MEDICARE

Medical care for dependents of military personnel is another essential requirement in retaining skilled military personnel. The executive director of this program, who will present detailed supporting data to this committee at a later date, has estimated that the number of dependents of these personnel eligible for medicare will increase by more than 200,000 during the 1960-62 period.

Procedures have been in effect since October of 1958 whereby dependents are authorized care in civilian facilities only after it has been determined that military facilities are not available. This "permit" procedure has proved effective in keeping total patient loads in military hospitals at a level related to capability. However, the majority of the estimated increase in dependent patients will have to be accommodated in civilian facilities.

In addition to the increased patient load, we are also requesting funds to provide for increases in per patient day costs. These costs are estimated at $52.60 in 1962 as compared to our current experience of $51.36.

Our total request for the medicare program for 1962 amounts to $73 million. This amount, which reflects increased patient loads and costs, is substantially lower than the $79 million obligated in 1959 when administrative controls for this program were first established.

DEPENDENTS EDUCATION

We are requesting an increase of $10 in the per pupil limitation on dependents' education in 1952 from $275 to $285. Of this increase, $7.50 is requested to support higher teacher salaries which will be paid in 1962. The average salary to be paid in 1962 will be $200 higher than this year in accordance with the provisions of the Teachers Pay Act of 1959. We are also requesting an additional $2.50 increase in the limitation to support higher tuition costs in private schools and increased costs of textbooks for students. The total cost of our requested increase for 1962 is approximately $1.3 million.

DEPARTMENTAL ADMINISTRATION

The functions and organizations termed "departmental administration" were subject to a limitation of $317,613,000 in the Defense Appropriation Act for 1961. This area was dealt with thoroughly in the 1961 report of this committee. Throughout this year, every concerned agency within the Defense Department has felt the effect of this limitation both as to reductions in military and civilian personnel and in expenses related to major headquarters operations. As to the fiscal aspects of departmental administration, we believe it well to review our progress as follows:

1. In 1960, on a basis comparable to the pattern presented in your report, we obligated a total of $339 million.

2. We requested $336.2 million for 1961, but were limited to $317.6 million, or a reduction of $18.6 million. However, through the imposition of rigid manpower ceilings and fiscal controls, we anticipate that on a comparable basis we will actually obligate approximately $600,000 less than the limitation.

3. Our request for 1962-again on a comparable basis with the 1961 limitation-is approximately $1 million less than that limitation.

The above summary is complicated by the fact that to be on a comparable basis, the limitation for 1961 should be adjusted by the addition of approximately $19.5 million to cover the cost of the 1961 civilian personnel pay increase. The limitation would then total $337.1 million, our estimated 1961 obligations $336.5 million, and our 1962 request $335.5 million.

The pattern of our civilian personnel inventory affected by the limitation follows substantially that of the fiscal situation :

1. In 1960, the average man-years of civilian employment totaled 37.112. 2. In 1961, we estimate that the average will total 35,073, or a reduction of more than 2,000 from the 1960 level.

3. Our request for 1962 supports a work force of only 34,319-for a reduction of almost 2,800 from the 1960 level and 750 from the restricted level. (As requested by the committee, MSTS and MATS departmental administration personnel were, in addition, subjected to similar reductions.)

With respect to military personnel assigned to the headquarters organizations specified in your report, we estimate that the end 1961 strength will be under

your recommendation by about 300 and that the 1962 level will continue to be under the December 31, 1959, limitation.

As the committee has requested, we have prepared a presentation on departmental administration and it is attached to this statement as attachment F-1. We have, as well, separately identified the 1962 costs and personnel for these purposes and have compared them, as above, with our 1960 experience and 1961 limitation. The organizations and functions covered do include MSTS and MATS as recommended in the committee report.

The question of uniformity in description of departmental administration is almost impossible of resolution. This situation arises because of basic differences in service missions, methods of administration and supervision, proximity of command headquarters to operating forces and the delegation of administrative responsibilities to varying echelons. Perhaps the most perplexing of these problems is the situation of a headquarters which has both servicewide administration responsibilities and a specialized operating function with both being carried on by the same personnel.

We have reached the conclusion that complete comparability or uniformity as to functional coverage cannot be achieved without a high degree of statistical division and pro ration. We, therefore, would prefer to present a general pattern which is fairly well covered by the following definition:

"Departmental administration includes that force which is engaged in the continuous centralized direction and administration of the total resources and personnel of a single military department, or of the Department of Defense."

The application of the general pattern has the effect of modifying the list of units specified in the committee report for 1961. For example, we have deleted the Ballistics Missile Division of ARDC and several field activities of Department of the Army headquarters. In addition, we have attempted to "shred out" servicewide administrative activities from specialized operational tasks in such headquarters as AMC and ARDC. Even within this general pattern we have been faced with the necessity for relatively arbitrary decisions. The results of our efforts as they modify the list of organizations contained in the committee report-are set forth in attachment F-2.

We believe it evident that the Defense Department has conscientiously controlled the amount of resources to be applied to headquarters activities.

Further, we have a history of such control as witnessed by our 13.6-percent reduction during the period December 1956 to June 1958. It is indeed an area that receives continuous and rigorous self-review. We, therefore, urge the committee that no continuing limitation be attached to the activities referred to collectively as "Departmental administraion."

TRAVEL

We estimate our travel requirements in 1962 for all appropriations at a total of $697 million, of which $273 million is included in the operation and maintenance accounts. On a comparable basis, this total is $19 million less than the 1961 limitation plus our supplemental requests. Details by appropriation title, showing 1960, 1961, and 1962 travel costs on a comparable basis and showing the adjustments necessary to convert from the old object class 02 to the new object class 21 travel, as directed by the Bureau of the Budget, are contained in attachment G.

Each of the services is most anxious to present an explanation of the problems resulting from the current travel limitations and the severe curtailing actions they have had to initiate. The paperwork involved in administering the travel limitation imposed on these appropriations in 1961 is substantial. Each allotment and other funding document issued must contain a notation as to the amount of travel funds that may be utilized under it. Inasmuch as violations of these individual limitations are subject to legal penalties, this also requires special recordkeeping at local levels. In view of the austere travel request for 1962 and the severe administrative problems involved in the exercise of such legal restrictions, we are requesting that such a limitation not be included in the 1962 appropriation act. We would intend to continue to take aggressive administrative action at every level to insure that travel expenses are held to the minimum necessary to carry out essential missions.

CONCLUSION

The problems inherent in managing the operation and maintenance funds are substantial. We have briefly indicated some of the special attention that has been given to those areas in which the Appropriations Committees of Congress have shown interest. We believe that evidence has been presented to indicate that our management has been prudent and economical and that our requests for 1962 substantially reflect the management improvements recommended by this committee in your 1961 report.

This concludes the presentation based on the President's budget as submitted January 16, 1961. Secretary McNamara, the service Secretaries, and the Joint Chiefs of Staff are currently reviewing the Defense budget as submitted by President Eisenhower. It is possible that changes will be made in the operation and maintenance requests as a result of this review. If so, the changes will be submitted as required.

Operation and maintenance, Air Force.

National Board for the Promotion of Rifle Practice.

Claims, Department of Defense..

ATTACHMENT A-2

Obligations in operation and maintenance appropriations, fiscal year 1960-62

NOTE,-Amounts will not necessarily add to totals due to rounding,