SUBCOMMITTEE ON DEFICIENCIES AND SUPPLEMENTALS

JOHN O. PASTORE, Rhode Island, Chairman

JOHN M. WITECK, Clerk to Subcommittee

SECOND SUPPLEMENTAL APPROPRIATION BILL

FOR 1965

WEDNESDAY, APRIL 7, 1965

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 1224, New Senate Office Building, Hon. John O. Pastore (chairman of the subcommittee) presiding.

Present: Senators Pastore, Holland, Hayden, Byrd, Young, Saltonstall, and Kuchel; also present: Senators Bartlett and Allott.

BUREAU OF THE BUDGET

STATEMENT OF ELMER B. STAATS, DEPUTY DIRECTOR OF THE BUREAU OF THE BUDGET

SUPPLEMENTAL APPROPRIATIONS FOR PAY INCREASES GRANTED IN 1965 Senator PASTORE. The subcommittee will please come to order. We shall begin consideration of H.R. 7091, the second supplemental appropriation bill for 1965, which was reported to the House on Friday, April 2, and passed by the House on April 6, which includes $579,691,188 in title III and $29,604,500 in title I, for increased pay

costs.

It would be helpful to the committee in the consideration of this bill to have testimony from the Bureau of the Budget with regard to the total pay costs, the amount of absorption, and additional amounts requested.

We are honored to have Mr. Staats here from the Bureau of the Budget this morning, and if there are no comments from my colleagues, I think, Mr. Staats, that you may proceed.

Mr. STAATS. Mr. Chairman, I have a brief statement, which I would be happy to read.

I appreciate the opportunity to appear before you in behalf of the proposed supplemental appropriations for the current year to cover the cost of pay increases granted employees of the Federal Government last year.

DETERMINATION OF SUPPLEMENTAL REQUIREMENTS

It is our understanding that the purpose of this hearing, as was the one 2 years ago on the same subject, is to acquaint you with the general policies and procedures followed in the determination of the supplemental requirements, and that, as you did 2 years ago, you will look to the individual agencies for such further information as may be

needed.

The supplemental appropriation requests now before you are required because of recently enacted laws and administrative actions taken pursuant to law which granted increases in pay as follows:

The act of August 12, 1964 (Public Law 88-422) increased the rates of basic pay for members of the uniformed services.

The act of August 14, 1964 (Public Law 88-426), increased the rates of basic compensation of certain civilian officers and employees in the Federal Government.

The act of September 2, 1964 (Public Law 88-575), increased the salaries for District of Columbia policemen and firemen, teachers, school officers, and other employees of the Board of Education of the District of Columbia.

The act of October 6, 1964 (Public Law 88-631), provided retroactive salary increases for certain civilian employees of the Federal Government and of the District of Columbia whose compensation is fixed by administrative action pursuant to law.

Actions by agency heads pursuant to law granted comparable pay increases to employees not covered by the above laws.

Actions by agency heads pursuant to law (5 U.S.C. 1082(7)) increased the pay of so-called wage-board employees in line with prevailing rates for comparable jobs in private industry.

TOTAL ESTIMATED PAY INCREASES AND RELATED COSTS

The total estimated cost in 1965 from Federal funds for all these pay increases is $969.8 million. This sum includes $58.9 million for related costs, such as the Government's retirement contribution, insurance, and employment taxes which are based on pay levels and increase as the pay levels increase.

BUDGET REQUEST AND ABSORPTIONS

To finance the $969.8 million cost, it is necessary to request 1965 supplementals of $618 million, with the remainder of the cost being absorbed within presently available funds.

Senator SALTONSTALL. May I respectully ask, will you please repeat that figure again, that total?

Mr. STAATS. $969 million.

DIRECT AND INDIRECT COSTS

Senator SALTONSTALL. How does that correspond with what we have on page 6 of this report? In other words, is it $910 million of direct pay and $58 million of indirect costs.

Mr. STAATS. Yes; the 58.9, Senator Saltonstall, includes those items that we call related or indirect costs which are always tied to any increase in pay, such as the Government's share of the contribution on retirement benefits, insurance, and employment taxes. Senator PASTORE. Which increase proportionately.

Mr. STAATS. Which always increase in proportion, as the base pay for employees goes up.

Senator PASTORE. Which is quite fundamental.

Mr. STAATS. What we have done here is to break out that total cost, $969.8 million, so as to show those indirect or related costs which are tied to the pay increases.

ARY

Senator SALTONSTALL. And you absorb all of that, except $30 million, plus $587 million, is that correct?

Mr. STAATS. That is right. The total supplemental is $618 million. I think these figures, Senator Saltonstall, come out a little clearer as I read on.

Senator SALTONSTALL. Thank

Senator PASTORE. As you reduce the $969.8 million to $618 million, automatically you reduce those contributions in proportion to the figure that you state is the final figure.

Mr. STAATS. That is correct.

CONTEMPLATED ABSORPTIONS CONTINGENT UPON CONGRESSIONAL ACTION

Congressional action in certain instances is necessary to achieve this much reduction. The actions required are primarily increases in limitations on administrative expenses and authorizing the transfer of funds between current appropriations. Assuming these congressional actions, it will be possible to absorb 42 percent of the cost of pay increases for military personnel and 35 percent of the cost of the increases for civilian workers.

Senator PASTORE. Before you go further, I think it would be very important for the record, to state what kind of scrutiny did you make in reaching this final figure.

Mr. STAATS. I have indicated that in my statement.

Senator PASTORE. All right, sir. Go ahead.

Mr. STAATS. I will be be happy to come back and add to it if you wish.

Senator PASTORE. All right.

Mr. STAATS. In accordance with previous practice, the requested. pay supplementals were transmitted to the Congress in two separate documents: House Document 80, covering appropriation items for which both program cost and pay increase cost supplementals are required (the pay costs in this document amounted to $30 million), and House Document 98, covering appropriation items for which only pay increase supplementals are required in 1965 (amounting to $588 million).

STATUTORY LIMITATIONS ON SUPPLEMENTAL REQUESTS

You may recall that in enacting Public Law 88-426, the Congress included a requirement that 10 percent of the cost of the title I increases for the executive branch is to be absorbed within funds appropriated for the fiscal year 1965 (title I of Public Law 88-426 granted pay increases to classified and postal employees). The law further limits the total of the supplemental appropriations authorized to be made to cover such costs to a total of $544 million, the amount carried in the 1965 budget for civilian pay increase cost.

BUDGET BUREAU REGULATORY BULLETIN

The requirements of the law were specifically called to the agencies' attention in Bureau of the Budget Bulletin No. 65-2, issued August 20, 1964. This bulletin prescribed the policy and procedure to be followed in the executive branch in the apportionment of the 1965 appropriations and in analyzing the need for additional funds and submitting supplemental estimates therefor.

DOUBLE REVIEW BY BUREAU EXAMINERS

The agency estimates were twice subjected to critical review by our examiners. In addition to the review of the requirements made in connection with the preparation of the 1966 budget, we undertook in January a more detailed and critical review of the agencies' formal submission of their proposals for supplemental appropriation requests. Thus the requests for additional appropriations contained in House Documents Nos. 80 and 98 have been carefully screened. We believe the recommendations of the President are fully justified and represent the best judgment of the requirements that could be made at the time the estimates were transmitted to the Congress, and we think the results of our review are impressive in view of the very substantial absorption which has been accomplished.

DETERMINATION OF TITLE I ABSORPTIONS

In most instances title I costs are being met along with the costs of other pay increases chargeable to the same appropriation. For this reason, it is not possible to identify separately how much of the title I costs are being absorbed within available funds. Therefore, in testing compliance with the law, it was necessary to make an assumption as to the amount of the absorption. We used the most conservative assumption possible; namely, that the cost of all other civilian pay increases were to be met completely from presently available funds before any of those funds could be applied to the absorption of title I costs. Using that assumption, $155 million or 24 percent of title I costs for the executive branch is being absorbed and slightly more than $500 million of the supplemental appropriations requested are for the purpose of meeting title I costs. It became quite clear then that the requirements of the law were fully satisfied.

EXPLANATORY TABLE

We have prepared a table which is attached to my statement, which shows the total pay increases of each agency, the amount of these costs which have been absorbed, both in terms of dollars and percentages, and the additional funds required.

Senator PASTORE. If there is no objection, we will have it included in the record at this point.

(The table referred to follows:)