Dr. KORB. The Army is about 6 months. I assume it would be about the same for the other Services. We can supply that exactly for the record.

If all operational and rotational moves were delayed in fiscal year 1983 by the dollar amounts shown. Reductions directed to specific geographical locations would increase the number of days delay for those members affected.

IMPORT OF ROTATIONAL MOVES ON BUDGET

Senator STEVENS. We had a $740 million figure. When we asked DOD if we changed it for 6 months, they gave us a figure of $740 million. Now, the $230 million is the one that you have indicated to the Armed Services Committee would be for the same amount of time. Unfortunately, or fortunately, whichever way you want to call it, the Armed Services Committees' reduction of $5 billion is an effective reduction of $5 billion according to the Budget Committee. We are going to be told to make it effective, as we understood it yesterday, we are going to make certain that we do it in a way that does not impair morale and have reduced readiness. So, I would like to have some figures in terms of the rotational moves and whether you draw any distinction between overseas rotational moves and the domestic rotational moves, what impact they have as far as the budget is concerned.

Dr. KORB. Mr. Chairman, we can supply you the figures that went into the numbers I gave you and what the exact impact would be on each of the services.

[The information follows:]

OPERATIONAL/ROTATIONAL MOVES

Operational travel involves moves to and from permanent duty stations located within the United States or moves to and from permanent duty stations located within an overseas area when no transoceanic travel is involved. Rotational travel covers movements to and from permanent duty stations overseas when transoceanic travel is involved. Reductions directed to specific geographical locations would increase the number of days delay for those members affected.

Total

Service

'If all operational and rotational moves were delayed in fiscal year 1983 by the dollar amounts shown.

INTRODUCTION OF UNIFORMED PERSONNEL

Senator STEVENS. The Army, Marine Corps, Navy, and Air Force have statements here. We have them in the record. I would like to inquire from the uniformed personnel if they wish to answer any of the questions I have given to Mr. Korb.

Admiral Zech, General Bronars and General Isoue, would you like to come up now and address some of these questions, and General Thurman, too?

DEPARTMENT OF THE NAVY

STATEMENT OF VICE ADM. LANDO W. ZECH, JR.

Admiral ZECH. Mr. Chairman, on the subject of the aviation officer continuation bonus, I would just like to summarize the Navy's views on that bonus program.

I believe the Navy has complied with the letter as well as the spirit of the congressional directive. I believe the program is very cost-effective; it is one of the most cost-effective programs that we have in the Navy at the moment.

For example, in 1981 the program cost the Navy $26.4 million. We believe we saved potential training costs in excess of $427 million with the money that was given to us to retain those aviators in 1981.

COST OF TRAINING NEW AVIATORS

Senator RUDMAN. Could you explain those numbers for us, Admiral? I would like to understand where they come from.

Admiral ZECH. Yes, sir. It would cost us over $400 million to train the number of aviators that we figure we would lose if we did not have the program. The program itself cost $27 million. We anticipated the program would retain 358 aviators. We actually retained 599.

The program cost $26.4 million for the Navy. To train additional aviators to replace those that we expect to lose would have cost us in excess of $400 million.

There are anomalies, as Dr. Korb has pointed out, in the program caused by using length of aviation service for bonus computation. We would agree with that part of the GAO report, and we have been staffing initiatives to change the computation from years of aviation service to years of service.

I would like to point out that although there are anomalies which should be changed, there were very, very few people involved, but they did get considerable publicity. We agree that it should be changed.

The statement-or at least the implication-was made that it was not important or necessary to give the bonus beyond the 8-year

or perhaps the 10-year point. I would disagree with that. Our figures show that it is extremely cost-effective at the 6- to 8- to 10year point. It is also cost-effective beyond that point.

You can say that it is less cost-effective than earlier and that is true, but it is still cost-effective even during the later years.

The figures that were used indicating 90 percent continuation refer to our career force. These are experienced people we hope to retain in our Navy. On the other hand, our retention figures refer to the people who are just completing their obligated service and are junior people at the 6- to 7-year point. The retention figures were declining to roughly 30 percent before the bonus went into effect.

We feel the bonus is indeed cost-effective. We believe we need to continue it. We believe the shortage we have targeted is our critical shortage of aviation officers in the ranks of lieutenant, lieutenant commander and commander with 6 to 15 years of service. These are our shortages, and they are what we targeted.

We believe we have complied with the letter and the spirit of the law. We are still short, and we need the bonus continued: therefore, my view is that the bonus program is cost effective. It is an important program to us, and if we are to continue to retain our aviators, we need the program continued.

[The prepared statement of Admiral Zech follows:]

PREPARED STATEMENT OF VICE ADM. LANDO W. ZECH, JR., USN

DEPUTY CHIEF OF NAVAL OPERATIONS

MANPOWER, PERSONNEL AND TRAINING

I.

INTRODUCTION

Mr. Chairman, I appreciate the opportunity to appear before you today to discuss military compensation. More than any other factor, it has been the past compensation policies and initiatives which have contributed to our success or our failure in attracting and retaining the manpower needed to man our Navy at a high state of readiness. The impact of the FY 1981 and FY 1982 compensation improvements has been striking. The personnel hemorrhage that reached its height in 1980 has been arrested. Although the serious petty officer shortage will not be fully resolved for several years, virtually all our indicators, including recruiting, retention and personnel readiness, are now pointing in the right direction. Retention rates have increased dramatically. Due to this increased retention, the total number of petty officers in the Navy increased by 5,000 in FY 1981. Also during the past fiscal year, we had 2,185 fewer members request transfer to the fleet reserve, and of particular importance to fleet readiness, 1,138 more sailors requested duty at sea as a reenlistment incentive.

Although the continuing sluggish economy has contributed in considerable increases to our recruiting and retention sources, I believe the recent compensation initiatives have been the key ingredient to this success story.

I firmly believe that it is essential to maintain military pay comparability in order to recruit and retain the required manpower for our Navy.

II. PAY COMPARABILITY

Recent initiatives have restored the level of military compensation to rough comparability with wages and salaries in the private sector, but have also instilled a new confidence in our personnel in the commitment of the congress and the administration to support our military forces. This new confidence has had a very positive effect on retention of our career force and readiness of the fleet. It is important that this confidence be maintained.

The competition for manpower in the all-volunteer force is fueled by wage growth in the private sector. If military pay is allowed to deteriorate below pay opportunities in the private sector, as happened in the late 1970's when pay increases were capped on three occassions, and a portion of the raise was reallocated to quarters allowance on two occassions, there is no reason to expect that the result will be any different from the results experienced then. We lost thousands of talented careerists, and were totally unable to meet our accession and retention goals - despite the application of bonus programs. Today, we can ill afford the larger price tag that will be exacted for training replacements for the skilled, experienced people who will leave should we again lose our ability to compete with the private sector.

Another area of concern is maintaining the present value of special and incentive pay entitlements. The amount of most of these pays are fixed by law. If these special and incentive pay programs are to remain effective, they simply must maintain their value as an inducement to undertake the duty for which they were designed.

As an example, in 1949, sea pay ranged from $8 to $22.50 per month and was equal to approximately 10 percent of enlisted basic pay. Prior to the recent sea pay improvements the value of sea pay had lost its effectiveness to attract members to sea duty.

We

would support a mechanism that would insure that these entitle

ments

retain their value over time.

A. SELECTIVE REENLISTMENT BONUS (SRB) PROGRAM.

an

The SRB Program is the Navy's most flexible and cost effective tool to retain needed petty officers in critical skills. The FY 1983 budget contains $279.5 million for reenlistment bonuses of which $240.7 million are for new awards and $38.9 million are for anniversary payments. This program will yield additional 2000 experienced petty officers over the 1982 program and is essential to enable us to provide the experienced, critical-skill petty officer base required to man the fleet of the late 1980's. While Navy's overall retention program will target the aggregate petty officer shortages, the SRB portion of that program is the best method to apply scarce resources to those selected critical ratings where our most severe shortages exist.

to

To ensure that our dollars are applied in a cost effective manner, the Navy continually reviews its management techniques more effectively allocate resources in this program. As a result of our FY 1982 mid-year review, Navy decreased award levels in 21 ratings and reallocated those funds into 12 ratings with more severe inventory shortages. We also reduced three skills to 1/2 award levels to evaluate the retention yield in relation to cost savings.

the

Associated with attempts to achieve SRB cost savings is shift from lump sum to 50% lump sum and anniversary payments. Although the near-term cost savings associated with this method of payment are obvious, a Center for Naval Analysis Study points out that, for a given award level, the savings over the term of enlistment are zero and that the effectiveness of the bonus as a retention tool is significantly reduced. In FY 1982 alone we expect to lose over 400 reenlistments as a result of this change, and FY 1983 projections are 600 petty officers lower than under the previous payment system. Of critical importance is that these losses represent hundreds of trained, experienced petty officers in ratings where we are already short of requirements. The consequence is an adverse effect on fleet readiness.

B. ENLISTMENT BONUS

In addition to the selective reenlistment bonus program, Navy also has a limited enlistment bonus program, which is an effective tool for targeting Navy accession needs into ratings with chronically low volunteer levels or those with extemely high technical skill entry qualifications. These skills include nuclear field trainees, cryptological specialists, machinist mates and boiler technicians. With the bonus and additional training received we require additional obligated service e.g., nuclear field-six years. The success Navy has experienced in meeting the initial accession goals in these and other eligible skills is directly attributable to the enlistment bonus incentive as well the special training. The FY 1983 budget contains $16.5 million for the enlistment bonus program. These funds are essential to provide accessions of the proper quality to keep pace with Navy's overall manpower expansion.

C.

AVIATION OFFICER CONTINUATION PAY (AOCP)

The Navy also strongly supports the extension of the aviation bonus beyond its current 30 September 1982 termination date.

as

From fiscal year 1977 to 1980, Navy experienced a severe loss of mid-grade 0-3 to 0-5 aviators. Among mid-grade pilots, shortages increased more than 200 percent, to a total of over 2000, between FY 1977 and FY 1979. Despite constant inventory requirements this mid-grade inventory decline is a direct reflection of pilot retention, which fell from 46 percent in FY 1978 to 30 percent in FY 1980.

The Aviation Bonus (AOCP) was developed as a supplement to Flight Pay (ACIP) in order to correct current and projected shortages of career officers in aviation specialities. The bonus payment plan concentrated on aviators in the retention-critical sixth through ninth years of aviation service. Payment is based on multiples of basic pay with the multiples highest in the sixth through ninth years, then gradually decreasing through the