But personnel-related costs are not the only area of the defense budget that has grown over the past decade. The budget for acquisitions, including research, development, test, and evaluation (RDT&E) and procurement, has also grown by a total of 46 percent since FY 2001, adjusting for inflation and not including war funding. A notable trend within the acquisition budget is the relatively high level of funding allocated to RDT&E for the development of new weapon systems. Over time, this has undermined DoD’s ability to substantially fund for the procurement of new weapon systems and correct the lagging pace of procurements from the past two decades. The ratio of procurement to RDT&E has fallen from a peak of 3.5 to 1 during the early 1980s to its current level of 1.5 to 1 in the base budget request for FY 2011. What this trend indicates is that DoD continues to spend a greater share of its acquisition budget to develop new and sophisticated weapon systems but does not adequately fund the procurement of these systems in quantity. However, the future-year defense program submitted with the FY 2011 budget request begins to reverse this trend. Funding for procurement is projected to rise and RDT&E is projected to decline over the coming years. By FY 2015 the ratio of procurement to RDT&E in the base budget will reach 2.0 to 1, the highest level since FY 1990.
Classified funding in the DoD budget has also been growing at a rapid pace. Total classified funding, including both base and war funding, is some $57.8 billion in the FY 2011 request. Adjusting for inflation,this is the highest level seen since CSBA began tracking it in FY 1987. Classified O&M funding has not been consistently reported in previous years, but this year’s budget request reveals that it is the fastest-growing area within classified funding. Classified O&M increases 9.6 percent in real terms in the FY 2011 request over the previous year, which follows a similar 11.0 percent real increase in FY 2010.
The Air Force receives the largest share of DoD’s classified acquisition funding—nearly 80 percent of the total. Classified programs account for about 43 percent, or $19.1 billion, of the Air Force’s procurement request and 46 percent, or $12.6 billion, of its RDT&E request. The concentration of classified funding in the Air Force’s budget is the result of two factors. First, the Air Force acquisition budget is believed to contribute funds to a number of intelligence agencies, including the Central Intelligence Agency (CIA), National Security Agency (NSA), and National Reconnaissance Office(NRO). Second, the Air Force is responsible for most command, control, communications, and intelligence (C3I) functions and related assets such as reconnaissance satellites and satellite launch and control facilities, which tend to be heavily classified programs.
The record for classified acquisition programs is mixed. A notable success was the Corona program for reconnaissance satellites, which produced valuable imagery intelligence from 1960 to 1972. Several successful and effective aircraft have also been developed and even produced as black programs, including the F-117 stealth fighter,the B-2 stealth bomber, and the SR-71 reconnaissance plane. Some classified programs have had troubled histories, such as the National Reconnaissance Office’s Future Imagery Architecture program to develop the next generation of spy satellites, which was canceled in 2005 due to significant cost overruns and technical issues at a reported $4 billion loss for the government. However, it should be noted that the mere existence of classified programs can create uncertainty in the minds of potential adversaries. Such uncertainly complicates their planning and, potentially, compels them to divert resources to hedge against an unknown capability. Classified programs can therefore be part of a cost-imposing strategy on potential adversaries.