Officials say a number of other compromise options are also on the table as the Army prepares its fiscal year 2008 to 2013 program objective memorandum, due Aug. 15 to the Office of the Secretary of Defense, as InsideDefense.com reported June 5.

The need to consider the most drastic changes is being driven by a potential shortfall to the Army's budget of $20 billion to $30 billion per year, according to one service official.

That estimate takes into account the fiscal guidance handed down by Deputy Defense Secretary Gordon England in April, which directed the Army to eliminate $25 billion across the POM including a total of $17 billion from its FY-12 and FY-13 budgets. The Army's worst-case scenario estimates also include the cost of implementing the Army's plans for modularity, base realignment, compensation and benefit packages, as well as money to increased the capabilities of special operations forces. Further, the service must fund efforts to make the Army Reserve an operational force rather than a strategic reserve force.

The shortfalls are also fueled by historic fiscal woes, among them what the Army's chief of staff sees as a $56 billion deficit in service accounts that has existed since the Sept. 11, 2001 attacks, the official said. Last fall, England handed down an $11.7 billion cut to the Army's budget between FY-07 and FY-11, InsideDefense.com first reported in November 2005.

With a skyrocketing national debt, Congress is also likely to face pressure to reduce the size of the overall defense budget, informed sources said.

While POM drills typically encompass a range of potential billpayers from the mild to the severe, the combination of budget reductions while the Army fights the war in Iraq and attempts to modernize and overcome past deficits makes this POM the most difficult to execute in the last 10 years, a service official said.

The POM season is further complicated by the fact that the Army thought it would increase its overall budget in the years to come -- not scale it back.

The Pentagon's program budget decision 753, issued in late 2004, directed a $5 billion-per-year increase in Army budgets between FY-07 and FY-11. Beyond that, the Army's future years defense plan in 2005 was tailored to sustain a continued topline increase in order to purchase FCS, according to documents viewed by Inside the Army.

Despite such rosy assumptions, money from the Office of the Secretary of Defense has not materialized. In fact, the Pentagon has ordered the Army to continue cutting its budget, the official said.

That leaves Army officials debating the best way to make budget cuts without breaking the force, a former service official said. Because of the size of the potential shortfall, the service is focusing on two major areas for reductions -- FCS and force structure, service officials said.

Since early 2006, Chief of Staff Gen. Peter Schoomaker has said repeatedly that he will cut the size of the force rather than operate with an under-equipped Army.

“Whatever the government gives us to do it will be the size of the Army,” Schoomaker told reporters at an April 26 Defense Writers Group breakfast. “If we get cut, we're going to cut the size of the Army. . . . Or they'll get somebody with a different idea” (ITA , May 1, p1).

But cutting a division from the Army in FY-08 might prove to be impossible, the official suggested.

Such a cut would drop the Army's overall end strength from 482,400 to about 460,000, with the corresponding money taken from the base budget. But because of the war in Iraq, the troops would be needed anyway, and the Army would have to transfer the cost of the troops from the base budget to its request for supplemental funding, the official said.

But Congress has made clear it is unhappy with the Pentagon's continued use of massive supplemental appropriations requests. In marking up the FY-07 defense authorization bills, lawmakers have included calls for a more accurate picture of spending for the war and a push to include fixed expenses in the Army's main budget.

As for FCS, service leaders are also considering a number of options short of termination that would delay portions of the program or remove some of its 18 platforms, officials said.

Training and Doctrine Command has been studying the mix of unmanned aerial vehicle in the Army's fleet, a study that could be used as the justification for cutting one of the four UAV development efforts within FCS, according to a source familiar with the program.

But even cutting FCS entirely, which would free up $3 billion per year in the Army's research and development accounts, would not provide enough money to make up impending shortfalls, sources said, putting other costly procurement programs in jeopardy.

The Army is not alone in feeling the pinch of England's fiscal guidance and other financial pressures; all of the services were told to scale back their plans in the FY-08-13 POM. But the Army, which is carrying the heaviest load during the war in Iraq, may be feeling the pressure most keenly, an official said.

Even though the Army traditionally makes up 24 percent of the overall Pentagon budget, the service's chief lobbying organization, the Association of the U.S. Army, says DOD only spends 16 percent of its procurement and research and development dollars on the Army.

Because so many soldiers serve in the Army, the service spends heavily on personnel, leaving less money to buy weapons, the official said.

This is not the first time FCS has been mentioned as a billpayer for the Army's fiscal woes. Last fall, the Army faced a $7 billion-a-year budget shortfall without continued supplemental funding, but the service rallied around FCS and offered force structure cuts to pay some of the service's bills (ITA , Sept. 19, 2005, p1).

The service emerged from internal budget negotiations with a $111.8 billion budget request for FY-07. The Army's cuts to force structure, which included one active-duty brigade and six National Guard brigades, did not stick. The Guard fought cuts and the Army agreed to fully fund the Guard in FY-07; future years are still being discussed.