 Welcome, everyone, and thank you for joining us for the latest edition of Conversation with the Shipmate. I'm Lieutenant Caroline Hutchison, and we're here today with the Chief of Naval Operations, Admiral Jonathan Greenert. Good morning, Admiral. Thank you so much for being here with us. It's great to be here, Caroline. Let's get this out right now. It is Monday morning, 0800 on the 10th of March. So this is no bankers hours midday thing, right? We're hitting it early. That's right. Starting early, sir. And we're going to talk about one of our favorite topics, the budget. So I'd really like to get your views, Admiral, on how this budget impacts our Navy and the Navy family. First and foremost, one of the topics on a lot of folks' minds is the subject of compensation reform or sailor's compensation. Can you tell us a little bit about what the changes are and why we can't sustain the growth rate that we're on right now? Why do we need to make changes? Well, let's set the baseline maybe a little bit. Two years ago, the Department of Defense received effectively a $500 billion reduction. And then just about a year and a half later, another $500 billion reduction. So as we look at, okay, how do we endure these, you know, the sequestration and what took place before that, what are our options to balance our force structure we have today, our future shipbuilding, operations today, and of course, the personnel accounts? As we look over the last, say, decade or so, actually two decades, our compensation, that is, the military's compensation, has grown at a pretty good rate. And we've in fact made up for what was a deficit. And folks have been, well, frankly, compensated pretty well. But that was the right thing to do. People have earned that compensation. So today, compensation for the military, and that's civilians and uniform, is about one-half of our budget. You know, some argue plus or minus, but it's fairly close. And that's about right, we figure. So we said, isn't it time to take a look at a comprehensive package, looking at pay, looking at housing, looking at tri-care, looking at all of our benefits, and put together, if you will, a comprehensive package. And the term comprehensive means there's a lot of parts to it. And limit that growth, hold it to about one-half. And that's the essence of what's put together. And when you get right down to it, that means about a 1% pay raise for a few years for our military and for civilians. So that's uniform and civilian. And we froze pay for generals and flag officers. So when you say slow the rate of growth, does that mean there's not an actual cut? I mean, what's the bottom line for sailors' pay and for money in their pocket? It means what it said, slow the growth. So for example, instead of 1.8% or 2.2% growth pay raise, I should say, we limited to 1% pay raise. So it is a pay raise. When you look at allowance for housing, instead of 5% or 6%, 4% or 5% or 6%, which is what it has been, we limit that growth to, say, 2%, 3% or 4%, and that varies by region. The idea is to limit the growth, not reduce or not take out. And how about, you know, Sailor's Future? What about retirement changes? Are we going to see any changes there? Oh, goodness. We keep seeing articles on that. No. Let me answer straight. No. There is no plan today to change retirement. This will take some time. There are folks studying it. There's a commission studying it. There will be articles on it as different, oh man, and they'll continue. But if I could make one thing clear, anybody who is wearing a uniform today, that retirement system will be grandfathered, which means that is the, today's retirement system is their retirement system. The only thing that might change is they may have the option, and I underline option, to transition to a new system if they want to. That is one that would come in for people who come into the military after it would be implemented. But I'll tell you, Carolyn, it's going to be a few years before we get one put together, studied, voted on, and actually implemented. If you wear the uniform today, today's your retirement, today's the retirement system is your retirement system. That is definitely good to hear. I'm sure that a lot of folks will be reassured to hear that directly from you, sir. I've also seen some articles on some proposed changes to tuition assistance, and maybe Sailor's paying a little more out of pocket. What's going on with that? What are your thoughts? The Chief Enable Personnel, Admiral Moran and I have talked at length about what's the appropriate distribution for tuition assistance, and what I mean is, should we make it all, it's not really free, but how do we make sure that our folks get the right education? That's very important to me to have an educated force, but they get the right education and we aren't taking, first of all, they're not getting ripped off by these Johnny Come Lately or whatever institutions out there that actually target that. They get something that is useful, so that while they're in the military and when they leave the military, the Navy, it enhances their life, it accelerates their life, as we like to say. But anyway, we looked at and toyed with, and right now in the budget is a 75% Navy pays, 25% Sailor pays. That's what's in the 15 budget right now. However, throughout the rest of this year, tuition is 100% Navy pay. But I'll tell you what, I'm rethinking. And before we get to the fiscal year 15, I may want to change and go back to what we have today where Navy pays all of it. More on that later, I'm still thinking about it. To me, though, the bottom line is I want our kids to have the best education they can get. Absolutely. Admiral, before you discussed some changes to the basic allowance for housing or BH, and we've seen a 5% cut and then something about renters insurance, can you elaborate on that a little bit and your thoughts on taking away the BAH for Sailors? Well, again, I guess I wouldn't characterize it as taking away, but I know what you mean, all right? Because it depends on how you look at it. But here's what we would propose to do. This would be done incrementally. You don't do it right away. You don't have one year where you say, well, it's .95 of what it was last year. That's not the intent. It BAH has gone up consistently at a percentage that varies from three to five to six, and I think it might have been a tad higher than that. I'm not sure exactly, but it's somewhere in that area. We were proposed to limit that, that growth, and it would be inserted incrementally. So we would stop, if you will, that incremental limitation when we reached a point. It would be no less than, or kids would receive no less than 5% out of pocket. Now the other thing that today BAH provides is renters insurance. And when you do the average on that, how much is renters insurance? Does everybody get it? No, but it's free right now. BAH pays it. We'd say we would propose not to pay renters insurance. That is an estimate of about 1%. So therefore you got the 5%, which would be out of pocket for rent and mortgage, and the 1% for renters making it a total of six. Does that make sense? That's where the 6% comes from. So bottom line, you're not going to see a change in your next paycheck, and this could all depend on where you live and where you're stationed. That's an important point. Thanks for bringing that up. Today if I have a lease, I'm in San Diego, I'm in Norfolk, Mayport, you know, the packed Northwest. I have a lease, I'm at a duty station. You won't see any change until UPCS. After UPCS and go to a new location, or in some cases you can PCS and stay in the same location, then you would look at and see, okay, you're under new rates for that area. That's when the transition would take place. So when you PCS, of course, you can redo your lease because orders, you have the clause in your orders. So it isn't going to happen where somebody is playing their mortgage, going about their business, and all of a sudden it's different. No, it'll happen with a duty station change. Okay, that definitely makes sense. I guess the bottom line here is that all of this is working towards cost savings. I mean, that's what we here propose cuts, and we need to save money. But where is all of this money going, the savings from the compensation reform and reductions? That's a good question. And I'm glad you asked it, by the way. Let's go back to the beginning. Remember, we had these difficult choices to make. So Mick Pond and I have been spending a lot of time asking around the Navy, you know, what's important to you all. And our sailors are very clear, paying compensation is very important to us. But they've also made this clear. You know what's almost as important. What's about as important is where I work, that I have a proper man division, that I get my schools, so that's personal training, I get my professional training, that our unit trains right, so I can do my job. I want spare parts, so I can do PMS. I want tools. I want a decent place to live in if I'm a single sailor. I call that the quality of their work, their environment, you know. So the quality of their entire service, you know, their quality of life and their quality of work is kind of out of balance a little bit. So every penny that the Navy gets out of compensation reform will go into areas to improve quality of service and work. So let me give you an example, if I may say, what are you talking about? We would put that money into aviation spare parts, surface maintenance and surface spare parts. In fact, all spare parts. We would increase retention bonuses, improve base services at barracks. We would put 70 million dollars per year for renovation of single sailor barracks, military construction for five barracks and reserve training center, improve birthing barges in your coast to Japan. I think you get my point. Those sorts of things, they would continue to help support the changes in career see pay, but we're going to do that anyway. So career see pay is in and it will stay in, the change that we put in. And there's one other thing I wanted to mention, Carolyn. We would like to revisit what we call high deployment allowance. And high deployment was, by definition, is greater than 190 days. If you go on a deployment greater than 190 days by actually a DOD mandate and a law, you are required to get a high deployment allowance. We're on a waiver from that as a result of 9-11. So this has obviously been an old law and it's been in the books quite some time. We would propose, and we're still evaluating this with the Secretary of the Navy, but he's looking at it reasonably favorably, that we lift that waiver, that we implement the payment of a high deployment allowance and that folks who are on longer deployments greater than 190 days receive that allowance. So more on that later, but that's another initiative that these sorts of compensation reforms would help support. You're looking at money in a sailor's pocket, but also improving where you go every day, especially if you're deployed on a ship and it's where you are for months at a time. Where folks work. I want them to be enabled where they work and to be prouder of the area that they work, in addition to feel that they're compensated reasonably. Admiral, how do you see all of this impacting the recruiting and retention for our shipmates? Well, Caroline, that's hard to say. I'm not concerned, but we'll be vigilant. We'll look closely at this. What I'd like to do, we need to keep talking about this. We need to talk at the division officer level. We need to talk in the wardroom about what these mean. We at headquarters have to continue to put this out in what I call in English, so folks can understand it. We need to work with the newspapers and the sites and the social media that our kids read. And so, when they understand that, then we'll see how they feel about that. How does that balance, make sense to them? Today, our recruiting is good, very good. We have no different issues than we've had for a long time. Medical folks are hard to recruit. Reserves are hard to recruit. But in general, we're meeting all of our goals and retention is very good as well. But we'll be vigilant. Absolutely. Emeril focused on sailor impacts, but back to the budget, big picture. You mentioned some hard choices. What was your decision-making process, your thought process through all of this? Well, I looked at what does the Navy require to do, all right? What is their primary mission and the number one mission for us, the defense of the homeland and the ultimate defense of the homeland is our strategic nuclear deterrence. So for the Navy, it's called the sea-based strategic deterrence, and that's our Trident submarines and their follow-on, the Ohio replacement program. So it's the submarine, it's the missiles, it's the systems that support it. So that was number one. We had to make sure that we funded that properly. Number two, we need to be where it matters in the world when it matters. So our forward presence has to be the best it can be, and we have to look for innovative and proper ways to be out there around the world, supporting the Asia-Pacific rebalance and making sure we're in the mideast at levels that make sense. So we can, again, we can respond to crises and do that. Those forces have to be ready. So it was presence with ready forces that are capable to respond as necessary. We have certain capabilities that we bring that are unique in the joint arena, the undersea domain. That's all ours. We own it today. So we had to continue to bring those capabilities in, air-to-air capabilities, electronic warfare capabilities. I call them asymmetric because they're different and they're better than just about any other, well, certainly than any other Navy in the world. We had to continue to bring those along. We also have readiness. Now we have the way we provide ready units to be where it matters, when it matters. We call it the fleet response plan, and it's almost like a conveyor belt. You go into maintenance and then basic training, then integrated training, then you get kind of a capstone event called a COM 2X, a comprehensive exercise, and then you go into deployment and maybe a response to a contingency if necessary after that deployment. It's called sustainment phase. It's almost two years long. So that phase, I'm sorry, that plan, that process, we tuned it up a little bit to make sure there's enough time to do maintenance. People get the right training, get the people to their units so that when it's time to get underway and train up to get ready to deploy, you've got your crew on board. They're not arriving later. You're not cross-decking so much. So that element of readiness, we put a great bit of attention in. So again, those ships that are forward deployed out and around are as ready as they can be. And then lastly, we have to have an industrial base, aircraft building and ship building especially, an industrial base in the future so we can continue to build the future. If we were to not build enough ships or not build enough airplanes and folks closed and I'd say, well, what am I going to do now? I don't have enough shipbuilders if we wanted to respond. And you can't just snap your fingers and say, hey, anybody want to build military ships? Those are special welders, special shipfitters at special locations. And there's unique suppliers for U.S. shipbuilding that we have to watch, keep our eye on. It sounds like quite the balancing act of you've got a lot of different priorities and you hear a lot of talk about balancing readiness with force structure. I think of as readiness as our ability to do the things we need to do and force structure is the stuff that we need to do the things that we need to do and be where it matters. How did you balance those two priorities in this budget? Well, what we looked at is what is the need of our combat commanders globally and how are we best suited to support the Asia Pacific rebalance and make sure we protect, if you will, the Mideast and our interests in the Middle East. So we looked at, therefore, what kind, how many ships do we need forward? Well, today we have about 100 forward. That's about right with the right capabilities, the right ships in the right regions. We look to the future and say, can we sustain that and grow appropriately? Want to try to do that, but at the same time build enough ships because if you hold on to all your ships today and say, I'll pay my bills or the reductions with shipbuilding, I won't build this ship. I won't build that submarine. And as you know, perhaps in the future won't overhaul a carrier because that's in the budget. And we have to balance that and say, we're going to have to maybe lay up or retire some ships and keep that money in building destroyers, building submarines, building aircraft carrier airplanes and all that's needed. So some folks think you walk through it once and say, OK, looks pretty good. It's an iterative cycle that we loop back through. And underpinning it all, we talked about earlier, our people. We're manned about right as far as the number of people per unit on average today. We don't have all the people in the right place and they don't have all the right skill sets. So that's what we need to concentrate on. But, Caroline, what we can't do is just say, OK, let's just take five thousand more people out of the Navy. You know, we buy equipment stuff, as you said earlier, and we man it. And we have to man that equipment properly. If I just reduce the manning, then I've reduced the number of people per unit. I can't do that. Well, Emily, you touched on what I was going to bring up next, which are lots of news reports and conversations about the aircraft carrier. Can you tell me a little bit about what's in the budget and then and the idea of decommissioning an aircraft carrier and how that impacts deployment cycles and manning? Well, aircraft carrier overhauls require a lot of long range planning. I mean, that sounds obvious, but this is mostly long range, what we're dealing with. So here's what I mean by that. The aircraft carrier in question is the George Washington. And the plan right now is for her to come back from Japan when it's due for her reactor fuel to be replaced. And so that's a long overhaul of roughly four years. That overhaul is scheduled to start in September of 16, which is almost fiscal year 17, if you think about it. So let's just use that for us. So during the fiscal year of 17, she will need to be start her refueling. So when we looked at the budget, we said, hmm, I don't we don't know if we're going to have that kind of money in the future. So let's for now put the the program in a situation where we can either retire her in that fiscal year in that 17 year, fiscal year 17 or refuel her. So we'll put the money in to bring her in, take the fuel out. And then next year, we will address whether we're going to retire her or whether we're going to refuel her and keep her. Now, given that it's a four year, she's offline for four years until 2020, at least in probably 2022. It really has no impact on the fleet. That that carrier was going to come back and go into overhaul. So she was going to be out of service. So whether she's permanently out of service or she's being refueled, she's still not available to the fleet. So the impact on the fleet and a carrier rotation won't be felt till 2021 or 2022. And then the situation will be we will have one less carrier to provide a presence. So it will be that much more difficult to maintain one carrier in the Gulf, one carrier in the Western Pacific. And that turnaround, you know, as I talked to you before for the fleet response plan will be more difficult to maintain. So my point too is we've set it up for an option to retire it or to overhaul it. And the monies for that will have to be put in the 16 budget. So that's a decisional point when we build that budget and take it up to the Congress. It won't affect deployments for the near term because she was going to be, if you will, out of the fleet rotation for the next goodness, well, starting in 16, really late 16 when she leaves Japan for at least the next five years. So sailors are safe in that plan. And it's a decision that will will make down the road. Yes, it is down the road would be actually in the next say five or six months in the Navy, we will work our budget and see what is the proposal. And as the Secretary of Defense indicated, we'll look at what the sense of the Congress is in retaining the amount of money we've requested, you know, through the future year defense plan. If that's the sense of the Congress or the intent, then we'll look hard at saying, okay, we think we can retain this carrier. So the Department of Defense will go into those deliberations. On another topic of ships staying in our fleet and the cost to maintain and modernize them, what's happening with the cruisers? Can you tell us a little bit about this phase modernization plan and what happens to the sailors on those ships now? Sure. Well, again, we had some difficult decision to make. We look and say we don't have enough money. There are 22 cruisers in the fleet today. We could keep, and I want to if I had the money, keep all 22 of them and operate them and modernize them so that they reach they're in the most modern fashion and most capable to the end of their life, their planned life. The problem is we don't have that kind of money. So we said, do we have to retire these ships and put them away forever? Or as we look at the sequencing of when they need to be modernized, 11 of these carriers, actually, excuse me, cruisers, and they're the earliest one, which is counterintuitive, but the first 11 have been modernized. So if we keep those operating and we take the other 11, 20, and we put them, we lay them up in preparation for their modernization and then pull them out and get into that modernization in a sequence. As you go through the 20s, then maybe we can retain that class of ship. Always have 11, because one of the original 11 retires. One of the later 11 will come back in. So it's a way to take 22 cruisers, maintain all of them on the books, because they'll just be laid up. We could bring them in as necessary or in a crisis. And then sequentially bring them in, modernize them and bring them out into operation, the fleet holding 11 across the board. When we bring one in for this long term phase modernization, you set it into the shipyard for a while, we will demand it down to a level that we haven't determined yet, but there'll be a minimal crew. Those folks and those billets don't go away. They go into the fleet where we currently have gap billets, a float and a shore. And we'll continue to do that so that we continue to bring those skills and when it's time to man them, when we bring them back in, we'll have the right skill set and the right manpower. So this wouldn't be a reduction in force for the sailors. They'll just go to other billets across the fleet? Yes, that's correct. I'm what we've talked about, about sailors, about compensation reform, potential changes in force structure. Is there anything else that you'd like to add? Yeah, I'd like to ask our folks, first of all, thank you for your service. All right, our sailors, these are very, very difficult decisions and people say, geez, I'm worried about, we're not keeping faith in that. And I take that very deeply because they're doing an amazing job. Ask them to look and make sure that their opinions are well founded and ask us questions, get on those sites and ask, okay, what's the story on this? How does that work? And ask us questions about the budget. They, when I go out and the McPon and I have all hands called, I'm astounded at the strategic vision that our kids have in there and I think it's amazing. So we're very fortunate and it is a foundation of, we'll get through all of this with the right force and we have the right force today. Admiral, thank you again for your time and for giving us your thoughts on the FY15 defense budget. We really appreciate your time. You're welcome. And we want to thank you for joining us for another segment of Conversation with a Shipmate. Be sure to stay on top of the entire series on the CNO's leadership page on Navy.mil and the Navy's official YouTube channel. Thanks for tuning in. I'm Lieutenant Caroline Hutchison. We'll see you next time for Conversation with a Shipmate.