"Inside the Air Force Budget"

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General Faykes: Good afternoon, everybody.

Given that we have a fairly small group here today what I’d like to do is, I’ll go through my pitch, but I’d like to invite a dialogue, questions, as we go if you have any. I think I can see out there pretty well. So if you have a question or something in mind that you’d care to ask me, I’ll be happy to share everything I know about our Air Force budget and where our Air Force is headed over the next several years.

My general rule is you can ask me anything you like. As long as nobody says anything bad about my mom, I think we’ll all just get along great.

My briefing today is “Inside the Air Force Budget”. I’m not going to talk to you a lot about the numbers because each of you has a specific interest and you know what the numbers are, so I’m going to talk about what I call the budget beyond the numbers, kind of where we started when we began this journey to build the FY07 program, how we came through the year, where we are now, and a little bit of insight on the way ahead this next fiscal year.

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Here’s what I’m going to talk about today.

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As you all know, last year about this time we had a turnover in leadership, a new Secretary of the Air Force, Secretary Wynne; a new Chief, Chief Moseley came in. Clearly they had a vector in mind, several vectors for us, and you can see those. The three vectors they gave us as we began building the FY07 budget, as you all are very attuned to, was to be prepared to fight and win the long global war on terror; to be able to continue to take care and develop our people; and then finally, which I consider the big one, is to begin recapitalizing and modernizing our Air Force.

I think everybody felt that we were facing a looming crisis in our investment portfolio and that we were not preparing for the future and we needed to. So despite the budgetary pressures given to us by the Congress, given to us by the Office of Secretary of Defense, we made a decision that we would begin to recapitalize and modernize the United States Air Force.

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The Air Force of today, as you all know, is very very engaged around the world, supporting the combatant commanders.

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You can see we have 200,000 of our Air Force personnel directly supporting combatant commanders. We’ve got about 36,000 people today deployed in Afghanistan and Iraq. We’ve got about 79,000 people who we call forward deployed, primarily in the European theater and the Pacific theater, and we’ve got about 100,000 people that we call deployed in place, i.e. manning the missile silos and things like that, that are directly prepared to present forces, capabilities to the warfighting commanders.

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Since we’ve been in this war on terror since September 11, 2001, we’ve been very very actively engaged. You can see from the chart that we’ve flown over 400,000 sorties in Afghanistan and Iraq since the war on terror began. We’re averaging about 200 sorties a day, each and every day, every day of the year. We’ve got 400-some airplanes that are deployed flying those sorties overseas, performing all the major missions -- mobility, strike and ISR.

We also are now beginning to, or have begun to fill some of the Army missions, what we call “in lieu of” where we’re supporting missions primarily that were in the past performed by the Army. Everything from providing base security to driving convoys. We’ve got nearly 4,000 folks doing that. Most recently in responding to General Abizaid who wanted to take convoys, truck convoys off the roads due to the IED (Improvised Explosive Device) threat, we’ve begun using our aircraft in a tactical mode, C-17s and C-130s, to remove convoys for the roads for security reasons and protection. You can see that just in the month of June our airlift has taken 212 convoys off the road, so a big security issue there for our forces as they are deployed in Afghanistan and Iraq.

Clearly, precision weapons, laser-guided and GPS weapons are the desired weapon of today, and we dropped nearly 20,000 of those munitions.

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Not only are we heavily engaged overseas in the deployed environment, but we’re also heavily engaged at home and in other parts around the world. Homeland defense since September 11th, we’ve flown over 43,000 missions in the United States supporting the prevention of a potential attack on the United States, similar to what happened on September 11th.

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Hurricane Katrina support was the largest peacetime air operation on US soil. You can see some of the factoids there. One of the things we’re very proud of is the fact that we saved over 5,500 lives during that operation. A great example of our total force where we integrated active, Guard and Reserve assets to support that mission.

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Then the recent Lebanon crisis where we evacuated over 20,000 personnel and 1,000 medical patients.

So, your Air Force is extremely busy supporting crises, humanitarian operations all around the world each and every day.

The reason we talk about this is because people who are not familiar with the Air Force, either inside the Beltway or outside the Beltway, sometimes are unaware of what it is that we do. So we always attempt to educate people about what their Air Force does for them and their country, so you’re not just reading about what happens in the United States military by what you read on the Washington Post front page. So clearly, we are heavily engaged each and every day.

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As we look at where we’re headed, what we’re doing now, and what we’re doing in the future, we are clearly the world’s dominant air and space force. We all know we can’t assure that future dominance. You have to be prepared not only to fight today but also to fight tomorrow. To fight tomorrow means you need to be prepared to modernize and recapitalize to address future and emerging threats. As we looked at the fiscal environment that was facing our Air Force and the Department of Defense, it was clear that the resources being allocated to defense were beginning to level off. Level off at a time when we knew we had to recapitalize and modernize our Air Force, hence the looming crisis in acquisition.

So given that resources were not going up, given the burning platform of having to modernize our aging weapon systems and bring on new capabilities to address the future threats that you see up there on the slide in terms of the evolving and emerging requirements, we said we need to transform our Air Force for the 21st Century, i.e. do things more efficiently, more effectively, free up the resources that we currently have because we’re not getting additional resources, and then reinvest those in the Air Force for the 21st Century.

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So we built a plan and briefed it through OSD. It got approved. It was substantiated by the Quadrennial Defense Review. And really, it tells the story about why we have to transform and use more effectively the resources that we currently have at our disposal.

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First we looked at, you all have heard AFSO 21, Air Force Smart Operations 21. Basically that is our interpretation of techniques used in the private sector, Six Sigma, lean, that have allowed our private sector corporations to compete in the international environment so effectively. We’ve said we’ve seen spotty results in the few places where we have applied these techniques inside the Air Force, mostly in our aircraft depots, where we have been able to take time out, take work out, improve the aircraft availability that we’ve returned to the combatant commanders. You can see some of these areas there.

The C-5 overhaul flow days, we cut it nearly in half. The KC-135 tanker that we work on at Tinker, we cut the program depot maintenance time from 400 days down to nearly 200 days. All of those things have returned warfighting capability to the warfighter because we don’t have the airplanes in a depot for such a long time.

So we know that the lean six sigma processes that are out in the corporate world today can be used effectively in the production environment.

We’ve also seen it in the administrative environment. The Air Force personnel system has reduced the time it takes to hire civilian personnel by about 30 percent. We’ve seen our civil engineers figure out how to streamline, design, to build contracts for new military construction projects. So we’ve seen pockets all around the Air Force where these techniques work, so the Chief and the Secretary said we need to apply that everywhere across the Air Force where feasible in order to free up resources -- either personnel resources, investment resources, or operation and maintenance resources -- to invest in our recapitalization.

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One of the things we’ve seen that I consider a good news/bad news story, is that our personnel costs have increased significantly over the last ten years, about 51 percent. You can see the red line/blue line. The red line is the cost of our personnel. You can see personnel are remaining constant over the last several years.

The reason for that increase is one, we’ve had great support for pay raises by the United States Congress and we’ve closed the pay gap for our military and civilian personnel in comparison to the private sector. Great news for our people.

However, just like in the private sector, we’ve seen significantly increased growth in our health care costs. That’s driving our costs up. We’ve seen great support by the Congress to increase the entitlements to our military personnel. All those things are good, but all those things have put pressures on the budget by driving our personnel costs up, so we knew that was an area we needed to be able to address through lean six sigma and AFSO 21.

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This slide shows the operating costs of our weapon systems, and basically across the top you see where it says MC rates, that stands for mission capable rates. Basically, a mission capable rate is the percentage of our fleet that is able to perform its mission on any given day. We’re hovering around 75 percent. That’s great. You can see the cost associated with doing that has gone up significantly, about 87 percent over the last decade.

The good news/bad news. The good news is our maintainers are the best in the world and they can keep any airplane flying. The downside of that, it’s very expensive to do so and if you don’t recapitalize, if you don’t modernize and bring on the newer systems which are less costly to operate and maintain, then the older systems, you get yourself in a “do loop” that you can’t pull out of.

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The age of our system. All of you are familiar with that. The Chief says that when he first came into the Air Force the average age of the fleet was nine years. Currently we’re hovering around 23 years average age, but you all know the B-52 is 50 years old; the KC-135 tanker, the older ones are about 45 years old. So we need to recapitalize those aircraft.

However, sometimes we’re faced with criticism by folks outside the United States Air Force and potentially some of the folks across the river that said. “You Air Force people just want new stuff.”

It’s not about new stuff. One, it’s about the cost of maintaining the old stuff, but it’s really about the military utility, the military capability of the systems that you have and whether they’re relevant for the fight today.

A clear example. The F-117 aircraft was a dominant aircraft in Desert Shield/Desert Storm about 15 years ago. In the recent fight in Afghanistan and Iraq we’re not flying the F-117 because the enemy’s radar systems, warning systems, now are able to find that airplane easier than they were 15 years ago. So that system, which will be replaced by the F-22 which is a fifth generation fighter, advanced integrated avionics, fifth generation stealth, supercruise, all those capabilities, and has the ability to do ISR (Intelligence, Surveillance, and Reconnaisance), clearly makes the 117 an airplane that no longer has military utility today and therefore we want to retire that platform.

On the other hand the A-10 aircraft, which is much older than the F-117, we do want to keep around because it has great military utility and supporting the United States Army on the battlefield, we’re going to re-wing those airplanes, and if we have the ability to come up with some other resources, we’d also like to re-engine them.

So clearly it’s not about replacing old systems just to get new ones, it’s about the utility of those airplanes and remaining relevant in the skies for the 21st Century.

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The looming investment crisis that I talked about is depicted on this slide. You can see back in this period here about 20 years ago in the ‘80s we were averaging about 50 percent of the Air Force budget went into R&D (Research and Development) and procurement, the investment accounts. The private sector realizes that you need to invest in R&D and procurement. We went on a procurement holiday where we are down to about 35 percent of our Air Force budget is invested in R&D and procurement. We’re trying to pull out of that dive there and start investing more. But clearly the pressure on the O&M and O&S accounts, the pressures of rising personnel costs, I’ve just said if you’re going to do that it’s going to come at the expense of these programs which means you’re never going to modernize the United States Air Force.

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To cap it all off, we’re seeing a leveling of the budgets. I won’t say the budgets are declining, because clearly they’re not declining, but they certainly are leveling out and the real growth associated with them is starting to come down. You can see the early part of the 2000’s here when we had big growth when the administration came in. You all remember the current administration campaigned on wanting to build a strong defense. They came in and they did it. In this period from 2000 up to 2006, 2007, the Air Force budget was initially plussed up about $85 billion. That was great for us and we were able to do a lot of things, except for buying new weapon systems. We needed most of those resources to pay for those systems we have.

But you can see what’s happening in the out years here. Growth is significantly slowing, which said if we are going to modernize and recapitalize it’s got to come out of the personnel accounts and it’s got to come out of the O&S accounts.

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So we sent over the budget to the Congress on the first Monday in February and they’ve been deliberating on it up until now. Last night the appropriations committees filed their report and we’re going through that to see how well we did, and I’ll get to that in a minute.

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If you look at what the ’07 budget, we had about $105.9 billion compared to what we had, $101 billion last year. You can see that the supplemental, this was for the Global War on Terror and Hurricane Katrina costs, took us an additional $13 billion that the Congress had to appropriate. To fight the Global War on Terror in FY07 is going to cost us $17 billion which includes the recapitalization of our systems that we’ve lost over in the AOR on top of the $105 billion we had.

So you look at the budget in these four pillars -- people, readiness, infrastructure, modernization/recapitalization -- and you can see that we’re starting to make some in-roads in the ’07 budget, it goes up a little bit over a billion dollars. The people accounts basically flat, come down a little bit. The O&M, readiness accounts go up a little bit to cover the increased cost of aviation fuel. Infrastructure comes up a little bit as we begin to implement the decisions of the Base Realignment and Closure Committee.

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This slide just breaks out the $4.8 billion growth and it just goes to show you that the military personnel account basically is flat, we’re only paying for the pay raises. No growth there as we begin to downsize our force.

In the O&M accounts the big painful issue for us is the cost of fuel. You all know the factoid. For every ten dollar increase in the price of a barrel of oil it costs the United States Air Force, as the biggest consumer of oil and petroleum products in the Department of Defense, it costs us $600 million.

Last year at the end of the budget build we had to add $1.1 billion just to pay for the cost of JP8(fuel) in FY-07.

So readiness accounts are flat. The military construction account, family housing, comes down. You can see our first incremental funding for the Base Realignment and Closure. BRAC is about $700 million.

Unfortunate for the United States Air Force is we had high expectations that the BRAC results would allow us to save some money to reinvest in our Air Force programs. Our plan was that if the BRAC Commission approved everything that we wanted to do we’d save about $2.6 billion.

As you all know, BRAC did not allow us to do everything we want to do and as a result it’s going to cost us $1.8 billion. So in the ’08 budget we had to add $1.8 billion to pay for all the things that BRAC is requiring us to do that didn’t allow us to close bases and infrastructure.

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Budget score card. How did Congress help us out as we went through this big budget deliberation?

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From inside the Beltway as we looked at the environment we’re in, we see an increasing pressure on the defense budget, a downward pressure, due to the deficit, due to the rising cost of entitlements in the private sector -- Social Security, Medicare, Mecicaid. And a general migration to other departments of the government from the Defense Department. In the ’07 budget deliberations, many of you saw that when the House Appropriations Committee received their allocation of funding, they were given a target that was $4 billion less than what the President submitted; the Senate was given a target about $9 billion. They compromised that at about $4 billion. So $4 billion of funding was taken from the Air Force budget and moved to non-defense spending. We saw that last year. We saw that this year. It’s a troubling trend at a time when budgets are already starting to level out.

Our FY07 appropriations bill, when you normalize it for inflation, has negative real growth. That’s the first time we’ve had negative real growth since 1997, so that is challenging for us.

There’s a growing sense inside the Beltway that the Global War on Terrorism supplementals, Congress shouldn’t have to add additional money to the services to fight the war, that the services should pay for that from within the funding in their program. I’ll tell you, that’s a non-starter because it won’t work. The Air Force needs about $17 billion. The Army, as you know, needs significantly more than that to prosecute the war. So unless there’s an increase in DOD top line, which I’m not expecting to materialize, you won’t be able to fight the war within the baseline program.

Clearly there’s a big focus on ground forces and a lack of recognition, if you will, on what naval forces and air forces bring to the current fight.

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My folks are going frantically through the appropriations bill just to see where we are and what we’ve got. What it looks like is our personnel accounts come down about $100 million. Congress took a reduction there. O&M which ends up being the big player. Readiness comes down about $2 billion. Infrastructure comes down a little bit. But our modernization/recapitalization accounts, when it nets out it increases a little bit. So let me peal back and give you all a little bit more insight.

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These are some of the selected programs that we put on our watch list, if you will, and engage on very heavily with the Congress.

The F-22 program, the multi-year program for the F-22. Congress added $1.4 billion to that program to support 20 airplanes and have approved the multi-year procurement profile on the Appropriation Committee. That’s great news for us.

The Department of Defense had determined that we only needed one engine for the F-35 due to great engine technologies we have today, and that the risk of downsizing from two to one, the risk would be minimal. The folks on the Hill weren’t convinced of that and have added $170 million to continue development of the second engine for the Joint Strike Fighter.

Our F-35 Joint Strike Fighter program, we had five airplanes in the ’07 budget that we were expecting to build. Congress has reduced the program about $300 million which will allow us to build two aircraft in FY07.

The tanker program is on track. We recently, this week, released a request, the RFP, the draft RFP to build a new tanker. Congress took money out because the program has slipped. As you know we’ve been managing that program very transparently, or attempted to manage it transparently due to all the help we’ve gotten from the Congress there, but they’ve left $70 million in to begin that effort. That should be okay.

The Joint Cargo Aircraft is an interesting one. The Army has a lot of resources in the ’07 budget. We have $16 million to begin standing up a program office for that joint program. Congress supported us there.

A couple of our space programs took some reductions. The Transformational Satellite, TSAT program, we lost $130 million. Space radar, they’re concerned about the development there. We lost $80 million. The EELV, expendable launch vehicle, lost $80 million. That will probably cause us to have to defer a launch in FY07. The O&M program sustained a $2.1 billion reduction I think in large part to support some of the plus-ups in the other areas.

I’ll tell you, my view is that our big trouble spot for FY07 is the O&M appropriation, that $2.1 billion reduction. If you try to put a face on it, what does that equate to? What that would equate to would be a $25 million reduction to every Air Force base in the United States Air Force. So those of you who are at a base level, if we said hey, you’re budget’s going to be reduced $25 million, you can understand what the impact would be.

So a challenge for us, because the O&M appropriation translates directly to readiness which translates directly into preparing to fight the global war on terror, so we’re going to need to watch and monitor that account very very closely this year.

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On the authorization committee side, what I just showed you was what the appropriators have done for us. They’ve given us the ability to fund those key programs that I’ve talked about. The authorizers, the issues that we mostly monitor there is our aircraft retirements.

Part of what we wanted to do was retire those legacy systems, and you can see them all up there, retiring those legacy systems, again freeing up resources and people to reinvest into new systems. We’ve had a heck of a time trying to retire any platform, primarily due to the fact that retiring airplanes translates into jobs somewhere in America. People are very concerned about that, but we’re continuing to press that issue because if we don’t retire the old systems we’re going to be unable to buy the new systems. And if all of these areas here are precluded from retirement it’s going to cost us an additional $153 million this year in FY07, and another $850 million across the FYDP if we have to sustain them. So we’re going to push hard to retire all those weapon systems in the next couple of years.

For the ones that we’re unable to do this year we’ll try again next year.

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Pretty much summarizing, ‘07 is going to be a challenging year. As a budget guy, we say that every year. Every year presents its own unique challenges and opportunities. I think we’ll get off to a good start by virtue of the fact that Congress is going to pass an appropriations bill by 1 October. You all recall last year we got the appropriation bill in December, we got our resources in January and February so that made it hard to execute efficiently.

There’s a continued downward pressure on resources and I think we’ll see that through the ’08 election and potentially for a few years after that as the government attempts to balance resources across all of the departments in the government.

We are going to accelerate our transformation. Those of you who saw General Johns’ pitch the other day, he’s my brother. We’re linked at the hip. He’s a programmer. I’m the budget guy. He worries about money that doesn’t exist, I worry about the real money. But we are going to accelerate our transformational efforts, move everything forward in order to save money to invest for the future.

When it’s all said and done at the end of the day I will tell you that the ’07 budget that we built, the ’07 budget that’s being sustained for the most part by the United States Congress allows us to prepare to fight and win the long global war on terror; allows us to take care of our most critical resources which are our people, to develop our Airmen; and then will get us on to a significant path to recapitalize and modernize the United States Air Force of the 21st Century.

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Okay, I went through that pretty quickly to allow you all to have some questions if you have any. I’d be more than willing to answer any questions you may have.

Question: General, you talked a little bit in the beginning of your presentation about the modernization accounts and how they have been sort of on the decline and now you're putting more effort into bringing them up.

Do you feel like you’ve caught this problem in time and now the procurement accounts, as they start to go back up, the looming crisis that you described is going to be caught?

General Faykes: I will tell you that the plan we have built which is the ’07 budget that starts us on the journey of transforming and modernizing the Air Force that’s being supported by the ’08 budget that we’re in deliberations with right now with the Office of the Secretary of Defense’s office, gets us on track and recapitalizes and modernizes the Air Force. So I will say the plan we have is funded. People criticize us and say sometimes hey, the plan’s not funded. The plan is funded and we’re on the right flight path to do that.

So the big issue and the big question will be what kind of support will we get from OSD and ultimately the Congress as we start bringing on these new systems -- additional F-22s, Joint Strike Fighter, the tanker program, combat search and rescue, all of those things. They’re all funded and they all fit. So we’re optimistic that we’ll keep those programs on track. And as long as the funding doesn’t come down significantly from where we are today, I think we’re in pretty good shape.

We could use more money because there are other things that are not funded and we would like to move the acquisition profiles in many of those programs forward as opposed to having to stretch them out like we did. But we have not canceled any major systems up to this time. We’ve canceled a couple of them, but we’ve got most things on track.

Thank you for the question.

Moderator: Can you kind of recap the C-17 situation?

General Faykes: The C-17 situation. I’m going to give you the long story because I think it’s very very important.

The Air Force has lost nearly 120 airplanes since we began the Global War on Terror. Forty-six of those airplanes have been lost in the AOR -- Afghanistan and Iraq -- either being shot down or aircraft accidents or some type of malfunction where we’ve lost the platform. Forty-six there and the rest in training, preparing for the war.

The Office of the Secretary of Defense, the rules set out by the Comptroller organization has precluded us from identifying those as assets that needed to be recapitalized and replaced for our Air Force, so we’ve been unable to replace those.

In addition to the airplanes we have lost, we’re seeing great stresses on the airplanes that we had deployed, and the C-17 is a great example of that.

The C-17, the long story is if you look at the engineering life, it’s built to last for about 30 years, fly about 1,000 hours a year, so 30,000 over a 30 years lifetime. We’re flying the airplanes much more in Iraq and Afghanistan, we’re flying them on different flight profiles. For example, I showed you that we’re taking convoys off the road which means shorter missions which is a tougher, it’s tougher on the airplane, more stresses, and so we’re wearing out the C-17s at a faster rate than we had intended. And Air Mobility Command has laid all that out, done all the engineering looks and said we need about seven to ten additional C-17s to keep the fleet size currently at 180 about right. And we’ve been unable to tell that story or get support for that story up until now.

So what we see now is great support for that weapon system on the Hill to the extent that Congress is adding ten C-17s to the 12 that we had budgeted in FY07 so that will give us 22 airplanes that we’re going to buy in FY07. Congress added about $2 billion to do that.

Question: An Air Force colonel recently referred to the combination of deficit spending, homeland security, Global War on Terrorism as the “perfect storm” for science and technology budgets within the Air Force. I guess I’d like to hear your comments on what is the future of science and technology funding over the next few years.

General Faykes: Science and technology is an important part of our research and development investment opportunities. We typically spend about three percent of so of our Air Force budget in that regard. That is critical and we try to maintain that level of funding. Clearly you have to be exploring in those areas the different types of R&D efforts, because that translates into the capabilities of tomorrow.

I don’t know that I’d categorize it necessarily as a “perfect storm” if you will. I’d say I don’t think it’s that pessimistic of an outlook, but clearly that’s one of the areas where as Laura was talking about, the stresses on our budget. That’s one of the areas where we are over-stressed. What we’re trying to do, what we’re trying to focus on is the modernization accounts, R&D and investments. We’re trying to keep those programs on track and not whittle them away like we’ve had to in the past to migrate money into personnel and operations and maintenance. We want to keep those accounts sound, and over the short term we’re willing to take some risk in O&M and we’re willing to reduce the Air Force by about 40,000 people to invest those resources into R&D and investment.

Question: Sir, I think your mother’s a wonderful lady.

General Faykes: [Laughter].

Question: The question I want to talk about is capability and electronic warfare. Can you give a sense for where EW and airborne electronic attack might be on the priority list and when we might see some kind of a capability in the 2012, 2017 timeframe, and how that’s falling out in the priorities?

General Faykes: During the QDR we had problems keeping the A-10 and the MPRTIP on track. Lately we’ve said we need to have that capability so where do you put that capability? Where does it reside in terms of a platform? And what do you do in terms of the long term to have that capability out into the 2013, 2014, 2015 timeframe. I will tell you I don’t know that we’ve got the solution set to that yet, but clearly it’s a recognized capability the Chief is starting to talk about, if you’ve heard some of his presentations, where he says we need to continue on track to develop it, although right now we don’t have an investment strategy that does much for us in that regard.

Question: Sir on the industrial base panel the issue of cost growth in weapon systems came up. I just wondered from a budgeteer’s perspective is that still a real variable looking out over the FYDP you’ve just prepared? Or do you think it’s really pretty much nailed down?

General Faykes: In terms of maintaining the industrial base?

Question: No, from a cost and budgeting standpoint, is it something you still worry about when you prepare these budgets?

General Faykes: I worry about it all the time. But, I will tell you, I guess from an industrial base perspective one thing that concerns us within the Air Force is nobody outside the Air Force or outside of our industry folks here seems to talk about much, what about maintaining the industrial base for airplanes, when you hear a lot of people talking about maintaining the industrial base for other systems like ships.

Well, we have a similar problem of shrinking industrial base for aircraft and we’re not at the point where we’re going to stop buying airplanes. So that does worry us.

Clearly, the more capability you have to develop systems and the competition that that engenders in terms of keeping costs down is a good thing for us from a fiscal perspective.

I think we would like to see more rather than fewer aircraft production capabilities within the United States. I think that’s a national asset we need to maintain. Clearly foreign countries are developing airplanes, and the last thing we want in the Air Force is to be flying foreign airplanes of a significant capability.

Question: General Faykes, CINCPAC, Air Command and Staff College.

General Faykes: He used to be one of mine so he’s going to play “stump the dummy” I think. [Laughter].

Question: Sir, how sound would you, in your opinion, your analysis, say that the analysis behind the manpower cuts are going to result in materialized savings that we need for procurement and reinvestment? And if those savings don’t materialize, when will we know it, and are they talking about even more than 40,000?

General Faykes: There’s a lot of angst in our Air Force about the fact that we’re drawing down the force, but I will tell you drawing down the force is nothing new for us. Those of you who have been around a while remember when the Cold War ended in 1989, the Berlin Wall came down, all the services and the Air Force came down significantly. At that time the Air Force came down about 170,000 military end strength; came down about 70,000 civilians; and about 12,000 or 13,000 Guard and Reservists. And I would argue that the United States Air Force of today is at least every bit as capable as it was during the Cold War, but I would also say it’s significantly more capable.

So can we draw down the force effectively? I would say yes, we have a history of doing that. Can we achieve the savings that we have already taken to do that? That will be the challenge for us. As you know, to get people to leave our Air Force, and oh by the way, a great commercial is nobody wants to leave. So it’s a good thing. At a time when we’re the most stressed Air Force than at any time in recent history, people generally don’t want to leave. So that’s good for us.

What it’s going to do, it’s going to cost us money to get people to leave. You can range in estimates of half a billion dollars, $500 million to pay for the separation incentives that we’re asking Congress to approve to be able to downsize the force.

But clearly, we have to. Clearly, we have to. It’s a burning platform. I believe if we give up on modernizing our Air Force it won’t be an Air Force that we would all want to be members of in the future.

A lot of people just focus on the threat of today, and the danger for any military organization is to solely focus on the war you’re fighting today and lose focus on the war you’re fighting tomorrow. So for us, we support the combatant commanders who are very interested in the war we’re fighting today, but we also need to be mindful of the future, who our enemies may be in the future and what capabilities they have and what assets we will need to go against those capabilities.

So it’s a fine balance. To get back to your question, I think we can do it. We will do it. Do we save all the money we say we will at the time we said we’d do it? I don’t know. But we have a very aggressive plan. Everyone’s working hard. The personnel folks are working mightily to develop plans to have our people leave our Air Force in good shape, so we’re going to take care of everybody and do it the Air Force way. Over time by the time we’re finished, now in FY09 is what we’re now shooting for, we will have those savings from then on forever.

Thank you very much, General Peterson, members of the Air Force Association. Thank you for the time and giving me the opportunity to talk about being inside the Air Force budget. Thank you.