months in advance of how much cash each department expects to draw out of the Treasury in a given month, so that they can provide funds and have them on hand when the money is required. In the past they have had no such requirement, and very frequently, I imagine, they have had too much cash on hand, and possibly at times they have not had enough. Now the executive departments are required to let the Treasury Department know what their monthly requirements of cash are, and then the Treasury Department can con-olidate those reports and have the amount required on hand, thus preventing them from having too much or too little money on hand. While it may not be proper for me to express an opinion, it seems to me that this is a very logical business procedure.

Mr. AYRES. The transformation, no doubt, has been disturbing, particularly since the plan was initiated this year after plans and appropriations had been made upon the former order. The limiting figure for this fiscal year, no doubt, has made necessary the deferment and possibly the complete abandonment of some projects, which I assume we shall discover when we take up the individual items of appropriation.

NATURE OF OUTSTANDING OBLIGATIONS CARRIED OVER TO FISCAL YEAR 1934

In a general way, Admiral, what was the nature of the outstanding obligations contributing to the total of $67,000,000 at the beginning of this fiscal year?

Admiral BLOCH. The larger portion of outstanding obligations at the beginning of the fiscal year 1934 were probably due to contracts which had been let for ships and supplies. When a contract is let for ships amounting to so many million dollars, only a certain amount is paid in 1 year, and any amount unpaid will be carried forward 13 a contractual obligation. Also, you will find similar obligations carried forward under nearly every appropriation. For instance, take "Pay of the Navy", you will find for the month of June, at the end of the fiscal year, when the personnel are paid on the 30th of June, that the checks drawn actually do not reach the Treasury, probably, Intil as late as August.

That represents an obligation and carry-over under "Pay of the Navy." Take the appropriation for the purchase of airplanes; you will find that under the contracts that were let, the planes will not be delivered until the end of the year 1934. Therefore, that would be carried forward as a contractual obligation. That is true of nearly every appropriation.

Mr. HART. Has that demand by the Treasury Department for information as to cash withdrawals caused any added expense to the accounting for the Navy?

Admiral BLOCH. Actually, no, sir.

Mr. HART. I would like to have that in the record.

A mira! BLOCH. Actually, no, sir. As a matter of fact, the Secretary of the Navy directed that the clerical force of the Navy Department be reduced 10 percent, and that was done June 1933. It has been accomplished with great effort, but it is a reasonable effort on the part of the Navy Department to effect economies. The accounting force in the Navy Department, while much less than it was this time last year, is meeting all additional requirements.

Mr. AYRES. Will the outstanding obligations at the end of this fiscal year be of the same general nature?

Admiral BLOCH. They will be of the same general nature, but they will be increased about $12,000,000 due to the fact that there are some ships that have been contracted for, and, also, due to the fact that there will be a greater number of airplanes under construction that will be completed during the fiscal year 1935.

Mr. AYRES. They will be of the same general nature, but they will amount to about $12,000,000 more.

Admiral BLOCH. Yes, sir. That permission to have $12,000,000 more carried forward had to be obtained from the Director of the Bureau of the Budget.

Mr. AYRES. The $79,000,000 is distributed in the estimates among the items making up the total of $313,530,725, is it not?

Admiral BLOCH. That is correct, sir.

Mr. AYRES. The carry-over obligations that you stated a moment ago the Director of the Bureau of the Budget might permit, of course, would be obligations within and against regularly authorized appropriations?

Admiral BLOCH. Yes, sir.

Mr. AYRES. Now, Mr. Swick, I believe you have a question that you wish to ask at this point.

Mr. SwICK. The Admiral has explained the matter to my satisfaction. It just means that they are doing more work, as I understand it, and are getting the same pay. The obligations that are carried over this year, as I understand it, amount to the difference between $57,000,000 and $79,000,000.

Admiral BLOCH. The unpaid obligations carried forward into 1935 amount to $79,000,000.

Mr. AYRES. You may proceed with your statement, Admiral.

Admiral BLOCH. As money must be appropriated before contracts are made and expenditures can take place, it is necessary to include in these estimates all features of the requirrments of the Navy for the fiscal year 1935. as it is impossible to determine at the present time what parts, if any, of the several economy measures will be continued into 1935. If, by reason of the action of Congress, certain old or new features of economy are carried on, then such parts of appropriations as may be unused by reason thereof will be impounded or reserved by order of the Director of the Bureau of the Budget as has been the case in the past year.

SAVINGS FISCAL YEAR 1933 UNDER

ECONOMY-LAW PROVISIONS

Mr. AYRES. Admiral, you have supplied us with a statement, which I shall later ask you to insert, showing the savings actually effected during the fiscal year 1933 under various economy-law provisions. Admiral BLOCH. Yes, sir.

Mr. AYRES. That totals $17,434,378?

Admiral BLOCH. Yes, sir.

Mr. AYRES. Have you a figure of what you expect such savings to amount to during the present fiscal year?

Admiral BLOCH. Yes, sir. The estimated savings during the fiscal year 1934 under provisions of the various economy acts will amount to approximately $34,240,940.

Mr. AYRES. I am afraid I will have to ask you to supply us with a statement similarly constructed and detailed showing the amounts that have been restored owing to the uncertainty as to the continuance of the several economy measures. That statement may be inserted immediately following the statement applicable to 1933.

Admiral BLOCH. I will supply that statement marked "I-B-10." The amount is $2,972,457 for restoring automatic increases in compensation, and $10,353,696 for the restoration of 5 percent of the 15-percent reduction in compensation.

BASIS FOR 1935 ESTIMATES

Mr. AYRES. You may proceed with your statement, Admiral. Admiral BLOCH. In making your comparative study of the various estimates, you will find that the detailed estimates of each bureau, office or activity are made and compared to the sums available for expenditure in 1934 on a 100 percent basis.

These estimates include funds for the commencement of one new heavy cruiser no. 45-which may be laid down by Treaty of London on January 1, 1935, this being the last heavy cruiser permitted to the United States Navy under the treaty; the estimates also carry funds for 82,500 enlisted personnel in the Navy, and 16,000 in the Marine Corps. The necessities for this personnel will be fully explained in detail by the Chief of Naval Operations, the Major General Commandant, and the Chief of the Bureau of Navigation. Furthermore, there are funds included in the estimates for restoring normal promotion to officers and for paying 90 percent of full pay to all officer, enlisted, and civilian personnel of the Navy. There is not corporated in the estimates any money for the resumption of the Payment of reenlistment gratuity to men of the Navy and Marine Corps. There is a question of law involved here. Should that part of the economy law which has to do with this feature not be perpetuated, this sum of money will be required by law unless some action is taken by Congress toward the repeal or modification of the act requiring these gratuities.

I am not prepared to discuss the relative merits of the existing law, but this can be fully presented to you by the Major General Commandant and the Chief of the Bureau of Navigation. Another alient feature of the estimates is an additional amount of fuel amounting to 1,574,000 barrels of fuel oil for the purpose of enabling the fleet to return to the west coast in the autumn of the calendar year 1934. This is the amount which is required for this purpose and it is additive to the amount otherwise estimated for, which was somewhat below the normal requirements of the fleet.

REENLISTMENT GRATUITIES

Mr. AYRES. Admiral, you are estimating for 2,800 additional ensted men for the Navy and 657 for the Marine Corps.

Adn.iral BLOCH. That is correct, sir.

Mr. AYRES. It seems to me, since you have stated that provision has been included in all other instances to take care of the additional demands if economy measures are not continued, that funds should have been included looking to the restoration of reenlistment gratui

ties. You place the enlisted man at a decided disadvantage by leaving that money out, or, at least, that is the way it appears to me.

Admiral BLOCH. $2,650,000 will be required for this purpose; the Director of the Bureau of the Budget prohibited the inclusion of money for that purpose.

REENLISTMENTS

Mr. HART. You are not having any trouble about reenlistments, are you?

Admiral BLOCH. Last year, as Admiral Leahy will tell you, I think the reenlistments were over 90 percent. In other words, 90 percent of the persons discharged turned around and shipped over. Since the suspension of gratuities, longevity pay, and so forth, the reenlistments have dropped to something like 70 percent. All of those men who are not coming back are getting jobs in civil life.

Mr. HART. Have you any record to show what length of service those men have?

Admiral BLOCH. Yes, sir; those records are in existence, and I think, if you will make a note of that, under the head of "Bureau of Navigation", when Admiral Leahy comes up here he will give you the statistical data.

Mr. HART. I can understand one reason for their reenlisting, because after serving for 20 years the ordinary sailor will draw about $103 per month from the retirement fund, and they figure that they can go out into civil life with the assurance of making enough money for a good living.

Admiral BLOCH. Of course that feature would not apply to these men that we are talking about in connection with reenlistment. Very few of the 20-year men ever reenlist.

Mr. HART. That would not be the cause of their dropping out. Admiral BLOCH. No, sir; that would not be the cause of it. The cause of dropping out has been due undoubtedly to the fact that a great many men with 1, 2, or 3 enlistments, particularly men with families, have not been able to make ends meet, and they had to find other ways to do it. For that reason, reenlistments have fallen off. In other words, the incentive to continue in the Navy is not as great

as it was.

Mr. HART. You also find that the grade of the average seamen who is coming in now, has been going up, do you not?

Admiral BLOCH. It is very much better than it has ever been in the past; yes, sir. They are fine men, and you cannot beat them anywhere.

Mr. HART. I found that the sailors on the last two ships at San Diego were of a high grade. I think that something over 55 percent of them had a high-school education or better, and quite a number of them had a college education.

Mr. SwICK. Is there a scarcity of recruits now for enlistment? Admiral BLOCH. No, sir; we have no trouble in getting men at the present time.

Mr. SwICK. And they are a high class of men?

Admiral BLOCH. Yes, sir. The last information I had regarding it was to the effect that practically all the recruits were high-school men. They are fine men.

Mr. HART. I think the percentage of high-school men was higher than I stated. I believe it was up around 79 or 80 percent. know it was very high.

Mr. AYRES. You may proceed with your statement, Admiral.

COST OF MATERIALS AND SUPPLIES

Admiral BLOCH. The prices of material used by the Navy are the same as were taken account of in framing the 1934 appropriation Fill and no increase has been made due to the predicted rise in the price of material and services, nor has any increase in the price of fuel oil been estimated for; the average price of fuel for the year 1934 was taken as the base. In the case of rations for the men of the Navy and Marine Corps, 38.08 cents was used in the case of the Navy and 36 cents was used in the case of the Marine Corps. The Navy's figure is the average cost of rations for the fiscal year 1933, and the Marine Corps' was set about 2 cents less, as there appears to be a small differential in favor of the Navy.

Mr. AYRES. I understood you to say, Admiral, that the increase has been brought about by the "predicted" rise in the cost of material. My information from naval sources is that recent contracts indicate quite a substantial raise already has occurred.

Admiral BLOCH. That is a correct statement of the fact. It is true that a great increase has already taken place. For instance, we have been purchasing oil on the west coast at about 54 cents per barrel, and I understand that the current price on the west coast is somewhere between 75 cents and $1 per barrel. However, by direction of the Bureau of the Budget, all departments were required to use 1934 estimates so as to have a uniform base. The increased prices that we included in the original estimates were taken out by the Bureau of the Budget.

The exact mechanics to provide for increases in the cost of material, fuel, and rations are not known at the present time. However, it s my understanding, after conversations with officials of the Bureau of the Budget, that they intend to recommend to Congress the creation of a reserve fund under control of the Bureau of the Budget. to be disbursed to the various executive establishments if and when materials increase in price.

AMOUNT OF BUREAU OF AERONAUTICS ESTIMATE FOR 1935

These estimates include $18,643,000 for the Bureau of Aeronautics, together with an authorization for $2,800,000. This appropriation and authorization will permit of the Bureau of Aeronautics having on hand on July 1, 1935 the 1,000 aircraft permitted to the Navy by Law. At this time I might mention that, with the completion of the ruisers now under construction and the two additional aircraft carriers being built under N.R.A. funds, 1,000 planes will not supply the Navy with sufficient planes for its purposes afloat, and some conideration will have to be taken of this fact in the very near future. The details of the aircraft purchase and replacement program will be By explained to you by the Chief of the Bureau of Aeronautics. Mr. AYRES. I might remark, Admiral, that the 1,000-plane prozram was first realized in the fiscal year 1931.