The Budget Situation

The Poor Health of Research. Despite all the detailed planning and attention given to the infrastructure, R&D is not doing well in the DoD as a whole, and the problem is money: funding is down another 8% in the FY 2000 budget, although the overall DoD budget decreases only 5% from FY 1996 through FY 2002.

The health of Air Force research is of even greater concern. Ten-year trends for the three services show some stability for the Navy, a little less for the Army, and an unchanging decline for the Air Force. Expressed in then-year dollars (unadjusted), Air Force R&D funding decreases 5.24% from FY 1995 through FY 2005, while the overall Air Force budget decreases 3.24%. Total Air Force S&T (6.1-6.3 funding) was down 3.25% from FY 1995 to FY 1996, 7.94% from FY 1996 to FY 1997, 5.3% from FY 1997 to FY 1998 and 6.69% from FY 1999 to FY 2000. FY 2000 figures, at $1,182.83 million, are only 84.85% of the FY 1995 level. Basic research (6.1 money) by itself is down to $209.51 million, a 6.74% drop in 6 years from already anemic levels, and it is to drop another $32 million in FY 2001. This places the Air Force—arguably the most technology dependent service—last among the three services in terms of S&T investment. As one source said about S&T funding: "We are beyond cutting muscle: we are getting down to bone." Meanwhile, 6.2 funding for applied research will take a devastating cut of 14.29% in FY 2000.³⁹

The issue, of course, is that these cuts have lasting effects on future decades of Air Force technology.

DOD RDT&E INVESTMENT
		Funding for Department of Defense research, development, testing and evaluation has declined precipitously in the latter part of the 1990s. (Figures are shown in then-year dollars, the unadjusted actual funding level n any given year.) Source: The Military Balance, International Institute of Strategic Studies, various years.

This is not a new concern. As long ago as 1985, Gen. Robert T. Marsh, USAF (Ret.), former Air Force Systems Command commander, pointed to "decreasing support" for basic R&D over the prior 20 years.⁴⁰ And in 1988, John J. Welch, Jr., then assistant secretary of the Air Force for acquisition, noted that the lack of RDT&E money meant any high-priority system that met development difficulty had to compete for more funding against other programs "that we know we can afford, that are on schedule, and that are performing."⁴¹ In his comment on the May 1997 Quadrennial Defense Review, Chairman of the Joint Chiefs of Staff Gen. John M. Shalikashvili cited the "patterns of the last four years": cutting investment and selling the "force of the future" to "pay current operations and support bills."

		SERVICE INVESTMENT
At the end of the Cold War, the Air Force was the unquestioned leader in science and technology investment. In the 1990s, it dropped to third place, behind the Navy and Army. Source: Office of the Secretary of Defense.

Is further shrinkage likely? The CSIS-sponsored Working Group on Technology and the Industrial Base asserted in 1997⁴² that "underfunding" of 6.1-6.3 programs had already limited the Air Force's ability to translate "promising, innovative ideas" into real systems. Gen. Robert T. Marsh, USAF (Ret.), former commander of Air Force Systems Command, pointed out that "Air Force investment in the technology base in constant dollars has declined since the early 1960s. Except for a short period of modest growth—4% a year—from 1982 through 1986, it is still declining" and "I say that our store of technology on the shelf is becoming sparse."⁴³

		AIR FORCE S&T INVESTMENT
Air Force investment in all of science and technology has declined since 1993, dropping most dramatically in the 6.2 and 6.3 areas, where promising technology is explored and developed. (Figures are shown in then-year dollars, the unadjusted actual funding level in any given year. Source: USAF.)

There is little to gain and much to lose from such persistent budget raids on the R&D coffers. S&T accounts for only some 1.5% of Air Force total obligational authority (TOA); it is dwarfed by investments in readiness and modernization. Taking money out of this small sector of TOA can devastate S&T programs, where funding stability is critical because much of the activity is performed by industry. Moreover, cuts to S&T provide a very small return when measured on the scale of regular programs.

At the same time Air Force R&D investment is being raided, the Defense Advanced Research Projects Agency (DARPA) has become more involved in providing funding to the Air Force. In FY 1996, DARPA provided over $360 million to the Air Force; that funding has grown since then to nearly $450 million. But DARPA funding is devoted to research for joint activities, which, in effect, reduces the flexibility the Air Force has in terms of directing and managing the funding. So not only does the Air Force end up with fewer research dollars, it also has less control over how to spend them.

DARPA FUNDING TO AIR FORCE
		Increased funding provided by DARPA to the Air Force benefits joint projects, but it also masks a substantial reduction in Air Force-focused S&T funding. Source: Air Force Research Laboratory.

Improving the Process. Does the existing programming and budgeting process itself endanger R&D funding? This two-year process opens when the Secretary of Defense issues annual Defense Program Guidance, giving broad program priorities but seldom including funding figures. The services interpret this guidance and create their annual budget submissions. Air Force submissions originate with resource needs requested by the program element monitors for each program. These program element needs are then consolidated and adjusted by one of 14 mission panels, each a center of expertise for broad Air Force areas like air superiority. This is the last level at which RDT&E is represented as a distinct voice,⁴⁴ and even the major commands are not evaluated separately above this level. Options prepared by the panels, and inputs from issue process teams, are forwarded to the Air Force Group, headed by the deputy director for plans and programs (AF/XPP), a colonel, who for the first time creates an integrated Air Force budget program. Recommendations from the Group are then presented to the Air Force Board, headed by either the director of programs, AF/XPP, or the deputy assistant secretary for financial management and budget, SAF/FMB, both major generals. The Board reviews "important" resource allocation issues requiring a corporate resolution and makes recommendations for integrated programs to the Air Force Council. In the course of this entire process, the tough tradeoffs are made between readiness ("today's Air Force"), modernization (the "next Air Force"), and S&T (the "Air Force after next"). The Council, headed by the vice chief of staff, a general, makes final recommendations to the chief of staff and secretary of the Air Force.

Program submissions are then reviewed by program element in the Office of the Secretary of Defense (OSD), which looks for unusual growth or shrinkage. OSD budget negotiations with the services follow, and the resulting revised submissions are consolidated into the Presidential Budget submission. This is where there lately has been some bruising redirection of Air Force thinking on spending. For example, the Air Force tried to gain $94 million in 6.4 funds in the FY 1999 budget by reclassifying the Space Based Laser (SBL) and Discoverer II programs as having "significant" S&T content, shifting both programs from Engineering Manufacturing Development (EMD) to S&T. Again in FY 2001, the Air Force wants to cut $50 million—about 25%—from the S&T account.

		S&T BUDGET TREND
By shifting engineering development funding (6.4) for Space-Based Laser and Discoverer II into the basic S&T account, the Air Force artificially boosted overall S&T funding. Without SBL/Discoverer II funding, overall S&T funding drops nearly 22% in 4 years. Source: Air Force Research Laboratory.

The strength of R&D institutional advocacy at key points in the late stages of the four-level Air Force budget decision-making process is cause for concern. This is where tradeoffs are made among readiness, modernization and R&D, and R&D is one of over 600 programs being weighed. Although there are many influential R&D champions in the Air Force, their influence is not apparent in the latter stages of the resource allocation process. This lack of timely advocacy may well explain why overall funding levels are spiraling down from their historical 2% level, a matter of grave concern. There also seem to be too many bureaucratic layers between the Air Force Research Laboratory (AFRL), the major commands, OSD, and the Congress that the Air Force R&D program submission must pass through.

Joint Projects. The cascade of R&D reprogrammings that followed last year's SBL/Discoverer II funding change seriously upset existing Air Force commitments to programs that share R&D costs with the other services and industry. Such "Reliance" programs began 5 years ago, when the services agreed to share facilities and processes as part of DoD attempts to create savings within the services. Reliance programs meld R&D needs to vision statements like Joint Vision 2010. The Air Force-administered and very successful Integrated High Performance Turbine Engine Technology (IHPTET) program is one example. Although shared funding would seem to benefit the resource-strapped Air Force R&D program, the Air Force has previously attempted to withdraw from other Reliance programs, such as high-performance powerplants and hypersonic and missile propulsion. But OSD maintains "robust" oversight of these programs and has thwarted Air Force attempts to pull out of them.

Erratic Implementation. Because of irregular funding, then-Assistant Secretary Welch noted a decade ago that "financial stability and program stability" were missing from what was otherwise a "well-understood and well-structured acquisition process."⁴⁵ Industry notes that long-term development is being adversely affected by varying funding levels, which lead to erratic research programs. Funding stability involves two issues: stability within overall DoD funding from year to year, and stability within each service's funding. OSD claims to be "working very hard"⁴⁶ on overall S&T funding—with Congress and with the services to assure a "fairly stable number of dollars." But degradation in service Future Years Defense Programs is a concern as programmed obligations turn into expenditures. For example, in FY 1996, when Air Force TOA was $72.992 billion, the projected S&T budget for FY 1999 was nearly $1.5 billion. But 3 years later, actual FY 1999 S&T budget authority was about $1.175 billion, down nearly 22% from those earlier projections, even though actual authority only shrank 12.3% over the same period (see Appendix B). This indicates that program managers have as little control over their planned budgets as they have over their authority to spend.