Mr. WOODRUM. And how much remains and what you expect to use it for? Mr. MANGUM. About $15,000 remains, and this, or as much of it as may be necessary, would be used for preliminary work in connection with the August dedication. May I add, with reference to the matter of the urgency with which the new appropriation is needed, that at Montfaucon the physical installations necessary for the dedication ceremonies will take quite a long time to erect. These installations will include speakers' stands, toilet and first-aid facilities, seating accommodations, and so forth. About 15,000 people are expected to attend that one dedication. The physical work of preparing the necessary installations at that one place will take a long time, and this is only one of the places where such work must be done, with only about 6 weeks in which to do it. Besides there are innumerable other details that will consume time, and work on them cannot proceed until funds are available, which makes it apparent why it is necessary to have the money as soon as possible. In fact, unless funds for the actual work are made available within a very short time, it would not be possible to hold the dedication as contemplated. Mr. WOODRUM. If there is nothing further, gentlemen, thank you. VETERANS OF FOREIGN WARS OF THE UNITED STATES, Hon. EDWARD T. TAYLOR, House Office Building, Washington, D. C. MY DEAR CONGRESSMAN TAYLOR: When the Committee on Appropriations shall take up for consideration the communication from the President transmitting a supplemental estimate of appropriation for the American Battle Monuments Commission, amounting to $200,000, to be available for expenses in connection with the dedication this summer of the chapels and World War memorials erected in Europe, under the authority of the act of March 4, 1923, please record the Veterans of Foreign Wars of the United States as being in favor of such proposed appropriation. We should be glad to appear in person before your committee, when hearings are to be conducted for the consideration of same, to state the viewpoint of the Veterans of Foreign Wars in support of same. Respectfully yours, M. W. RICE, Legislative Representative. (NOTE. The following testimony held in connection with, and the appropriation discussed herein carried in, H. J. Res. 433 (Public Res. 50).) MONDAY, JUNE 28, 1937. RAILROAD RETIREMENT BOARD STATEMENT OF MURRAY W. LATIMER, CHAIRMAN Mr. WOODRUM. Mr. Latimer, we have before us in House Document No. 277 an estimate of the Bureau of the Budget for the sum of $99,880,000, together with unexpended balances, for the Railroad Retirement Board, in its operations. Has that act been signed? Mr. LATIMER. Yes; I think it was signed on Thursday afternoon. Mr. WOODRUM. We would like to have an explanation of this estimate. Mr. LATIMER. The Railroad Retirement Act, in section 15 (a), provides for the creation of a railroad retirement account, and authorizes the appropriation to that account, for each fiscal year beginning with the fiscal year ending June 30, 1937, as an annual premium, an amount sufficient, with a reasonable margin for contingencies, to provide for the payment of annuities, death benefits and pensions under the Railroad Retirement Act of 1937 as well as the Railroad Retirement Act of 1935, under which we have already granted certain amounts of annuities. Mr. WOODRUM. Will you insert in your statement at this point the complete text of section 15 of the act? Mr. LATIMER. Yes, sir. (The section referred to is as follows:) RAILROAD RETIREMENT ACCOUNT SEC. 15. (a) There is hereby created an account in the Treasury of the United States to be known as the Railroad Retirement Account. There is hereby authorized to be appropriated to the account for each fiscal year, beginning with the fiscal year ending June 30, 1937, as an annual premium an amount sufficient, with a reasonable margin for contingencies, to provide for the payment of all annuities, pensions, and death benefits in accordance with the provisions of this Act and the Railroad Retirement Act of 1935. Such amount shall be based on such tables of mortality as the Railroad Retirement Board shall from time to time adopt, and on an interest rate of 3 per centum per annum compounded annually. The Railroad Retirement Board shall submit annually to the Bureau of the Budget an estimate of the appropriation to be made to the account. (b) At the request and direction of the Board, it shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the account as, in the judgment of the Board, is not immediately required for the payment of annuities, pensions, and death benefits in accordance with the provisions of this Act and the Railroad Retirement Act of 1935 in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired on original issue at par or by purchase of outstanding obligations at the market price. The purposes for which obligations of the United States may be issued under the Second Liberty Bond Act, as amended, are hereby extended to authorize the issuance at par of special obligations exclusively to the account. Such special obligations shall bear interest at the rate of 3 per centum per annum. Obligations other than such special obligations may be acquired for the account only on such terms as to provide an investment yield of not less than 3 per centum per annum. It shall be the duty of the Secretary of the Treasury to sell and dispose of obligations in the account if it shall be in the interest of the account so to do. Any obligations acquired by the account, except special obligations issued exclusively to the account, may be sold at the market price. Special obligations issued exclusively to the account shall, at the request of the Board, be redeemed at par plus accrued interest. All amounts credited to the account shall be available for the payment of all annuities, pensions, and death benefits in accordance with the provisions of this Act and the Railroad Retirement Act of 1935. (c) The Board is hereby authorized and directed to select two actuaries, one from recommendations made by representatives of employees and the other from recommendations made by representatives of carriers. These actuaries, along with a third who shall be designated by the Secretary of the Treasury, shall be known as the Actuarial Advisory Committee with respect to the Railroad Retirement Account. The committee shall examine the actuarial reports and estimates made by the Railroad Retirement Board and shall have authority to recommend to the Board such changes in actuarial methods as they may deem necessary. The compensation of the members of the committee of actuaries, exclusive of the member designated by the Secretary, shall be fixed by the Board on a per-diem basis. (d) The Board shall include in its annual report a statement of the status and the operations of the Railroad Retirement Account. At intervals not longer than three years the Board shall make an estimate of the liabilities created by this Act and the Railroad Retirement Act of 1935 and shall include such estimate in its annual report. Such report shall also contain an estimate of the reduction in liabilities under Title II of the Social Security Act arising as a result of the maintenance of this Act and the Railroad Retirement Act of 1935. Mr. LATIMER. The estimate which is here incorporated in the language of the appropriation item is the amount which we have estimated to be the premium for the fiscal year ending June 30, 1937, and the fiscal year ending June 30, 1938. The reason for the language adopted here, that is, appropriating an amount, plus unexpended balances, is to enable us to get our money by which we can pay pensions which are due on July 1 next. As I understand the legal situation, the appropriation of an unexpended balance allows us to expend the moneys without any additional warrants, which would ordinarily be required. Since the time is very short, and since the Retirement Act provided for the payment on July 1 to some 50,000 persons, who were not eligible under the preceding act, that is, pensioners on private pension rolls of the carriers, we wish to do everything possible in order to make this payment on the due date. If we may use the fund already in the Treasury to cover these pension certifications, pending the availability of the additional appropriation we shall be able to meet the due date. Mr. WIGGLESWORTH. What do the unexpended balances amount to? Mr. LATIMER. Approximately 41 million dollars. If you will notice here, it is in effect two appropriations, amounting to $146,650,000. The original appropriation under the Retirement Act of 1935 was $46,620,000. Added to that is $99,880,000, which, together, will give you the amount of $146,500,000. We are taking only the unexpended balance; you will notice at the end of the item it is provided that the expenditures or payments already made shall be considered as having been made from the railroad retirement account herein established. In other words, this is, in effect, an appropriation of $146,500,000, and against that are to be charged the payments we have already made under the Railroad Retirement Act of 1935. Mr. TABER. How much was appropriated to start with? Mr. LATIMER. The original appropriation was $46,620,000. That is for the annuity account. There have been three appropriations for administrative expenses, beginning with $600,000 for the fiscal year ending June 30, 1936. Then for the fiscal year ending June 30, 1937, there was an appropriation of $1,000,000. We had a deficiency appropriation just after the 1st of May of $280,000. Then there is an appropriation of $25,000 for printing and binding. With the $1,000,000 that makes a total of $1,905,000 for administrative expenses up to the end of this fiscal year. For the next fiscal year the amount for administrative expenses is $2,300,000, plus $25,000 for printing and binding. Mr. WOODRUM. There is no amount for administrative expenses involved in this item? Mr. LATIMER. No; there must be an extra, additional appropriation for administrative expenses. Mr. WIGGLESWORTH. You are asking for no amount for administrative expenses in this item. Mr. LATIMER. That was provided for in the regular Independent Offices Appropriation Act. Mr. TABER. You had $46,620,000 for the retirement fund? Mr. LATIMER. There was no fund under the 1935 act. Mr. LATIMER. Yes. Mr. TABER. For the payment of retirement pay? Mr. LATIMER. Yes. Mr. WIGGLESWORTH. For what year? Mr. LATIMER. That was first made for the fiscal year ending June 30, 1937, and was made immediately available and when the bill was passed. We were thus able to make a one month's payment for the fiscal year 1936. The annuities began to accrue on June 1, 1936. Mr. TABER. How much of that will have been spent Mr. LATIMER (interposing). Approximately $5,000,000. Mr. TABER. $5,000,000 will have been spent probably by Wednesday. Mr. LATIMER. By the end of this fiscal year. Mr. TABER. That leaves a balance of approximately $41,000,000. Mr. LATIMER. Yes, sir. Mr. TABER. And you are planning on expenditures of $146,000,000? Mr. LATIMER. No, sir. Mr. TABER. How much? Mr. LATIMER. This is an appropriation account, and the amount appropriated thereto is to be available until expended. The amounts of the unexpended balances are to be invested by the Secretary of the Treasury in precisely the same way as the unexpended balances under the Social Security Act for the old-age account are invested. We estimate that we will have to expend an additional $5,000,000 in respect of retirements which have already occurred this year, and for which we have not yet made payment. In taking over the private pension rolls we have discovered about 7,000 persons who have been retired under the private pension plans of the railroads and who have either not made application for annuities, or had not given us any notification of retirement. Under the law annuities may be applied retroactively 60 days before the application was made. A great many retirements now appear to have been made as long ago as June 1936, or shortly thereafter. We find ourselves with a considerable liability in respect of these potential annuitants. We estimate that the payments made in respect of this fiscal year, 1937, will amount to $10,860,000, and that payments during the fiscal year 1938 will amount to $54,700,000. Mr. BACON. That is a total of about 65 million dollars. Mr. LATIMER. Yes, sir; we estimate that at the end of the next fiscal year the unexpended balance will have earned interest amounting to a little better than $1,600,000. So there will be a little more than $82,500,000 in the reserve account. Mr. TABER. You are asking for an appropriation of how much? Mr. LATIMER. The amount is $99,880,000 in addition to that previously appropriated. Mr. LUDLOW. These balances are invested either in Government bonds or bonds guaranteed as to principal and interest by the Government. Mr. LATIMER. Yes, sir. Mr. BACON. Why should not this be put on a pay-as-you-go basis so that there could be appropriated each year the amount that you will need? Why do you need to set up a reserve of 82 million dollars? Mr. LATIMER. Because of the rapidly increasing load which this account will have to bear. Mr. WOODRUM. The law provides for setting it up? Mr. LATIMER. Yes, sir. Mr. WOODRUM. Is not this the whole proposition, in a nutshell? You have the money already appropriated and available with which to pay annuities under the old act. Mr. LATIMER. For the next year. Mr. WOODRUM. But you have not any money with which to pay annuities under the new act. Mr. LATIMER. No, sir. Mr. WOODRUM. You have not any money with which to start a reserve account, which the law provides shall be set up? Mr. LATIMER. Yes, that is true. Mr. WOODRUM. That is what this appropriation is for? Mr. TABER. How much taxes have been collected in this fiscal year? Mr. LATIMER. The Tax Act, which was signed in 1935, has been under an injunction since June 30, 1936, and as a result only $325,000 has been collected under that act to date. The act which was passed in the House on last Mr. WOODRUM. A week ago today. Mr. LATIMER. Some day last week, and which was passed in the Senate this afternoon, provides that the provisions of that act shall be in substitution for the provisions of the tax act of August 29, 1935, as amended, and it repeals that act and sets, as the effective date of the new act, January 1, 1937. A part of the agreement which underlay that legislation was an agreement on the part of the railroads and the labor organizations that the proceedings in the courts, which are now pending in the court of appeals, would be remanded to the district court, and there, on the petition of both parties, would be dismissed, and at that time the taxes for the first half of this year will be due. The taxes are to be collected quarterly and, under the usual Bureau of Internal Revenue regulations, must be paid within 1 month after the end of the quarter. For the quarter ending March 31, 1937, the taxes would be normally due on April 30, 1937. It has been assumed, I believe, that one quarter's taxes due in this fiscal year will be accounted for, as allocable to the fiscal year, and that four quarters of taxes will be due and accounted for in the next fiscal year, 1938. Mr. TABER. Your estimate of revenue for this year is how much? Mr. LATIMER. For the current fiscal year? Mr. TABER. Yes. Mr. LATIMER. The amount is 30 and a quarter million dollars, and for the next year it is 121 million dollars. Mr. LUDLOW. Is it your belief that you can make a pretty close forecast of the tax collections? Mr. LATIMER. The pay rolls of the railroads do not vary very widely over short periods. For the first quarter of this year we have the figures from the records of the Interstate Commerce Commission on about 90 percent of the pay rolls. We could not do very much better than that, I think. Mr. TABER. You probably will not receive any money until the last of July. 148745-37-18 |