VI. AVIATION A. Status both as personnel and matériel. B. Appropriations. VII. INCREASE OF THE NAVY (Bureaus of Ordnance, Engineering, and Construction and Repair) VIII. BUREAU OF YARDS AND DOCKS A. Bureau appropriations. B. Public works. 1. Statement of projects under way or projected at time of diversion of funds, showing (1) location and name of project, (2) total cost, (3) amount that would have been available during fiscal year had program not been disturbed, (4) projects resumed under National Industrial Recovery Act funds, (5) total cost, (6) amount actually allotted, (7) new projects under National Industrial Recovery Act funds, (8) total cost, and (9) amount actually allotted. IX. MARINE CORPS A. General statement by commandant. 1. Itemization of officers and men receiving compensation incident to their assignments in lieu of or in addition to their Federal pay, giving rank, Federal compensation, extra compensation and by whom paid, and date of commencement of detail. 2. Itemization of retired officers holding civil positions under the Federal Government, showing the activity with which employed and compensation of position. B. Paymaster's department. C. Quartermaster's department. X. BUREAU OF MEDICINE AND SURGERY XI. MISCELLANEOUS 1. Miscellaneous expenses, Navy. 2. Contingent, Navy. 3. Guam. 4. American Samoa. 5. Naval Petroleum Reserves. a. Résumé of what has transpired since 1934 hearings. b. Products: Source, nature, and quantity, and disposition made since previous hearings and proposed. XII. NAVY DEPARTMENT A. Salaries (general statement with respect to entire Department and specific justifications for each bureau and office; a single spokesman as to all salary items is desired unless some special situation would seem to require justification by an official directly in touch therewith). 1. Number of employees, by bureaus and offices, at the close of fiscal year 1933 and on October 31, 1933. B. Contingent expenses. 1. Navy Department. a. Naval war records. 2. Hydrographic Office. C. Printing and binding. Mr. AYRES. I anticipate that our task is going to be more difficult than formerly, owing to a combination of circumstances which have introduced new and somewhat confusing methods into our budgetary procedure. I had planned to have Assistant Secretary Roosevelt open the hearings with a general statement summarizing the salient features of the current Naval Appropriation Act, outlining the departures therefrom made necessary by the policy of the new administration, and recounting the fiscal changes consequent upon such policies, followed by a general portrayal of the 1935 expenditure program. It has developed, however, that pressing naval business has called Mr. Roosevelt from the city, and he is not expected back for 4 or 5 days. He has sent us a prepared statement, which I am going to ask Admiral Bloch to read as for the Assistant Secretary. My thought would be, under the circumstances, to make no interrezations upon the statement. Questions which suggest themselves may as well be asked of Admiral Bloch when he follows with his own statement. He will cover practically the same ground and in more detail. We shall be glad to have you proceed now, Admiral. STATEMENT OF THE ASSISTANT SECRETARY OF THE NAVY Admiral BLOCH. The statement of the Assistant Secretary of the Navy is as follows: When the present administration assumed office last March, the Budget for the fiscal year 1934 had been presented and the Congress had made appropriations for the current year. As you know, there was made available to the Navy approximately $323,000,000, of which $309,000,000 was appropriated and the remainder was in the form of transfers, reappropriations, and so forth. The details of these appropriations will be presented further along in the hearings by the budget officer of the Navy Department. The President immediately decided that drastic reductions in public expenditires must be made with a veiw to balancing the Budget and for other obvious reasons. The Bureau of the Budget was principally concerned with the cash to withdrawn from the Treasury during the fiscal year, and, to control expenditres and to endeavor to make the Budget balance, it was decided to limit the ash withdrawal of each and every department, irrespective of appropriation. De Navy was initially placed on a basis of $270,000,000 for cash withdrawals, s sum being made a lump sum to the Navy Department to be subdivided by propriation titles as the Secretary of the Navy decided. With this allocation, * an apparent that the Navy could not be maintained in any degree of efficiency *thout severe curtailment of its activities and without effecting every possible onomy, even at the expense of omitting some features which were certainly Brable and others which were almost necessary. Certain policies were enunated by the Secretary of the Navy as are enumerated below as being necessary to meet the program of the President: Close certain stations: Training Station, Newport; Training Station, Great Las: hospital, Great Lakes; station at Key West; station at New Orleans; aten at Lakehurst; and several readio stations, the names of which I do not ou here. 4 Place certain navy yards on a ship-construction basis, namely, PortsN.H., Boston, and Philadelphia. To have the industrial establishment of the Navy to be employed on a 40week schedule, thus eliminating the 4-hour half holiday with pay on atunday. 4) To place certain larger ships on a rotating-reserve basis, in addition to the aer ones already on that basis, thus to reduce the personnel of the Navy to at 77,500 for the year. To reduce the aviation-purchasing program and the appropriations availte to the various bureaus to amounts which appeared to be as low as they could > reduced and to trust that no serious harm would develop on account of these • To reduce Naval Reserve activities to a bare maintenance basis. As the fiscal year developed, the above policies numbered 3, 4, and 6 were arandoned, as these policies appeared to be harmful and contrary to the best terests of the Navy and the Government, and additional cash was allowed for the purpose of abandonment of these policies; so that today the cash allocate to the Navy amounts to $281,310,000. As the pay of all personnel in the Navy is reduced 15 percent and there are no promotions taking place, and, further, as commodities have been cheap, the Navy is managing to get along, although I lack the assurance that the individual units of the fleet are being maintained in a fully prepared and ready condition that it is felt they should be kept in; nor are there sufficient men in the Navy and Marine Corps to keep the ships manned to the percentage of full complement that they should be. The personnel of the Navy has cheerfully borne such reductions of pay and allowances as were imposed on them and on other services uniformly, but I believe that the 15 percent reduction in the pay of enlisted personnel is felt severely and in many cases is actually working extreme hardships to certain ones. The restriction in the promotion of officers is affecting and will continue to affect the morale seriously. By this feature of the economy law the average pay of officers is reduced slightly over 20 percent instead of 15 percent, and some officers have had their pay cut as much as 42 percent. Furthermore, you find two officers performing identical duties, in the same rank, of the same age, and other equal conditions, one of whom is not receiving pay for his promotion and the other is. This situation is bad and works a particular hardship on the younger officers of the service whose pay is small at the best and who have great difficulty in making ends meet. I cannot recommend to you too strongly that this question receive serious consideration. This bill calls for an appropriation of $288,030,725, which provides for 82,500 men in the Navy and 16,000 men in the Marine Corps and supplies the necessary funds for proceeding with our naval construction program at a normal rate of progress; it also includes money for restoration of 5 percent of the 15 percent reduction of pay. Furthermore, it has funds to restore the pay for officers when promoted. On this sum the Navy will be able to get along satisfactorily with careful and efficient administration. The number of men allowed for the Navy (82,500) only provides for manning the large ships of the active fleet at about 82.5 percent of the full complement basis; it has been estimated that 85 percent complement is the lowest percentage below which complements should not fall, in order that emergencies may be met promptly and fully. The number of men allowed for the Marine Corps will permit the concentration of about 1,000 men for drill and training together in order that they may be at all times properly drilled, trained and equipped for immediate call. I consider that the numbers allowed are the minimum on which the Navy should operate during the next fiscal year. During the year, considerable sums have been made available to the Navy from the National Industrial Recovery Act, the greater portion of which was devoted to the construction of new ships with a view to approaching the treaty strength of the Navy. Other sums were allowed for the purpose of public works, machine tools, aircraft and radio equipment, but no money has been allowed for the purpose of repairing or altering ships of the fleet which are in arrears in this regard. In this estimate, provision is made for starting one new heavy cruiser, which can be laid down not earlier than January 1, 1935. This vessel has already been authorized by Congress and the funds requested here are only sufficient to make the necessary payments to contractors during the fiscal year 1935. This cruiser will be known as "Cruiser No. 45." The President has recently directed the Navy Department to have the entire fleet cruise to the Atlantic coast, leaving the west coast in April 1934 and returning to the west coast in the autumn of the same year. This necessitates fuel for both trips; the fuel for the eastbound trip will be obtained from funds which have been reserved by the President from the appropriation fuel and transportation for the fiscal year 1934. However, fuel for the return of the fleet-about 1,574,000 barrels will have to be provided for in the appropriations for the fiscal year 1935, and this amount of fuel has been included in the estimates which are now being presented to you. The Navy now has under construction 3 aircraft carriers, 7 heavy cruisers, 4 light cruisers, 6 submarines, 32 destroyers, and 2 gunboats; also, the battleship Idaho is still undergoing modernization. Of these vessels, 1 aircraft carrier, 5 heavy cruisers, 2 submarines, and 5 destroyers, and, in addition, the Idaho, will be completed prior to October 1, 1934. The completion of these vessels and their going into service will necessarily entail a somewhat greater financial load than has been carried during the past year. This increase you will see reflected in the estimates of the individual bureaus and offices. Thirty-two ships were provided for by funds from N.R.A.; the construction of these vessels is a measurable approach to treaty strength. Additional vessels will be required to complete the allowed tonnage and for replacement; none are provided for in these estimates. However, it is expected that legislative authority l be requested this year for further construction with a view to obtaining funds n the future. With this preliminary statement, I will stop, to give you an opportunity to estion me on any points that you may desire. I believe that you will obtain a better understanding of the problems before the Navy and the details thereof from the various officials of the Navy Department who follow me with their dividual estimates. BUDGET ESTIMATES FOR 1935 Mr. AYRES. We will now hear Admiral Bloch, who is making his first appearance before us as budget officer of the Navy Department. It is mighty good to have you back with us again, Admiral. The Admiral used to appear before us as Chief of the Naval Bureau of Ordinance, and we are glad to have him with us again. Admiral BLOCH. I am very glad to be back, Mr. Chairman. It is ine to see you here, Mr. Ayres, and, while I am delighted to see all the new members of the committee present, I am sorry to find that some of our old friends are not here. Mr. AYRES. You may proceed with your statement, Admiral. ESTIMATE FOR 1935 AND OBLIGATIONS CARRIED OVER TO FISCAL YEAR 1935 Admiral BLOCH. The estimates which are being presented to your committee for the fiscal year 1935 call for appropriations of $288,030,725, plus transfers from funds and from appropriations already made amounting to $9,000,000 and a reappropriation of an unexpended balance of which $30,000 will be expended in 1935. These estimates are predicated upon the assumption that the Navy will be permitted rash withdrawals amounting to approximately $313,530,725, exCusive of trust funds. The additional $16,500,000 reflected above is due to having that amount unexpended from continuing appropriations for 1934 and prior years which is available for expenditure during the fiscal year 1935. Mr. AYRES. Admiral, the $288,030,725 includes $1,698,333, of so called permanent annual and indefinite appropriations, does it not? In other words, the amount we are asked to appropriate is $286,332,392, as compared with $308,669,562 for the current year, omitting from both figures reappropriations and the employment of special funds. Admiral BLOCH. That is correct, sir. Mr. AYRES. The $313,530,525, that you have spoken of, exclusive of trust funds, includes cash withdrawals to satisfy unpaid obligations ncurred prior to the fiscal year 1935, does it not? Admiral BLOCH. Yes, sir, that is correct; when the Navy Departent enters the fiscal year 1935, it will have outstanding unliquidated obligations incurred prior to that time amounting to approximately $79,000,000. Such of those obligations as mature for payment during the year of 1935, will be included in the cash withdrawals. Mr. AYRES. By "trust funds", do you mean the permanents and It definites? Admiral BLOCH. By "trust funds" we mean the sum of two dePits funds, namely, the Navy deposit fund and the Marine Corps deposit fund, totaling $194,500. Mr. AYRES. You may proceed with your statement, Admiral. Admiral BLOCH. As your committee knows, the Navy Department has been placed on a basis of cash withdrawals from the Treasury rather than upon an obligation basis as was the case previously; during the fiscal year 1934, although there had been appropriated and transferred approximately $323,000,000, only $281,310,000, has been allowed to the Navy Department for cash withdrawals, the difference between the two sums above either being impounded by reason of salary reductions and vacancy savings or reserved by the President. When this practice was put into effect, it was felt most severely by the Navy Department, as there were outstanding at the commencement of the year about $67,000,000 worth of contractual and other obligations which had to be liquidated from the cash expenditures permitted to the Navy for 1934, thus leaving the Navy in cash for its current expenses approximately $214,000,000 for the entire fiscal year. This contingency was met by permitting the Navy Department to contract for and have obligations at the expiration of 1934 at least equal to the amount brought forward into that year, and, if necessity required, additional carry-over of obligations would be permitted by the Director of the Bureau of the Budget. As a matter of fact, it is estimated that it will be necessary to carry forward into the fiscal year 1935 approximately $79,000,000 of obligations, as compared to the $67,000,000 brought forward into 1934. Mr. AYRES. Now, let us get the effect of the change clearly in our minds: Heretofore we have endeavored to appropriate not more than you would require to satisfy obligations incurred in the course of a fiscal year, except as to large projects, as to which it was evident that the work would run into succeeding fiscal years, when the appropriations were made upon the basis of funds estimated to be required for disbursement in the fiscal year for which we were appropriating. We have not, as a general rule, refused money to pay obligations which for one reason or another could not be paid within the fiscal year in which incurred. That is a rather difficult and, in some instances I should say, an impossible thing to foretell. However, under the new arrangement, you must attempt to forecast your actual disbursements and estimate accordingly. That is correct, is it not? Admiral BLOCK. On the 1st of July we are required to predict the obligations, lay down in writing, and present to the Director of the Bureau of the Budget a statement of every appropriation of the Navy Department, with sums available, and the amount that is to be obligated each month. After the first year of the administration of the present system no future difficulties need be anticipated. The result for the first year causes a curtailment of necessary work and an apparent saving to the Government of a large sum of money, which will be shown in a statement which I will make later on in the form of salary savings, vacancy savings, and reservations by the President. All unobligated parts of annual appropriations reserved by the President will revert to the Treasury and will represent a direct saving to the Government at the expense of curtailment of activities. Actually, if the Navy is successful in weathering the fiscal year 1934, there will be no difference whatever in the system, except that the Treasury Department now demands that they be advised several |