It's been a while...well a long while, since I was involved in the National Honor Guard world but I imagine the Bands are pretty much the same now as they were then.
The National Service Bands, the ones that musicians audition for, are based in DC. These are the bands that members audition and enlist as E-6 and remain in the band for their entire time in the military. Nearly all these members have at least a Masters in Music and are accomplished musicians, the reason for the higher rank upon enlistment. The Army for example has several bands, and vocal groups, often the members will do double duty in more then one group. This would include everything from the Full Honors Concert Band to the Trumpeters that line the Portico of the White House during Full Honors Ceremonies. I have a feeling these bands will stay around.
When the article talks about there being 137 bands I do not doubt they are including the local Base Bands, these are not part of the National Band program but still fall under the same funding. These bands are not a musician for life type of band, they are usually staffed by service members from each base. For example, if you visit the Arizona Memorial and the Missouri you'll sometimes see and hear a band playing on the stern of the ship, this is not a National Band, it is a band made up of local sailors stationed at Pearl.
I would imagine the bulk of the budget is spent on the national bands since they do tour the country performing concerts. I would agree that there needs to be a tighening of the belt when it comes to all the local bands as well as looking at how the National Bands are used.