diminishes below a year we would consider a very serious violation and work with our allies to have proper response. >> and communicating with the iranians that any violation would be addressed and punished inbe an appropriate way? there's no death by a small a thousand cuts? >> yes, sir, we are in contact on their evaluation with the situation in terms of iran's compliance. >> mr. duncan is recognized. >> thank you, madame chair. first off, let me say that i hope history is right and sides with mr. connolly's comments and we will see. i hope that iran continues to comply, i hope that they don't have a nuclear weapon because consequences are dire. i want to talk about the visa-waiver law that was passed

in 2015,pa december, as it relas to jcpoa. i specifically want to point to negotiations that went on from november 30th through the passage of the omnibus. these were negotiations between the white house, state department, homeland security and members of the house and senate. during -- on new hampshire 30th, dhs asked to travel in the post 2011 time frame. the negotiations went on for quite n some time on november 1, december 1st,- december 1st, december 2nd, december 3rd and agreements finally reached and in december the third white house notifies homeland security via e-mail that they support the negotiated text that does not allow visa waivers for specific

groups or categories, okay? december 3rd. i december 3rd at 1037 in the morning white house notifies chs, the state department has no further edits to that text, okay. president signed hr202 into law whichch include it had visa wair program language. december 19th secretary kerry sends letter sending that the u.s. will implement requirements so as not to interfere with legitimate business interest of iran. t you ought to be talking about the legitimate business interest and national security interest of the nation of the united states of america. but that's whatta he said. then on january 21st, homeland security announced implementation plan for the visa waiver program enhancements with 5 broad categories of waivers including category exemptions that were rejected during negotiations by congress through december the second. are younc familiar, sir,

embassador, with theos visa wair recommendation paper memo, white papery issued by the state department? >> i've seen many papers that were involved in a discussion of deciding what the administration'sre policy woulde in implementing case-by-base waivers. >> let me -- i'll remind the committee and you that during the negotiations the congress and the administration including the state department said they agreed with the text and negotiated text through the passage of the omnibus and then shortly thereafter they issued paper, it references a second white paper called a legal paper, i have no idea what that is and we don't have our hands on it yet, in this paper it h thefically comes up wit rationale for circumventing the

will of congress as well-outlined in the negotiations signed by the president before the ink is dry on the bill, they're issuing a white paper on how to circumvent that, the state department feels like they're going to go around the will of congress, to go around these negotiations and actually allow the issue of waivers, visa waivers for people that have traveled to iran from european countries to the simple point that part of it says this is one of the questions they're going to ask madame chairman for someone traveling on business purposes. simpleos yes. was your travel to iraq and this was the iraq portion but i think it applies to iran as well, after march first, 2011,

question mark if traveled for business purposes. that's a pretty benign question to be asking. there's not a lot of opportunity for delving what the business was related to, who they were talking with and going back to mr. sherman's comments about contact with ieg. businessmen and women who are traveling to iran that may have contact with iran revolutionary guard, possibly come back to their home country in europe and apply for travel to the united states under the visa waiver program and according to state department they're going to be given a waiver. that goes against the will of congress, sir. we are going to delve into this more, madame chairman, mr. chairman, i wanted to say this on the record and i ask thatn the document be submitted for the record for my colleagues

on both sides of the isle to delve with that a little further. >> without objection. we go now to lois frankel from florida. >> thank you, mr. chair. thank you gentlemen formr being here. i have two sorry of -- i think they are sort of related questions. first has to be with the snapback sanctions. we have read a lot about economic activity now with iran, with other countries, so my first question is realistically let's say we look two years ahead from now or three years ahead from now and we had to do a snapback, what is the prospect of actually -- actually getting back to where we were before we

lifted the sanctions? that's the first question. second question i had is we hear talk of people -- not to get political, but there have been presidential candidates who have said, well, if i get elected i'm going to immediately rip up the deal and i would like to know what you think the implications of that -- of that would be? those are my two questions. thank you. >> thank you very much, congresswoman, in terms of snapback, ifk we get to a situation where we decide to snapback those sanctions, reimposing the secondary sanctions, we have been down before where european partners have an economic relationship with iran, companies from those

countries do, but for whatever reason ween decided to penalize and force those countries and companies to make a choice. you either do business with iran orim with us. i have n no doubt that if we decide to snapback sanctions that would be effective in achieving that. in terms of various interest that some candidates have said that they might rip up the deal on --p first day in office of e new presidency, i would only say that i would advise whoever the new president and his or her team would be upon taking office that to think very carefully about destroying a deal if iran has continued to comply which has reduced its breakout time extended it from one or two months to over a year to one thatmo has drastically shrunk

material to move to a bomb. i'm not sure what the benefit of u.s. interest would be from freeing iran on interests that made us much safer. >> mr. smith, do you want to answer? >> the world knows what we can do with secondary sanctions. i think they will follow. they know the force of u.s. law in this area. >> but i guess would it be safe -- i'm not sure safe is correct, i would assume that even if you put the sanctions back in place immediately, you're still not goingth to -- it's still going o take a while for iran to actually feel the same impact that they felt before they went to the table. >> it may take some time before iran feels sanctions if they come back on but we should

remember where we are today, iraney is in a half a trillion dollar hole because of thee sanctions that we've imposed over time and now they are facing a drop in oil prices just as the sanctions relief is coming into play. we are talking about them getting $50 billion much of which they need desperately to prop up currency, to be able to do any foreign trade, so when you look at the $50 billion that's relieved that they're versus the half a trillion dollar hole by half, i think it's going to be a very iran gets outre from under the sanctions' burden that we imposed. >> thank you, i yield back, mr. mr. chair. >> mr. perry from pennsylvania. >> thank you, mr. chairman.

in my view ball, i think it's a bit early to talk about cheating on some ofut the specifics but i do thinkut in time that they wil get there, but i could see as consolidating gains in syria and iran in using their ballistic technology, completing that test ing and that program to the point where they are ready to be nuclear, it'll be very little. that's a long ball and a long goal. within the context t -- the procurement allows article and do we use articles to be

provideden to iran through dedicated procurement channel, however, some of the materials that can be supplied are critical to iran's ballistic missile. i don't know if you're aware. this is a simply yes or no, would the carbon fiber be a violation of the agreement and/or security council resolution? >> i'm sorry,y, i can't give a s or no answer, each case would be dependent on the use of such material would be. united states has aul veto in te procurement channel.pr any time that we believe that an item is going to iran missile program or is going to be delivered in a way that's not subject to appropriate and monitoring, i can'tt imagine te circumstances inmo which the

united states would agree to a case like that. >> let me make sure i understand your answer. you said it depends on the proposition, but then you kind of said, i think that the united states understanding and recognizeing that -- >> again, we would examine the use and would it be monitored in a way that we are satisfied that it won't be used in a way to harm our interest across whatever. >> you know they can't domestically they can't produce carbon fiber, you know it's critical for their ballistic missile program, i'm sure and it's regulated through the procurement channel, how would it not be monitored if it's

regulated and how would its use not be monitored? >> according to the terms of the implementation of the procurement channel any country that wants to sell any materialy that's subject to controls as part of their applying for permission to proceed with the transaction, they must explain how they've planning to monitor the end use. we have a number of other tools outside of the procurement chance that will -- >> i don't mean to interrupt but i hav e a limited amount of time. rahani has stated that they intend too expand ballistic program and it will not go through procurement channel, are you familiar with that, that he saidid that? >> i'm familiar in broad terms of what he said as to how he plans to develop missile program. >> if and when do they do outside of procurement channel -- because it's outside, you

don't know what they're using it for and there's no inspection paradigm associated with that, would the administration consider that a violation of the agreement and the security council resolution? >> congressman, what is subject to the control of procurement channel of potential use material of other sensitive control of nuclear related items? >> including carbonin fiber? >> well, it depends. it depends. >> what does it depend on? they're going to go outside the procurement channel aste statedy ruhani. >> sure, i can assure you that we will use every technique and tool at our disposable. >> including considering it a violation? yes or no? >> well, a violation would be if iran procures something on the

nuclear supplier group outside of the procurement channel. >> including procurement fiber so the answer would be yes? >> thank you, mr. chair and thank you embassador for being so forthright. ii want to follow-up on some of the questions that mr. connolly has addressed. you've already described to us about the removal of the core of plutonium reactor, you've already described to us about the shutting down of the

thousandsds of centrifuges of highly-enriched uranium in exchange for nuclear power plant. i'm going to follow-up on these questions. i'm curious about the extraction of highly-enriched uranium. if you can tell us how that was done, and iranian regime would not be able to get hands on that or other highly enriched uranium in the future? iran would remove all of its nuclear material in order to keep that obligation. what it decided to do was to negotiate with russia the transfer of that material out of iran on a russian ship into russian custody without any

claim of title to that information. so it has surrendered this material to russia. russia has committed to responsibly safeguard it within the -- within its entire nuclear program that it has there a long history, obviously, of maintaining and safeguarding nuclear materials. rep. lowenthal: are we able to know? is there a way we can follow up on that? will we be monitoring where both the russians and the iranians re so that that enriched plutonium never --ambassador mull: yes, sir. we have worked with the iaea through this agreement to make sure that any possible entry point of nuclear material like that back into iran could only take place under the observation nd monitoring of the iaea. if there were some development by which someone tried to do that, we would be aware of it and we would consider that a violation. rep. lowenthal: approximately

how much was delivered to russia? ambassador mull: about 25,000 pounds of enriched uranium material. rep. lowenthal: what could 25,000 pouns of enriched uranium do? how much would it take of that o develop nuclear weapons? ambassador mull: none of that 19.75%. -- that was at nuclear weapons material. weapons grade uranium really has to be at the 90% level or higher. highly enriched uranium. rep. lowenthal: i want to follow up. i was proud to support the agreement. but we had concerns about the implementation. that's why we're so glad that the two of you are here today and we're concerned as some of these questions have been raised about iran's other nonnuclear trouble making. the security of israel and the region.

these are all concerns. congress wants to state abreast of the compliance and any violations. in a letter in august to my colleagues from new york, congress member to a new york congress member, the president allayed many of these concerns and detailed his plans which colluded with the boston to monitor them. that is really your position now that has come up. what i'm interested in is in your role, do you have all the proper access and information that you're going to need. are there any things you're going to need to report and how often can we expect those kinds of interactions with you to follow up on this? ambassador mull: yes, sir. i am at your disposal. any member of congress to come and answer any questions

that you have. i feel extraordinarily well supported by the entire administration. i have regular rich, frequent interactions with various representatives of our intelligence community. i have access regularly to secretary kerry, other senior officials in the white house who are very much focused on the implementation of this deal. so i feel very well support >> so you understand this is just the first? we just begun this process and that will be agreeable to coming back to the committee, to reporting because i think it's critically important that we stayim in touch. >> yeah,o absolutely, sir. this isal a vitally important pt of my job because you may raise questions that i haven't thought of. >> well, i will be calling upon you. thank you and i yield back. >> now we go to mr. mark meadows of north carolina. >> you talk about this

trillion-dollar hole that the sanctions have had great effect? let me narrow as it relates to hezbollah and thehe financing of hezbollah. i guess, i know that you implemented some new sanctions in january the announcement with sanctions but my question, i guess, goes really to the heart of the matter and it is with regards to iran and are they financing hezbollah in your professional opinion. >> i think we have seen iran support below over time, yes. >> are they today? >> i haven't seen the latest figure. >> wouldn't you -- >> i have seen iran to support hezbollah. >> so at what point would you consider putting sanctions on iran whether it's through the

executive order that is in place or through the -- the new law that the president just signed in to law in december? at what point will you consider putting sanctions on iran for supporting hezbollah? >> iran is already under a government blocking from here. >> i'm talking --me listen, i understand. at what point will you implement additional sanctions as it relates to hezbollah and the financing that comes from iran? >> i'll have to look at the evidence and when we see evidence we continue to develop targets to add them to our list, but your testimony is last intelligence is that they are financing hezbollah. let's be intellectually honest. isn't it true that the best

benefactor of iran is hezbollah? can you give it to the committee and chairman? >> perhaps another setting, classified setting. >> under your professional opinion, who might be a greater financier of hezbollah other than perhaps their illegal drug activities? what otherwh state sponsor could be greater than iran? >> i acknowledged that iran continues to do so. >> the american people see pictures off sailers on an anniversary today and they're offended. i'm offended and if we have tools in place that can address it and you're not using them, would you not believe that that is being irresponsible? >> sir, we are continuing to use our tools, we are continuing to designate virtually every month, every week, we are adding

additional designations of terrorists, we did so yesterday, i think wsigne will continue too so in the near future. >> the big hole is iran. we've got over a hundred individuals. i agree with you. i have been following the numbers. somehow iran is getting a free pass and that's concerning with the americanan people. >> i would disagree with you about iranan getting a free pas. there are a number of agencies that continue to be designated by the united states for their support to terrorism, individuals that continue to be designated of the government of iran to support to terrorism. >> embassador,mull, let me come to you, some of the colleagues were by you in the hearing and mr. duncan of south carolina

mentioned that since you're responsible for making this jcpoa stays in place, was there language in there that would allowld iran to actually participate in our visa-waiver program either directly or indirectly because they're participating indirectly now? was there language in there that would suggest that they should enjoy those e benefits? >> language in -- i'm sorry, in the legislation? >> i'm talking about the joint agreement, secretary kerry came out and very quickly said that we are going to expand it to business-related activities which was not -- >> the jcpoa in that agreement, all of the parties agreed that they would not attempt to block

legitimate business activity in iran, when legislation was passed iranians complain today mein accusing of violating throh legislation. that's decidedly not the case. we explained to them that this legislation was not aimed at disrupting i iran's business activity, it wass aimed at protectingng america's borders n responding to untrue charge. >> thank you, mr. chairman. >> we are going to william keating. >> those are the issues for violations outside the jcpoa that we were told during the whole process will be

vigorously, you know, pursued. we talked about some of the areas this morning where that would be relevant including support of terrorism, regional destabilization and human right abuses and ballistic programs and we do know that iran tested, guided ballistic missile capable of delivering a nuclear war head in violation of un agreement. wegr are aware that the u.s. sanctioned 11 individuals and entities responsible for supporting these kind of activities. now mys question to you is in terms of your oversight, our ability as a committee to work with you in communicate and monitor this, i know you can't be very specific on this because it'll hurt yourra leverage with sanctions in the future, in these sanctions outside the jcpoa, could you just shed a little light on how you work

administratively with other agencies of our government. can you just shed some light on the process where you are determining what to give for sanctions, a certain level, what factors are going to result in your reviewing that and changing those sanctions, maybe escalating them or how do you arrive atw that? do you function administratively in reviewing those, setting those so that we have a better sense going forward in these very important sanctions that are outside of the agreement? >> that's a t very important question and i will try to shed some light on it. we have analysts who are pouring through the intelligence and information that we have from a variety of sources. the intelligence community from the defense department from all

of the agencies of the u.s. government, they look at classified and unclassified information and they focus on programs. i have a team working on terrorism, hezbollah sanctions, isil sanctions, everything in the terrorism realm. we follow the intel as well as everything dealingn. with yemen and teams that focus on the ballistic-missile program. ..o they know what we're doing. we don't want to, for example, interrupt a sensitive intelligence operation. we don't want to interfere with a law enforcement operation, so we make sure that what we do, we communicate very well so that when we roll out, we're able to roll out in the smartest, most effective way. so, basically we start from

scratch, developing the intel, building cases, working with the team, so that we can roll out successive sanctions against the greatest threats to our national security and foreign policy. mr. keating: and in that process, what triggers re-evaluating things? without getting into detail. because i don't want to undercut the lesk rang you have. but -- leverage you have. but i mean, what are the things that are important when you say, you know, we're not reacting to these sanctions, we're going to have to leverage these things up, what kind of things are you looking at? mr. smith: i think we continue to look at our experience across all of our sanctions programs. we have a good idea of what's impactful and that's why when we wanted to have an impact on iran and many of these other sanctions programs, for ballistic missile, we hit -- there are major entities that do the programs. all of the big names in iran that are associated with the ballistic missile program, we hit those. and then we go after anyone outside of iran that we see

supporting that program. so that's why last month we went after u.a.e. and a china-based network that we saw supporting that program. so we follow the evidence to see what's going to have an impact. and the evidence sometimes will suggest different impacts for different programs. and so we try to get the networks that are most critical to those bad activities. mr. keating: so it's a dynamic situation. it's not something that's incremental. here we go, going to impose this, no, let's see. it's continually being evaluated, is that correct? mr. smith: those under sanctions know how to try to circumvent them so we have to continue to evolve. mr. keating: that will help us as we move forward. this committee is certainly going to be concerned on these other violations going forward. and how the u.s. reacts. and this will help give us our ability to perform the oversight function more properly. so thank you very much. i yield back. >> thank you very much. we go to ted yoho of florida. mr. yoho: thank you, mr. chairman. gentlemen, i appreciate you being here.

in your opinion, i think we already know the question or answer to this, hezbollah, we could assume they're a terrorist organization that carries out proxy work for iran, agreed? mr. smith: yes. mr. yoho: with iran offering to put g.p.s. technology on 100,000 missiles, would we assume that's for peaceful purposes? or terrorist purposes? mr. smith: i'll say iran's development of its ballistic missile program is something >> >> okay. good. if they are supporting has a lot with this technology to over 100,000 missiles there is probably not for good reasons? >> i will continue to follow the evidence. >> get points the that walks like a dead duck and?

like a duck is not a good thing that brings me to the opening remarks the president obama in the rose garden pledged to remain vigilant to the continued sponsorship of terrorism to support to destabilize the middle east against friends and allies with the stabilizing activity has continued in the wake of a nuclear deal. >> that was exclusively focused on the nuclear program. is that in good faith? >> are they out of the

agreement? >> yes, sir,. >> but to also that is part of good faith than based on mutual respect refrain from any action with a letter or extent of a spirit of jpcoa to undermine a successful implementation with those medium-range missiles with november 22nd when the agreement with into place the intention to abide they

are taunting for the administration to release sanctions that has over 100 u.s. representatives to wrasse the president to a whole lot of fun sanctions by over 100 members of this body to ask the president to look into this before we move further and there was a response. i think this is a travesty and it has we can best as we negotiate i would hope that our government was from a position in zero straight do you feel this is made our country stronger with the firing of love these missiles the way gay

apprehend the military personnel. does this make the country stronger? >> day you think the lead deal has made iran stronger? >> if has constrained itself and has made us safer. >> mr. smith you talk about half a trillion dollars in debt. if they are screaming for economic relief would you think the country in the dire straits suffering that dad would be funding terrorist activities? vivid they continue to fund terrorist activities over the course of the sanctions program. >> i heard that and i did not buy that. i hope what mr. duncan said

does not come to fruition it will either be neville chamberlain moment i yield back. >> since the jpcoa went into effect with that political power there with those openings created of the jpcoa in moderation but instead to reap the benefits to escalate there mulally and behavior. so what we see on the allies

why has there is a terrorist activities that use it is outside the scope of the deal but what do we know about the support for terrorism has increased or decreased? but how are the funds transferred in if we see the benefit of groups like hezbollah in is the administration pursuing those actions? with the idea of those

problematic behavior is? in these actions? >> in terms of the impact of jpcoa in the political situation with those views the and aspirations but the reason to pursue this has been diminished the ability of a nuclear weapon. with that breakout time to a least one year. it would be appropriate for we to speculate to have a political impact and now we are succeeding. in terms of that destabilizing activity in their region we have beset the we could use as

mr. smith has been describing. and with the ballistic missile program. in we will continue to do that. >> i don't have the exact amount. with the intelligence community works with bad treasury department but in terms to sanction and support of terrorism we have done that. and with support of terrorism with ballistic missile support and then we see the evidence show.

>> and with those terrorist activities with an increase or a decrease and happy to the we into more detail. if he hasn't seen an appreciable change since the implementation of this deal. >> i yield back. >> congresswoman? >> with that behavior of the neighborhood that includes iranian-backed forces in the committee raises yesterday and i pass these concerns on to you these individuals

need protection. end we have seen what has happened in terms of loss of human life. so i would convey to you that i did yesterday. we appreciate the time of the witnesses before the committee we heard the deep concerns of the area of policy so right now you'll want to continue to be in touch as we move forward at this time we will adjourn the hearing.

work and other pentagon officials outlined the details in the budget. this is about an hour and 15 minutes.

good afternoon, everybody. thanks for joining us as we roll out the fy-2017 defense budget. as we pull the defense budget 520 3.$9 billion of discretionary spending in $58 billion of overseas contingency operations that sustains the national security than the figures conform the budget levels on the bipartisan budget agreement. what informs the digit budget we will talk about is secretary carter first ask the department to take a few over the next 25 years, is likely to be different

because of all the strategic challenges to recite the drive the focus of the budget process. in the future shift to return to the era of competition we are faced by russia have nuclear arms power with those of various capabilities both permanent members of the un security council to take issue with some aspects the international border to enable the pursuit of prosperity to become more aggressive russia on the western borders and has the consequence even as we continue to cooperate to be

prepared for increased competition and other strategic challenge is of north korea and his ordeal nuclear arms to have the ballistic missile capabilities with stability of the region and is committed to develop missiles that pose a direct threat that is a new thing. as demonstrating a propensity for provocation which lends itself to a miscalculation and is very destabilizing. it stages conventional

forces pressing allies in for these reasons to retain forces that can fight tonight the north korean aggression. to counter an beecher the influence that a iran seeks to become the dominant regional power it in support of that goal pursuing go wide range of destabilizing activities throughout the region particularly israel. but that country takes to violate that agreement with its pursuit of nuclear weapons prof the fifth challenge is against terrorist networks the with the emphasis colin defeating

isil is a sustained effort effort, another al qaeda to counter the spread of isil on self asia. from our perspective to be entering condition over the next 35 years to monitor constantly and treat it. i want to make clear this does not reflect a prioritization of strategic threats should that deterrence fail the past to be able to provide the president with options with unexpected contingencies as well as those associated with the global fight against terrorism. so we sought to develop a

portfolio of the capabilities and readiness with some degree of risk. the president budgets that given the current level of funding it cannot have every rest with every strategic count therefore to develop the program that addresses all five the secretary said if we cannot reduce risk and we have to prioritize. so we were told to do three things prioritize the conventional deterrent and when doing so with those capabilities or symmetrically. because that technological and organizational constructs to strengthen deterrence.

in those of various capabilities floridians to competitors against lesser states and has deterrence in that regard. is with respect to for -- focus far more on shape incise with the balance of capacity modernization and readiness. to seek that balance. and expecting them on the full spectrum and placed heavy emphasis alliteration with the advantage of the we have our people are the best and most powerful competitive advantage with the challenges is secondly

to update that plan the secretary and chairman are pushing the department in terms of treasons regional will to functional its authors don't just look regionally by exploiting the global posture. to exploit his advantages to become an organization with those problematic leads. in the residual risk so with the jury chief of staff we

will be happy to take some questions. >> thank you, mr. chairman secretary good afternoon. i will start by expressing my deepest appreciation to the team of professionals who are the men and women with the defense budget. no easy task in the best of times we face the task to find ways to address and expanding complex challenges for national security interests. with a stream resurfaces those collaboration's is the best possible balance of capacity and capability in and ready disinvestments and make no mistake the strategic security environment is more unpredictable than i have seen in my 35 years of service. dedicated soldiers sailors and marines have been battling terrorism for nearly 15 years.

the pervasive threat has been in every means an immediate threat. but yet focusing on this thing combination with the budget uncertainty has come at a heavy cost with modernization and dash you are well aware the rest of the world has not remained stagnant with aggressive state actors with capabilities to do beyond our attention. as just highlighted facing from russia and china asserting power at the expense of regional security with ballistic missile technologies that continues to a plague the crimean peninsula as the world's chief exporter of terrorism.

this budget works to the investing capabilities of these growing challenges to a defense readiness. it supports the ongoing transition with a full spectrum capability with the surface capability and tactical aircraft it maintains the preeminent role as the most capable expeditionary bin sport -- response with high-end capabilities that we expect airforce to respond to improve readiness. in closing it reflects the hard choices we have made of the security environment in economic constraints for needed flexibility. we're in the process of

increasing congressional leaders ian staff with this budget and alex forward to eventually get it approved budget for a the investment and flexibility to address national security interest for the future. thank you for being here today. >> i just want to ask a couple of questions. first can you talk about the thinking the countering threats of north africa or west africa or the region and what you expect to buy with that many? in for afghanistan cut troop levels will that support for the coming fiscal year?

with the increase of funding what to expect with that use? >> i will give a little over a few of oco. we built from the bottom but so what do we need to do or need to accomplish? the president has made us a decision to keep the troops through some time this year the budget fully funds that. all of the operations from iraqi assyria that they trade in in the clip so low this oco budget gives us everything we need right now to execute our global operations.

leftover to cover base needs i would have to defer but generally $5 billion is able to address stick but to reemphasize the fact with the oco budget submitted we find it all and his blue dash anticipated cost with the northland west africa with the fight against terrorism. each services can cover the details of the request of that anticipated expenses. >> what about the $200 million? is that we try to address? >> if you look at the

threats that exist boko haram or the newly formed isil province in libya libya, where the money into the budget to work with indigenous forces to get those particular threats and others pert. >> we have to approach the problem from the coast of africa to afghanistan and potentially sell the station up. . . we look at it what do we need transregionally to address these threats. and the things that we are anticipating doing in northern africa would be in the broader support of our global campaign against terrorism. tony.

>> question to you and then to the general. this is the last obama administration budget. you've been discussing within the building the looming wave the next administration faces in terms of nuclear modernization and air force issues after 2021. how serious is that and what are some of the options? general selva, since august during the republican debates, there's been a constant drumbeat of claims that the american military has been gutted. i didn't want to ask mr. work this. how do you address someone watching hearing it's been gutted and you're talking about degraded overall capability, reduced modernization. can you put this in context in terms of the condition of the military today versus the hyperbolic word gutted? >> let me talk about the bow wave and turn it, tony, and talk about the fiscal risk that we see going forward. the primary problem we're faced

with is we like the budget deal. we applaud congress being able to provide us with two years of stability. but in 2018, we are planning on going up again significantly above the sequestration level caps. if you take all the money of '18 and '21, that's $100 billion we are counting on we don't know for certain we are going to get. the second thing is the future of oco. how will oco be done in the future? that's another big uncertainty. we have money that is in oco that should be in base. it just happened over the last 14 years of war and we have to address that. and then as you said, starting in '21, between '21 and '35 about $18 billion a year to reconstitute and recapitalize our strategic nuclear deterrent. if that comes out of the conventional forces, that will be very, very, very problematic

for us. so, rather than talk about the bow wave, there is future fiscal risk that the country, congress and future administrations and this administration must come to grips with because as soon as we have a better understanding of that, we'll know for sure that our defense strategy is on the right track. >> i won't be argumentative but i will take umbrage with the notion that our military has been gutted. i stand here today a person that's worn this uniform for 25 years. no time have i been more confident saying we have the most powerful military on the face of the planet. do we have challenges? of course we do. when you are faced with a global set of threats, you have to make choices on where you focus your energy. and so as i stated we focused our energy on this violent extremist terrorist thread for the better part of 15 years. that consumes the readiness of the force to do the other tasks we are given as part of our mission.

recovering that readiness is a challenge that each of the services will face but i would say we're far from gutted. that you have in your joint force today the most powerful army on the planet, the most flexible and determined air force on the planet, the most capable navy on the planet and a this is the reality of the men and women that serve in our army, our navy, our air force and marine corps. they're the best the world has to offer. >> we have time for one more. gordon? >> two quick questions. sir, can you kind of expand a little bit on the lcs. we have seen a lot of that. if you can expand on your thinking and also, update on the growth to 90 caps of isr and just if you see -- is that being delayed, accelerated? what in this budget specifically addresses that growth? >> thank you, gordon. first question. lcs is a perfect example of what the secretary meant by focusing

more on shape rather than size. the requirement for the u.s. navy is a battle force of 308 ships. in that 308 ships there's a requirement for 88 large surface combatants like a tie con at ti- ticonderoga class, and there was a requirement for 52lcss, for a total of 140 surface combatants. if you look at last 'er's plan the navy was going to build up to 321 ships, and then come down. we asked ourselves, what can't we buy? because we're going from 308 to 321. we said, well, we can't buy a lot of capability. and so it was a very -- this is not an indictment against the lcs. if we didn't like the ship we would stop buying it. but those 12 ships would take us from 321 to 309 ships and allowed us to put more money

into torpedoes, more money into p8s and advanced munitions. more money into tactical aviation, and it was more about achieving that balance between size, readiness, and modernizeddation. we think the navy is much stronger because of this decision, and the plan -- we'll get to 300 ships in fy19. 308 ships in fy21, which is the requirement. we'll stay above 300 ships through fy30. so, this was the type of challenges and the trades that the vice-chairman was talking about, where you look at it and say, what i'd rather have those 12 extra ships or would i rather have all the capability that allows to us buy, and we made a decision to go for capability. on the irs caps we're building a 90 low-end permissive isr caps like reapers and predators. 60 will be healthy isr caps in the air force, which means

they'll have ten pilots per line, per orbit, and that is a sustainable force structure. the armis going to add 16 caps in what we call the global force management allocation plan and they'll have 16 orbits. then we'll buy ten government-owned contractor operated orbits, which will be arabismer -- i mean our shock absorber that gets us to 86. and then 40 orbits supporting our soft forces today. that's how we get to 90. we won't get to 90 until the latters part but we're on track. there's no slow-down. that plan is fully funded. and we hope that congress will support us in that goal. general, did you have anything? >> nothing to add. you got it all. >> thank you again. we're going to -- >> lcs. why did you add one more lcs for

two when in december, the secretary said you're only going to get one at 17. can you square that? >> sure. the secretary is very flexibility on these points and the navy came back in and said, hey, in terms of competition, it would happen help us if both yards they the ship, both could compete and then we drool the down, select. doesn't change the 40. we're going 40 ships. just a slight change in the profile. and it was allowing to us make sure that the down-selected frigate, the frigate was away to do it. so, again, on all of these things these were hard choices. choices between size, modernization, and readiness. and each of the services are going to explain to you this afternoon the choices that they had to make and the choices that we approved to achieve what general selva said is we think the best balance. thank you very much. and thank you for being here this afternoon. >> thank you.

>> two minutes we'll get started with undersecretary mcchord. a little more detail about what the secretary was talking about. just one minute. magic. the deputy secretary is a very tall guy. [inaudible conversations] [inaudible conversations] >> this is undersecretary of defense comptroller mr. mike mccord and on his left is the director or core structure,

assessment for the joint staff. mr. mccord, when you're ready. >> thank you, mark, and good afternoon. first of all just want to say the deputy and the vice-chairman have done a great job leading the internal effort which stretches over many months, seems like forever sometimes. since this is the last time i'll likely be doing this i want to recognize the hard work that goes on all across the building and departments by so many people in the services and the combatant commandses and osd and omb to get this budget done. i just want to take a second to recognize the enormous contribution of two people, one, my colleague, jamie moore, the director of cost analysis and program evaluation, that leads a great team over there. i'll get to the second one in a second. it wasn't until early november, as you know, we got a budget deal that told us what top line we would get for the work we have didn't doing, starting back in late spring. so, we werer far plan to our process by then in building this budget and we lad to scramble

the last six weeks to cut $17 billion and i'll explain that number. in the last six weeks and it was only in the last ten days of our process that we knew what congress had done to the '16 budget in omnibus appropriations bill. so a lot of information came late mitchell staff worked through the holidays to wrap this up, get it done on time and get a quality product, and i want to close by thanking mary, of my staff who dead the work of two people throughout the entire process from november on. we were missing and are still missing the top career budget official in the department. he has been out for illness on for an extended period of time. mary has done enormous work to do his job as well as her and inwant to thank her for that. go to the first slide. the deputy kind of covered -- three things here. one there's the facts, the numbers, what's in the base, the oco, the total budget. you can read that, i hope.

second, he talked at some degree of specificity about secretary's guidance to us and the idea you have too fight and win across a range of challenges and that's the important place to start, what problems are we trying to solve, what problems does the secretary want us to solve. for anyone who is listening, who didn't read the secretary's remarks from a week ago, would encourage people to go to the defense.gov web site and start there with his speech on the second for what he is trying to do in a little more meat on the bone for the five challenges which is what this budget has been trying to address. then fortunately the deputy touched on this, a word on the future as we hand this off to the next administration would will do the '18 budget, the '19 budget and so on. the success at the issue is it -- sequester issue is still hanging around like a bad cold. our plans have been consistent but aren't going to work if we can't get the sequester problem solved and get back up to the level of resources we need to

keep the progress going, and we think we're making progress in this budget. i'm going to skim past the next slide which just shows you the history of the base budget and oco budget on top of it. since 9/11 we have done a slide like this before because i want to move to the next slide and drill down just at bit on the three-year period that we have just been through, and are about to start. so, what is important about the budget situation, the budget deal? a couple of things. from '16 to '17 the two bars on the right, we only have $2.5 billion more this year than last year and that's under the terms of the budget deal, which was very flat, from year to year, and the base budget and was exactly flat in the oco budget for those two years. so only up $2.5 billion, what i other would call kitchen table math, this year compared to last year. if you do the math the pay raises we have in the budget consume about that amount of money. so, taking that aside we really had just a flat amount of money once we got done with the

compensation part, to work with, so that really speaks to the deputy's point about this being more about the shape of the budget than its size because the size isn't growing, but if you look back to the year before, one of the reasons that the secretary has said he was grateful for the budget deal is that it jumped us up a good 20-$25 billion from where we had been stuck in a rut for three straight years down at the $495 billion level. i'd rather be in the 520 neighborhood rather than the 490 neighborhood and that's what this budget deal for is. also a better jumping off point for the next jumpup we need in the future. when the secretary talks about being grateful for the deal he is speaking primarily in terms of it was comprimised. heed been calling all year for compromise, make a -- get something done. when he says gratefully he doesn't mean he had to get everything he needed to think this was a good deal. we got? stability for the troops,

important to the troops and for our planners and industry partners inch that sense the deal was a step up to, quote, closer to where we need to be and also, again, some near-term certainty. i want to take you back for a second to where we were a year ago at this time. we were coming off of the second year of the murray-ryan deal, back to jump ball, free for all land in terms of what would happen to the budget, not knowing what is going to happen. so we were seeking -- you might remember in last year's budget, huge jump, after three years of being stuck in the mid-490s for the base budget we were seeking to go up $35 billion. so very large increase. that's what we were trying to accomplish last year. now i'll flip to this year's picture of where we are now. the budget deal came in, raised the cap for obviously '16 and '17 and the bipartisan budget agreement from november. didn't give us everything we wanted but jumped us up a good

bit of the way. so what we need this year -- this year our top line is -- there's no drama there because it was set by the deal the president signed in november. we're looking ahead at bit to the future now. we need to jump up again, just as we did from the '13, '14, '15 level to the higher-16-'1 level and need to make another jump in '18. two more things i want to point out about the chart. this has been the most consistent administration that i've if seen in my 30-something years in terms of the -- your profile, looking at the '15 budget on that chart, the '16, '17 budget, the lines in purple, blue and green, similar top lines. you used to see every fiver year plan was slanted down lower and lower and lower than the previous five-year plan. we have stuck to our position pretty well in advocate what we need, the size of force we think we need, the resources we think we need.

this chart also speaks to the point the deputy was making about the $100 billion, the caps in law have four more years where they're still in force. if nothing changes from fy '18 through '21. the difference between our position represented by those three lines and the red line, $25 billion a year or so per year over the next four years, is what is at stake for us between the resources we think we need and what we're going to get if the law is not changed. okay, if i could get the next slide. i'm going to pivot from the numbers picture, the top line picture, to the secretary's priorities, again the deputy talks about this and i don't think we need say too much more here. the thing that strike mess about what the secretary wents to us be doing is just the breath of what we need to be addressing. our military is the best in the world, and probably nobody us would even contemplate being excellent in all the things that the secretary wants to us be

excellent at. you think about what he is asking to us do it's to be able to fight and win today and far into the future, to think about the five challenges they deputy enumerated. they span europe, middle east, asia, so the world's geography, time from now into the future as well as domains that typical air, sea, land, as well as space, and now cyber space. so, just the breadth of what we're attempting to be excellent at is something only our military could do. now, if could i go to the next slide, i'm going to do something i wouldn't normally do in a budget brief, which is to talk about what's not in the budget. i know this is of some interest to folks and we'll have two slides on this. looking at the base budget, which is the predominant part of our budget and the predominant part of the budget agreement, the caps were reduced $22 billion below what we had planned for this year.

now, a couple slides ago i was talking about what called the kitchen table math, how much money did have last year and how much money die have this year? this is different math. this is what did we plan for in those lines that i just showed you that have been consistent year after year, what did we say we needed in fy17, compared to that plan, the budget deal, cut us $22 billion. as we have already discussed a. bit when the deputy was up here, the budget agreement for the first time had a specific number in there for so-called oco or wash time -- war-time spending. when we built our requirements from the ground up, as we always do in the okra budget, we came out to $5 billion less than that. so we had $5 billion of basically of relief, which was, as i think everybody who covers this knows, directly intended by the budget agreement. so that's not a surprise to anyone, i hoch. so that bought down 5 bill of the $22 billion so that leaves us with 16.8, $17 billion. on the right-hand side of this

chart, the first two things we did, of course, is we applied the economic savings either assumptions that are given to us by owe mb that apply to the whole government, which i the large part of the economic assumptions of that nature, and one or two that we develop ourselves but largely administration wide. everybody knows that we live in an era of low inflation and everybody can look at the pump and see what has happened to fuel prices, and so as a consumer of fuel and goods and services we benefit from those things, too. those two things combined saved us 5 bill compared to previously. so that helicopter us a great deal. the first two things, maving expenses to he oco budget as laid out in the agreement, and to take advantage of favorable economic assumptions, solved $10 billion of that problem for us. that still leaves us an $11 billion problem, which is two percent of our top line, let's say. we have some efficiencies which

we'll talk about later that will grow over time in the first year they're only in the half billion dollar range so that's kind of smallish red were there. then -- red bar there, the program changes we had to actually cut things out of our plan is the bulk of the $11 billion. so, i'll flip -- well, flip to the next slide now. what did we cut -- what is in that green bar of $11 billion? again, let me just take a second and talk about what is not there and what you don't see on the chart. we didn't cut compensation. there's no net reduction to the compensation portfolio, even as we look for $17 billion to save. so that portfolio is as well-funded as before. we didn't cut the size of the force in any substantial part. i'm not going to say there wasn't one change to anything in the department but generally the structure plan we had before is the structure plan we have now. we did look at modernization, it took the brunt of the reduction.

i would say not in a stupid way. we didn't terminate programs. we didn't break multiyears. neither on the people side did we issue rif notices. we didn't do the things that would involve flailing around and breaking things. we were careful and thoughtful how we purchased this. but students of defense reductions, i think, everybody would be familiar with this, that has studied this over time, especially when you have kind of a short-term in this case a two-year budget deal that tells you, you have less money but don't know what the future holds, doesn't make sense to change your structure, rif people. so we went to the modernizeation account is the most volatile and had to take some risks. you can see 24 less blackhawks, five less joint strike fighters for the air force. fewer b-22s. the aircraft approve tournament accommodate, $34 billion yes,

less money for ship building. these are not maybe things we love to do, certainly, but as we talked about protecting readiness recovery, that people are our most important asset, and with the kind of inadvisibility of trying to make a rapid change in force structure based on a budget signal of a two-year deal, this where is we had to go also we took risk in installation which is already lower than any of wuss like it to be. we had to take further risk there we can talk more about this later perhaps, again, modernization is where we had to take the brunt in terms of how to get the number down in a six-week period of time between when the budget deal hit and we had to be done. now let me talk about the budget. which is kind of rest of the talk here. the force structure levels are what we have been planning for some years and should not be any surprises there. consistency has been a hallmark

of this administration in terms of force levels, resource levels, stuff like that. i will were he'll talk later about the force of the future. the force structure, these numbers look familiar to everyone. the new start force levels on the nuclear side, the deputy talked about the ship count level. 54 fighter squadrons in the base budget, one funded in in the oco budget which is the same last year. over the marks on the wall that everybody knows, the 980,000 person army total of which 450,000 are active, that's still the mark on the wall we're moving toward. we go to 460 on the active side so we're dropping, as we had planned and also we had said, from 475 do 460 and then next year to 450 to reach the kind of objective level. the marine corps, stabilizing out at 182. so, again, there shouldn't be much of any surprise here to

both folks in here and the troops around the country and around the world. same thing on the next strength. the end strength number. this is important to have for the troops to see. again, people should recognize these numbers. there's virtually no change in at the reserve component side. first of all there's three changes that none of which exceed 1,000 people. on the active side the only major change from last year is the army dropping 10,000 but that has been planned for some time. -the next slide i'm going to try to just briefly touch on the major programs in the budget, joint strike fighter. this is one where we would have loved to have more airplanes. this is fuhrer than find last year and fewer than weed a planned. this is something that taking $17 billion out in six weeks is a challenge and so you have to look at some of the large programs like this where the money is. other programs especially do

thundershower the contractual situation, like a tanker, of course, were protected, and the multiyears on the submarines and the ddgs. that plays into the services thinking and our thinking, where you have multiyears and where do you not? the elv, this is five launches. if you can't see the quantities this year three-quarters would be competed. the dd gs are flight three ships and the submarines and the ddgs are both in the multiyear category the deputy talked about innovation and i'm not going to dwell on that. there's a couple things on here that are -- were started last year, some started this year, and this really -- the innovation agenda which the deputy can talk about a good deal more expertise than myself, expand this gamut from smaller, nimbler efforts to large programs or larger effort that could have significant war-fighting impact.

the secretary mentioned one last yankee, the arsenal plain but there's a variety of projects, classified and unclassified, that we're pursuing. at this point i'd like to turn it over to the general to talk about the reddiness and the people side of the budget for a few minutes. >> good afternoon, want to first say that readiness is absolutely aápb9÷ critical part of our effs and in the this budget, this budget funds service efforts to address readiness from the standpoint of both ensuring that units are prepared for the missions they will encounter today, as well as the demands of the future and ensure that the joint force is ready to accomplish missions as they come out in the future, and that is the recovery, if you will, of joint force full spectrum readiness. and it's a reorientation. the joint force has been engaged in combat operations over the

past ten years or more in one form of conflict, and now we must shift focus to the full spectrum that are outlined as implied as part of the five challenges that were talked.earlier. resources are programmed for this to occur. however, resources are not the dominant factor in readiness recovery. it's different in every service. and it's also impacted by mission demands and operational tempo that may be occurring at any time as occurred today. so, resources are not the dominant factor in readiness recovery. force capacity, uptempo, maintenance through-put, all add to this challenge of recoverying readiness. the services will talk in more specificity later about this, as we look at generating this type of readiness in the services and

in the joint force, we're really talking in the early portion of the next decade. before we see having regenerated in the force the full spectrum capability that we need. and we remain dependent on overseas contingency operation funding for current operational demands and future reset requirements. next chart. just highlight here a few of the -- again, the services will talk later. each of the services have their plans to regenerate full spectrum readiness in the case of the army, it's about training individual and at the collective levels, ensuring that combat training center unit goes through cam bat training centers. we funded 19 rotations in 2017. and this allows the army to achieve full spectrum readiness to get leaders and soldiers and units into these environments, to enhance theirs readiness so

they can have a full spectrum capability. the navy's focus is in level loading -- loading, maintenance requirements to support constituent and sustainable maritime presence. and ensuring that the force is in fact ready for the demands. the marine corps will continue to focus on crisis response and expeditioner in type capabilities, to maintain both the area and ground components to ensure they're ready for missions missions and the airs force will balance between flying hours and weapons sustainment to continue full spectrum readiness gains. the air force is intensely involved in the operations occurring today in our missions abroad, and time will be needed to regain combat readiness. finally, socom will maintain funding for deployments and have capacity to support plans and contingencies contingencies and, looks the

2020 time frame to regain its full spectrum ready unless. if i have one concluding chart from my portion here regarding the all-volunteer force. the first thing i'd like to point out is that as the chairman views this, it's about comprehensive and holistic view of compensation for our force, and the health of the force is viewed holistically, our service members train. do they have the proper equipment? are we ready to take on the tasks we're assigned? my second general selvas and others here today, the notion we have the best military in the world, it's resilient and dedicated and also running pretty hard. the 2017 request for a 1.6% pay raise for our service members within -- top line constraints, reflects the unique demands and recognizes the unique demands and sacrifices of our service

members. it buys down that gap between where we want to be and where we are. so the increase in that pay is the largest one of the last four year period and it's an important part of what we did as we looked at the chairman and secretary assessed this portion of the budget. you'll also see modest modifications for the blended retirement system and i'll just talk very briefly here. first to increase the shaping ability of the services to provide greater flexibility and continuation pay of that portion of the law that was passed to create blended retirement, and to start matching contributions later to incentivize retention. next, we want to obviously ensure nearly equivalent lifetime benefit here and increase the defined contribution matching rate, and allow it to occur until the end of service as opposed to a

particular point in time in a service member's career. finally, we'll propose the department will propose modernization improvements in the military healthcare system, to increase value where simplicity, greater choice and better access is concerned, increase the skills and prophecy of military healthcare providers, to provide them with opportunities to treat the beneficiaries for the benefit of the entire joint force, and to have their skills honed on a day-to-day basis, and then finally, have a balanced approach to fiscal sustainability as part of this package. that will be included as a legislative proposal. so, with that i'll pass it back to mr. mcchord. >> thank you. almost done. so the next slide, beyond the traditional parts of

compensation, think the secretary has really put a lot of effort, as i think you're aware, what he calls force of the future. the point -- there's a couple of things. november he gave a speech what he called permeability, which is about trying to make it easier for people to serve their country, either in uniform or as a civilian, for a career or just a few years, and those having been here a couple of years, the hiring process is one thing that could be improved. the second aspect, the second release of force the future was done just about a little over a week ago, late january, and had to do with the family portion, the child care hours expansion with fertility benefits, mothers rooms being installed and paternity and maternity leave. so building on everything the

genoas talk. the second is cognizant of the fact we're competing for talent with the private sector of the country, and that he want to us make sure that we are and remain a top tier employer. i think you could argue we already are. look across the span of our retirement benefits, education benefits, the healthcare system, we already are a good employer but the secretary knows that we are competing for talent in people, especially people trying to raise a family, the child cair and paternity and maternity leave, things we think can help move the needle and continue to retain the best people. so i think it speaks to the idea that compensation and quality of life for you and your family, which is of course as the sagos, you recruit the member, you retain the family -- is beyond just the paycheck and that's really to me the heart of what force of the future is about. not about the particular cost of the benefits which is modest in the scope of our budget for

these new packages. its it's more of a mindset of trying to be competitive for talent just like technology include. next i want to talk about the reform proposals that are in this budget and some of which have been in past budgets. on this chart i kind of bend them into two categories, those where the proposal is the same or substantially the same of what we proposed before that has not been accepted by congress itch put in the category the army's aviation restructuring initiative. the navy's cruiser modernization plan and also the base re-alignment and closure proposal. the same proposals we have had before. the base closure proposal of the year is now 2019-2017 because it's physically impossible to have one in 2017 based on where we are now. we have other proposals you have seen before from us that we modified in some way that are in

this budget. the air force a-10 is one that has -- word has gotten out. the genoas describing the tri-care proposal chisolm already financially to last year residents but is a different proposal than last year, and we have dr. wouldson, or department expect if we need to go into that in more detail, and we have plenty of material on the web with pains of information about the tri-care proposal, specific prices, copays and things like that. we have an over view book that contains that information that has been wished it to ad today. third thing is the commissary proposal. this is a different proposal, more modest proposal that only tries to get savings out of the business end, does not touch the benefits. that's different in an important way, i think from the troops' perspective to last year. so, these are just probably the most well-known reform alleged proposals, things we believe that given the continued

pressure on our budget, hard choices need to be immediate. the budget deal, good as it was for us to give us some stability, at the end of the day reducees resource from last year's plan. so the case is at least as compelling for the need for -- before we get anymore money for the budget deal and still have to make hard choices. the next slide is maybe somewhat lower visibility but just indicative of the breadth of things we're trying to do across the department from acquisition reform, to the mandate we have both impoemses on ourselves and had imposed on us by congress jointly to improve staff, the audit every time, new review the dc mode will lead to have people look at their service contracts to make sure there's still known contract courts. sexual assault prevention efforts, the goldwater knick koles review that the second has already talked about, and let me touch on the last one. everybody is probably recalling the massive breach of personal

information of people last year. the so-called owe -- opm hack. this is not limited to dod to the system we propose 0 move to is a new entity created none opm would be responsible for investigations and not a mission of opm mixed in with all they're other missions, it would be a specified mission of a new intent inside the opm to do the agencies, sore oft like now agency responsibility would -- the information produced by the investigation would then under our proposal be responsible to dod to protect that information behind our secure systems. so we would become a service provider, of the information, the i.t. side of the process, for the entire government. a new entity inside the opm would be the service provider for the entire government, including us for doing the

investigating. that proposal will come in a different part of the budget than the defense budget per se but we are part of it and our budget funds are part of that proposal. last thing i want to talk about, before we take questions, is the okra -- oco budget which the deputy talked about. a coining afghanistan effort in response to the question asked before, the average troop strength is 9700 for '16, drops to 6200 in '17. so that's not the end opinions which are more well known to people, 9800, 5500. the average number of man years throughout the year drops bay third from 9700 to 6200. the average strength in the iraq, syria, inherent resolve effort is roughly constant between the two years so the increase in funding us more driven by the pace of operating tempo than it is by having more personnel involved. there was a question before

again about the africa part. we are trying to give them a little more robust -- a little more help to have more robust resources to deal with a fluid situation that spans such a large swath of geography from the al-shabaab to boko haram, aqim across the northern part of the continent. the partnership fund is constant from last year's level. the biggest increase in here is the european reassurance initiative, something we have had good success working with congress on to date. i'm confident they'll be supportive of this, too. this more than triples what we got last year, appropriated, and pretty much quadruples what we asked for last year. the biggest increase in the area is to start prepositioning equipment in europe to enable faster response and provide greater deterrence. the other biggest part of this increase is basically a doubling of the uptempo aspect to have

our units training, exercising with our european partners. we're going to mo of a heel-to-to basis where we are on the ground constantly exercising. that's a doubling of the operating budget part of the eri from what we had last year. on top of that we'll add a prepositioning aspect. just to just touch in what the deputy i hope made clear, everything on this page know oco categories, whether it's the iraq syria operations, afghanistan operations, the european reinsurance initiative, we built the numbers based on requirements, what we felt we needed, what with executable, especially in the eri category. not constrained at all by the budget deal. we came up with everything we felt we needed to do at oco, and then at the bottom you see what was left to use up the rest of the headroom made viable us by virtue of the word neglect budget agreement. so that was $5 billion after the got done pricing out everything we needed to do in oco on the

merits. so, just to look at the last slide, not going to read it to you but basically as the depaultive -- deputy said -- predicate on the future being the higher level of resources we believe we made a compelling case for, how to reshape to address the challenges the secretary wants to us address to free up money for high priorities. i think we have a good product that does that. with that, happy to take questions. mark, will you handle that? >> 15-20 minutes. both gentlemen have appoints immediately following. with that in mine, sidney. >> you and the deputy secretary and -- i see things like rebuilding of army core

readiness plateaued. air force saying we'll -- once with get to certain -- 2020, then we'll have eight to ten years to get to full readiness from the force. these are very long -- will not get back to three areas deployed and three surge, apparently ever. it seems like this is a very long road back to readiness and i'm trying to get a sense of what the steps are and what the steps are that you'd like to take but can't because of lack of funding or too much demand. >> i would just start out by saying it's not linear. a dollar today does not necessarily -- although it certainly is required, it's necessary but not sufficient to achieve this full spectrum readiness you're referring to, and, yes in each of the service it's a bit different. the calculation includes time and availability for units, and the ability to be able to train and focus on those tasks.

some of the deployments that our units have in fact contribute to readiness. but some do not. and where we have to operate in different organizational designs to accomplish the tasks that we're assigned and to meet the mission requirements and the context of the environment, n which our units are operating, it does not necessarily lend-to-the full spectrum readiness that combat and supporting and enabling units in all the services have to have. so it's a function of time, it's a function of having the adequate resources, function of having units that are available to go through this. and have the opportunity to go to the combat training centers to participate in the high-end training environments and exercises to achieve those, and sidney, it's going to take time and what we're saying -- the services can illuminate this when when they brief -- it will be in the early portion of the next decade before we start to

see recovery regeneration rates exceeding where we need them to be. it's not linear and it's certainly not as fast as we'd like it to be but we'll continue to work that hard with the resources we have allocated to it. >> david. >> can you tell us how much in savings there are in the personnel reforms, the tri-care and the other things, how much modify is being saved? >> we can provide that. the tri-care number is very similar to last year mitchell recollection is it's just under a billion dollars, but we'll get that for you for the record. >> reforms benefits added on? >> within the compensation proposal, within the compensation portfolio we didn't move now in or out there. some savings in pay raids and force of the future, things

we're making things more generous and then there's the tri-care, where there are some savings we think we need to do to keep the healthcare costs sharing where it should be. >> thank you. they house armed services committee have been saying that in this budget, you're robbing the base budget to fund oco initiatives and i see that in your slide, where you show 11 bill in program cuts, is the think that maybe the increase oco by $1 billion you -- $11 billion you can get that stuff back? >> the think neglect budget was we comply with the budget deal. these numbers were pretty well known to everybody, i think, and i guess i wouldn't characterize it as robbing the base budget etch funded the base budget to what congress agreed to. >> i understand but that's what they've been saying in the

public, to the media. these why i was wondering what your reaction to that ac curfew saying was. >> well, i would say that the if you look at the history of the last five, six years, the president is the person who has had the highest defense number out there congress has repeatedly refused to fund the president's defense request. so i don't think of us as the ones who are robbing the defense budget certainly. we have made the case, i think, this secretary and previous secretary, this chairman and previous chairman, and previous joint chiefs, have been saying, we think that we have a good case for this level of resources with haved asked for. with not gotten it, second year of murray-ryan was the only budget where congress has actually funded what we asked for. so, every other year we have had cuts ranging from $20 billion, $30 billion, due to sequester or cut from the budget control act or otherwise. so i think we have been make these case for higher resources

and congress has not agreed to give them to us. so budget deal was not everything we wanted but we're kind of being used -- used to having cuts over the last couple of years so we still view this is a progress, but again, i think that we have done nothing more, nothing less than comply with the budget deal in this budget, and i don't think that we have played any games. >> the department has tried at the beginning when the obama administration came in tried to get rid of oco, that was the marching orders now. a lot has happened with both of the budget pa caps and threats. hough is the department now looking at oco in the long term? it seems it had been done on a yearly basis every year, re-evaluate. are you taking more of a long-term approach these days as looking it's -- is that been de facto making it kind of addendum to at the base budget? >> well, i have to say that we have had a lot of effort over --

at the start of this administration the effort was too tighten up the rules. i think the predictability of oco and we did a good job another that we moved from the practice of the previous administration, to submit one or two supplementals to building a good-faith estimate of the what the wars were going to cost, committing it with the budget. we have had as a result pretty decent predictability and greater transparency than what came before. now, there were some reasons why that worked well in circumstances where we had ongoing conflicts. it's a little harder when things are changing a lot to do it that way. in the last couple of years there's been an effort, especially from omb, and but an effort we worked with. the on to try to find way to get oco costs counsel and get everything back into the base budget. with have not made a lot of progress on that and the budget deal from november wend n the on

depression. it leaves the future of oco uncertain as we get ready to turn over thissed a norths a new team, and -- a new team and they'll probably take a fresh look at oco. the budget deal gave us no guidance what will happen the day after the budget deal expires. no guidance about '18, '19, '20, '2, 1 either base budget or ocoke budget. we're back to sequester value here, a resource level we think we need is up here. no information in the budget deal about what people think about that. oco arrangementness this budget deal was unprecedented. never seen emergency spending type numbers written in advance in a deal before in my 30 years, is this press dense or a one-time thing that will not be repeated? we have tried to work with omb to put some more predictability into oco to get the resources we could back into the base budget. hasn't really made a lot of progress and i think the battlefield is fairly confused right now, i'd have to say in

terms of what is the future of either going to be an oco budget in the future that looks like it does now. >> there is may be your last appearance up here but on audit issues, the gift that keeps on giving up there. can you give a reality check on the emerging results of the first? any understanding is they haven't been so great. what is the significance of sending an armored brigade-continual presence to europe versus -- i didn't -- infantry brigade. what's the message and the equipment -- the symbolism there in terms of the u.s. -- what we're sending over there? >> on 'on the audit, the big effort this year has been the three military departments, army, nevery, air force to odd

their resources two have gotten their reviews back from independent out -- auditors. the third one is coming within less than a month now for the navy. and so we are looking at disclaimers for the first two weeks with not a surprise the first time you try something this big and involved. so, i think on the face of it you could say it's not progress etch actually feel is it because as my predecessor used too say you have to get into the game -- you have to call in the independent evaluators to really tell you what you're doing right and doing wrong. so, we have spent a lot of time over this administration as well as previous ones, what i would call practicing and preparing, which i think is all necessary first step but at some point you only really learn by getting in and having -- showing up for the test and having the -- very much like in the military realm, i think of it the same way you. go out to national training

center and independent observers and controllers and opposition forces are out there and then you learn what you're doing right and what you're doing wrong i'm not discouraged that we have disclaimers on these efforts. there's still a lot of hard work ahead of us, but i think that we still are moving in the right direction. there are problems -- the think that can be frustrating in an audit is if you can imagine work only your car and you get in and work on one thing and then you find something else you have to fix so as you get into it, you can really find that there's a lot that -- a lot to get your arms around it, the more you open it up and work on it. but that's how we're going to get this done issue think, just to keep at it, and we are making progress, i think that both -- we think that and outside observers think that we have the right plan and we are making progress. so, we're going to keep pushing because i think that we are doing the right things and moving in the right direction, whether we'll get there exactly

on schedule is the big open question. >> thank you. the european reassurance initiative for this budget, 3.4 billion, really two main areas. one is increased presence which will include a united states army, armored brigade, being on a rotational basis and essentially being, as mr. mccord described, heel-to-toe with in break in the availability of a full armored brigade there the second main part is the prepositioning of army equipment, including another army brigade in prepositioned state in europe. exact location and details to follow. so, those are the principle components along with the infrastructure required to enhance os our ability to operate in europe. the significance of an armored

brigade is important because the units that are -- the united states army uns there as part of the joint force, we don't have armored brigades in europe. previously there were two heavy brigades withdrawn from europe as part of the army's draw-down so this is an important enhaspment to the ability of the combatant commander and the joint forces commanders to combined maneuvers and have the right capabilities on the ground, trained and ready to conduct tests. >> thank you. can you give us more details on the overall -- have you changed the overall -- what is the reduction, the percentage reduction? will this impact the unit costs in the near term or long term, and how much is this giving news savings and where is the money going? >> there's a number of questions there. i think we'll have to get you

that -- over the course of that -- i would say for the record but a that's reflex from my hill days. not the proper term here. one disease i -- detail i'll have you. there's 43a model ford their air force, 16 for the marine corps and four for foe navy. the biggest reduction in the -- compared to our previous plan -- that's howl i was talking was compared to previous plan -- is on the air force side. the unit cost increase is not projected to be noticeable, but significant, let me put it -- i wouldn't say noticeable, we wouldn't know what it was. not significant, but of course, you have to sort of look at the totality of the program, including the partners to really have your correct numbers there. so we will get with our folks in '18 and the program to get you the answer to all the questions

but in general the prediction from those areas is that it's not supposed to be a significant change in the unit costs but definitely -- it's a lot of resources, and we are trying to get it back up to where we wanted it to be but it's a lot of money, and it's unclear we'll be able to get this program back to the ramp that we had hoped for previously. >> two more questions. >> can you give us a sense what the offset effort was funded at in fy17? it has a budget label on the section for 35 million. we were expecting 12 to 15 bill. where did the rest of that money go live in fy-17 and what level is it funded at? >> we'll have to try to get you something on that. there's not a tag in our budget system that says, this program is a third offset idea and this

one is not or could not be. so it's at bit of a -- a little less precise than saying what is connected to the submarine program, something like that. >> you have a sense of the amount of new money that went toward it or is it existing programs that were relabeled, we'll include this under third offset. >> there are some of both and will re get you the best numbers we can on that. >> last question. >> can you give a breakdown of the contribution that dod is giving to the new background check system? you touched oned briefly but the resources -- have a figure behind that and the rationale for that and how long that will stretch into the future. >> the resource level in terms of the scope of the size or budget is not enormous. it's in the $100 million a year range, and then we also have at least for '17 the preexisting costs of the identity protection services that we have to offer to all the people.

80% of the people affected by this were in the dod family, either employees and contractors, past employees. so we have probably the biggest build there. omb gave us the resources, by the way, for the projected cost of this increased i.t. costs. but also important to remember that we will be doing this as a service provider. so for those entities outside the defense depth we would be doing the and eighting to be reimbursed so we're not subsidizing other people in that sense. we'll have a cost similar to what we got from omb through additional resources and some which we expect and would require legislation which we'll be sending up to make this happen to receive the moneys back from some other agencies. >> thank you very much. gentleman, i appreciate your time. that's all we have time for. we have army in ten minutes at 3:00, army will begin. followed by navy, air force, and then the defense agency.

i want to see what left at the end of the day. ...