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Mr. UMSTEAD. Mr. Secretary, have you or other officials of the Navy Department made any effort to take up with the Naval Affairs Committee of the House the desirability of changing existing laws, which would give you the latitude you need to effect economies in the disposition of materials such as you mention!

Mr. Edison. I have not, sir, except that I have taken the first step, which is merely to find out what these laws are; and that is all this file is.

Mr. UMSTEAD. Most of the legislation affecting the Navy Department is sponsored by the Department. Therefore there must have been, at the time the restrictive laws referred to by you were passed, some reason for those statutes. It seems to me that it would be a fine thing, now that you have compiled a list of the existing statutes which affect the Navy Department, to present that list to the legislative committee with some recommendations from the Department. Conditions

may have changed since the time some of those acts were passed, and the reasons for their passage may no longer exist; and yet, no doubt, from your statement, they have continued to prove restrictive and detrimental.

Mr. Edison. That was exactly what I had intended to do with this list. First I wanted to get a list of laws that govern the actions of the Navy Department; second, I wanted to make a study of those laws to see whether some of them were no longer desirable or necessary; in other words, some old law that had been passed, just as you say, for some special circumstance that no longer exists, but which still blocks efficiency in handling some of the work of the Navy. And then I wanted to take that up with the proper people in Congress to see if some action could not be taken to give us a little more elbow room.

Mr. UMSTEAD. Of course, the establishment of a routine from year to year in the Navy Department regarding its business affairs may or may not work for efficiency. For instance, restrictions such as you have mentioned illustrate that some factors in the established order of things are expensive, and necessarily so, and I think an establish: ment spending as much money as the Navy Department owes a duty to the Congress and to the country to make every effort possible to operate in such a way as to save all the money it can save. I am sure that is the desire of you gentlemen in the Navy, but, at the same time, I think sometimes that you move toward that objective rather slowly.

Mr. Edison. The bigger the body, the slower it moves, sir.

Mr. Thom. When it comes to the disposal of an old ship, it would seem to me that the policy that ought to be followed would be something like this: You would get bids on the whole ship, and then also invite bids on parts of the ship; the sum which is the larger is the sum which you would accept.

Mr. Edison. Ånd we should be permitted to keep some of it as strategic material. Now we cannot do that.

Mr. UMSTEAD. Is there any further statement which you desire to make, Mr. Secretary?

Mr. Edison. I think not, sir, at this time.

Mr. U'MSTEAD. We thank you very much, and we are glad to have you with us this morning.

WEDNESDAY, DECEMBER 8, 1937.

BUDGET ESTIMATES FOR 1939

STATEMENTS OF REAR ADMIRAL H. E. KIMMEL, BUDGET OFFICER,

AND CAPT. F. W. ROCKWELL, ASSISTANT BUDGET OFFICER

POLICY AND METHOD OF PREPARATION OF THE ANNUAL BUDGET IN THE

XAVY DEPARTMENT

Mr. UMSTEAD. We shall be glad to hear now from Admiral Kimmel, the Budget Officer of the Navy Department.

Admiral KIMMEL. Mr. Chairman, I have a prepared statement which I will read. The initial step in the preparation of the annual budget of the Navy Department is the Estimate of the Situation, prepared annually by the Chief of Naval Operations. The decisions made as a result of this estimate, when approved by the Secretary of the Navy, were promulgated to all the bureaus and offices of the Navy Department and served as a basis upon which the plans and policies were prepared by the various agencies charged with their preparation. These plans and policies, when approved by the Secretary of the Navy, were issued to the bureaus and offices of the Navy Department and constituted a directive to all Navy Department agencies in the preparation of their money estimates. "The plans and policies include the operating force plan, the fleet employment plan, the personnel plans for the Navy and Marine Corps, the proposed building program, the base development program, the district craft program, the naval aeronautical organization, the air operating policy, and the material improvement plan for vessels.

Projects not in conformity with the decisions of the estimate of the situation may not be included in the plans nor in the money estimates without reference to the Chief of Naval Operations and the Secretary of the Navy.

The bureaus and offices of the Navy Department submitted their preliminary estimates based upon the aforementioned plans and policies.

ESTIMATES FOR 1939

The preliminary estimates for 1939 as submitted by the bureaus and offices of the Navy Department totalled $713,743,273. After extensive hearings in the Department and a thorough examination of each item, this original amount was reduced to $632,208,336. The Bureau of the Budget, after further hearings, and in line with the fiscal program of the President, has set up an estimate of $565,929,461 to maintain the Naval Establishment for the fiscal year 1939. There are many highly desirable, if not essential, items which have been omitted and which must be provided for in future estimates.

Mr. L'MSTEAD. Admiral, heretofore the annual cost of the Treaty Navy has been submitted to us as $584,146,641. It is no doubt true that increased material and labor costs have changed that figure to some extent, but hardly to the extent of the difference between the top figure estimated by the Department heretofore, and the sum of $32.208,336 submitted by the Department to the Budget this year,

which difference is, roundly, $48,000,000. How do you account for that?

Admiral KIMMEL. In the first place, sir, that figure which was submitted by Admiral Standley 3 years ago was an average figure. · Mr. UMSTEAD. Admiral, pardon me just a moment. The first figure submitted was $550,000,000.

Admiral KIMMEL. That is right. · Mr. UMSTEAD. That it was admitted by all of the officials of the Navy Department that an error of $29,000,000 was made.

Admiral KIMMEL. In assembling the estimate.
Mr. UMSTEAD. In assembling the estimate.
Admiral KIMMEL. That is right.

Mr. UMSTEAD. And, of course, since that time new leave and sick laws have been passed ?

Admiral KIMMEL. That is right.
Mr. UMSTEAD. Which justify adding an additional amount.

Admiral KIMMEL. The $584,000,000 was a flat figure, a correction to the estimate made by Admiral Standley, which was just a plain correction. The thing was wrong without any change in law or without any change in the purchasing value of the dollar, but the main point, and what I started out to say was that the $584,000,000 figure, at the time it was prepared, purported to be an average figure, and in an average figure you are going to run over or under it a little bit. You are going to change that average figure with the purchasing power of the dollar. · Mr. UMSTEAD. But that average figure was predicated upon a treaty-strength navy?

Admiral KIMMEL. That is right.
Mr. UMSTEAD. Toward which we are still building?
· Admiral KIMMEL. Yes, sir; that is right,

Mr. UMSTEAD. And beyond which, as I understand, the present estimates are not designed to go ?

Admiral KIMMEL. That is right, except that the strength of the treaty Navy as presented by Admiral Standley has been increased by the escalator clause invoked by Great Britain and Japan which have resulted in an increase in allowances of 20,270 tons of light cruisers, 40,000 tons of destroyers and 15,598 tons of submarines. Of course, if you get down to the $632,000,000, we had some money in there for strategic materials, which was never included in the original estimates, $3,000,000, and we had $15,000,000 for the naval supply account fund which was never included in the original estimate which was brought up here. Those were extraordinary expenses that have been injected by necessity, and for good and sufficient reasons into the estimates that were submitted. Ship building, Public Works, and plane construction, were some $30,000,000 in ex cess of Admiral Standley's estimate. I think if I had a comparison in front of you I could show you very quickly. Unfortunately I do not have that with me. If you turn to page 41, you can see where most of it went. We have laid out there the increases. Does that clarify it any, sir?

Mr. UMSTEAD. That is sufficient for the present, Admiral, unless you have some further statement you desire to make about it in addition to the statement to which you refer.

Admiral KIMMEL. I have nothing further.

DISTRIBUTION OF ESTIMATE

Mr. UMSTEAD. You may proceed, then, with your statement.

Admiral KIMMEL. The total 1939 estimate as submitted to your committee is $565,929,461. This is an increase of $1,933,102 over that submitted to the committee for the fiscal year 1938 and an increase of $37,463,003 over the 1938 appropriations. This increase is for the purposes shown in the following tabulation. (The tabulation referred to is as follows:)

[graphic]

A. Naval and Marine Corps personnel including Reserve ac

tivities... B. Operation of the fleet. C. Repairs to the fleet. D. Miscellaneous operating charges. E Maintenance and operation of shore stations F. Additions and improvements to shore stations G. Experimental and tests. 1. Training, education, and welfare. I Fleet improvements. 1. Yard and district craft K. Additions and improvements, Marine Corps L. Replacement of naval aircraft. M. Replacement of naval vessels. N. Strategic and critical materials 0. Replenishment of naval supply account fund.

Total... Trust accounts.

Grand total.

$10, 247, 259

2, 472, 690 2,983, 173

529, 037

774, 064 5,882, 074 -778,000

41, 156 4, 281, 800

213, 400

212, 000 --7,048, 000

13, 700,000 -3,000,000

7,000,000

ADDITIONAL SHIPS AND PLANES FOR 1939

Admiral KIMMEL. Sixteen more ships will be operated in 1939 than in 1938. · Old ships will be replaced by ships of greater tonnage, increased horsepower, more offensive armament, and better ability to withstand damage. The total tonnage increase is some 55,000 tons, the total increase in horsepower is about a million. The ships to be operated in 1938 and those to be operated in 1939, with tonnage and personnel tables, are listed in the confidential supplement attached hereto.

One hundred and seventeen more airplanes, 112 regular Navy and 5 Reserve planes will be operated in 1939 than in 1938. These new planes have greater horsepower, weight, size, and complexity, and their offensive power and radius of action are much greater than for the ones they replace. While a large proportion of these new planes will be delivered during 1938, the effect, in increased cost of operation and overhaul, will be felt more in 1939 than in 1938. This is because a large proportion of those delivered in 1938, since they will be received throughout the year, will not be operated for the entire year, and also because their overhaul will not become necessary until 1939 and later.

The planes to be operated in 1938 and those to be operated in 1939, with type and personnel tables, are listed in the confidential supplement which we will give you.

PERSONNEL INCREASE

To man the ships and planes and to increase the strength of the Fleet Marine Force, the estimates provide for an average of 107,785 enlisted men, Navy, an increase from 105,000 at the beginning of 1939 to 110,570 men at the end of the year; for an average of 17,500 enlisted marines, an increase from 17,000 men at the beginning of 1939 to 18,000 men at the end of the year; for an increase of 241 officers, Navy, and 20 officers, Marine Corps; for increases in the officer and enlisted retired lists of the Navy and Marine Corps.

Mr. UMSTEAD. Admiral, I believe it has been testified before by the officials of the Navy Department that when and if the Navy has been built to treaty strength; the enlisted personnel at that time will be 111,000 men?

Admiral KIMMEL. That was testified to by Admiral Standley. Mr. UMSTEAD. And that that number would be required in 1941. If you are given the enlisted personnel requested in these estimates, you will then be short of the maximum number of 111,000 by only 430 men.

Admiral KIMMEL. That is right.
Mr. UMSTEAD. During 1939 rather than 1941 ?
Admiral KIMMEL. That is right.

Mr. UMSTEAD. What explanation have you to make for so nearly approaching the maximum number 3 years ahead of time.

Admiral KIMMEL. I think probably the estimate of 111,000 men is too low. I think, however, that the best people to answer that question are Admiral Leahy and Admiral Andrews when they come up.

Mr. UMSTEAD. All right, sir; you may proceed.

INCREASE IN OPERATION COST OF THE FLEET

Admiral KIMMEL. There has been a marked increase in material costs—to cite what is probably the worst example, the cost of aviation gasoline has risen from $0.0809 per gallon in 1936 to $0.1475 on July 1, 1937. Generally speaking, the material costs are approximately 15 percent greater at the present time than they were a year ago. Additional consumable supplies of all descriptions are required for the increased numbers and increased size of ships and planes. Increased ordnance supplies for target practice and fuel for the fleet are two examples. No allowance in the estimates has been made for any increase in 1939 over present prices.

Mr. UMSTEAD. Admiral, what is the cause of the tremendous increase in the price of aviation gasoline?

Admiral KIMMEL. I am unable to answer that. I think you should get the details from someone else.

Mr. UMSTEAD. You would prefer to get that information from the proper bureau ?

Admiral KIMMEL. Yes; I suggest you get that information from those who have it at their fingertips.

Mr. UMSTEAD. All right.

Admiral KIMMEL. The need for replacement of yard and district craft continues. The funds appropriated in 1938 were less than required to carry out an approved continuing plan. The sums requested in 1939 have been reduced to the minimum considered essen

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