "intense deliberations on how to keep our head above water." Right now, he added, the Army and Rumsfeld's office have a "good dialogue going," but the service wants to make sure Pentagon officials "have an understanding of the pressures that we feel."

Though cuts and delays to the Future Combat Systems program have been on the table, the service is reluctant to cut spending on FCS, something it believes would essentially mortgage the Army's future to pay for its current needs.

"I don't want to tell you that FCS is the place we're going to go [for budget cuts] yet," Melcher said, indicating that money eventually could come from smaller programs.

Preliminary budget figures obtained by CongressDaily bear this out, showing that the Army does not intend to make drastic cuts to FCS over the next several years that independent defense analysts have been anticipating. Rather, Army officials plan to budget the program at roughly the same levels as they projected last year.

But other cash-hungry programs will be stressing the Army's budget. Officials must scrape together more than $10 billion to pay for military base closures and the relocation of thousands of troops from Europe to the United States. Meanwhile, the Army has not filled substantial equipment voids in its current force, leaving a significant gap between the gear units need and what they actually have on hand.

The service had a $56 billion shortfall in its equipment accounts when combat in Iraq began in 2003. After three years and a series of extraordinary supplemental appropriations bills, the Army has not even cut that figure in half, Melcher estimated.

In addition, the Army is struggling to pay bills to repair and replace equipment damaged in Iraq and Afghanistan. The money to cover those expenses has come from the Army's share of the roughly $400 billion in supplemental funds earmarked for defense since 2001, according to recent Congressional Budget Office and Congressional Research Service reports.

But Congress this year cut $4.9 billion from the Army's so-called equipment reset accounts for fiscal 2006, leaving the service with a $17.1 billion bill in fiscal 2007. After that, the Army expects to spend between $12 billion to $13 billion a year on equipment repair and replacement.

The Army wanted to receive as much as $12 billion to cover reset costs in the $50 billion bridge fund that will pay for operations during the first six months of fiscal 2007, Melcher said. But he only expects to get between one-half and two-thirds of that request in bridge funding, and hopes to make up the difference in a supplemental later in the year.

It is a "combination of all those things that cause us a lot of pressure on the [budget's] top line," Melcher said.