"It necessarily follows that the expenditure of appropriations is not a mere ministerial function, but is a discretionary function that requires the exercise of sound judgment by the Executive Branch. "Enactment of the bill would *** be inconsistent with the President's constitutional obligations to see that all laws are faithfully executed; * AMENDMENT TO THE ANTIDEFICIENCY ACT PROPOSED BY THE CHAIRMAN OF Because of the intimate relationship between S. 3578 and the appropriations process, the Committee requested the views of Senator Carl Hayden, Chairman of the Senate Committee on Appropriations regarding the subject bill. He advised the Committee as follows: 66 * *It is my personal opinion that under the fundamental doctrine of separation of powers that the Executive Branch of the Government has the authority to incur obligations under obligational authority granted by the Congress and that under this same authority the Executive Branch does not have to incur obligations pursuant to every grant of obligational authority made by the Congress. Inasmuch as we are dealing with a 'Constitutional question' I personally question the desirability of this legislation." He proposed, however, that the Antideficiency Act be amended so as to require the Bureau of the Budget to give written notice to the Congress whenever appropriated funds are placed in budgetary reserve, stating in this connection that: **** I would like to point out that the Antideficiency Act, as amended, makes no provision for the Bureau of the Budget to notify the Congress when funds are placed in budgetary reserve. While I do not question the authority for the establishment of budgetary reserves, I do feel that once these reserves are established the Director of the Bureau of the Budget should give notice to the Congress in writing of-1. The purpose of the reserve; and 2, the effect it will have on the program and purpose for which the appropriation is made." In order to attain this objective, Senator Hayden suggested the following proposed amendment to the Antideficiency Act for the Committee's consideration: "Section 3679 (c) of the Revised Statutes, as amended (31 U.S.C. 665 (c) (2)) is hereby amended by adding at the end thereof a new sentence as follows: 'Whenever any such reserve is established, or the amount thereof increased or decreased, the officer designated in subsection (d) of this section to make apportionments or reapportionments of the appropriation from which the reserve is established shall immediately notify the Congress in writing of the purpose of the establishment of the reserve, or of the increase or decrease in the amount thereof, as the case may be, and the effect of such establishment, increase, or decrease upon the purposes for which the appropriation was made.'” In submitting this amendment, Senator Hayden wrote: "I hope your committee will consider the inclusion of such an amendment in any legislation that you may report to the Senate on this matter, or as a separate bill." RECOMMENDATIONS From the foregoing review of the impact of S. 3578 on existing law, the views of the Executive Branch departments and agencies, the constitutional problems which it appears to raise and the position of the Chairman of the Senate Committee on Appropriations, it would seem that this measure involves sufficient controversy to warrant the holding of public hearings if the Committee deems such action desirable. As an alternative, however, the Committee may wish to consider the desirability of reporting favorably Senator Hayden's proposed amendment as an amendment in the nature of a substitute for S. 3578. This action might be taken in executive session, without public hearings, since the views of affected departments and agencies are already available and no additional information is likely to result from such hearings. ELI E. NOBLEMAN, Professional Staff Member. 60-337-71-35 Exhibit 6 MARCH 24, 1967. Hon. GEORGE H. MAHON, Chairman, Committee on Appropriations, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: During Secretary McNamara's testimony on the Fiscal Year 1968 Budget before the Defense Subcommittee of the House Committee on Appropriations, the following request was made: "Mr. Rhodes. Mr. Chairman, on the record, I think it would be very helpful and useful if we could have an opinion by the Counsel of the Defense Department as to the interpretation which the Defense Department puts on permissive and mandatory appropriations at this point in the record." The nature of the appropriations process was discussed recently by the Attorney General in an opinion to the Secretary of Transportation, dated February 25, 1967. I believe the following quotation from that opinion is particularly relevant to the Subcommittee's request: "Although your inquiry is not directly concerned with an appropriation act, but rather with the effect of legislation authorizing actions ultimately leading to appropriations, it will be useful to consider first the effect of a congressional appropriation of money. The basic function of such legislation is to furnish the formal permission required by Article I, section 9, clause 7 of the Constitution for the withdrawal of funds from the Treasury. Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937). The courts have recognized that appropriation acts are of a fiscal and permissive nature and do not in themselves impose upon the Executive Branch an affirmative duty to expend the funds. Hukill v. United States, 16 C. Cl. 562, 565 (1880); Campagna v. United States, 26 C. C1 316, 317 (1891); Lovett v. United States, 104 C. Cl. 557, 583 (1945). affirmed on other grounds, 328 U.S. 303 (1946); McKay v. Central Electric Power Corporation, 223 F. 2d 623, 625 (C.A.D.C. 1955). "Congress, of course, is fully aware of the rule that an appropriation act in itself does not constitute a mandate to spend. The classic exposition of this characteristic of appropriations legislation may be found in the House Appropriations Committee report on the General Appropriation Bill, 1951, submitted by the late Chairman Clarance Cannon: RESPONSIBILITY OF THE EXECUTIVE BRANCH 'Economy neither begins nor ends in the Halls of Congress. The Congress *** decides the maximum amounts which must be appropriated for * various activities, and the annual appropriation bill provides the sums so determined by the Congress. 'Appropriation of a given amount for a particular activity constitutes only a ceiling upon the amount which should be expended for that activity. [It is the] responsibility [of every Government official] to so control and administer the activities under his jurisdiction as to expend as little as possible out of the funds appropriated.' H. Rept. 1797, 81st Cong., 2d Sess., p. 9. "Or as the then Senator Harry S. Truman observed in 1943: 'MR. TRUMAN. * * * When the Congress appropriates funds it gives the executive branch an authority to incur obligations. Certainly none of us hold that we give a mandate to expend the funds appropriated. We expect the funds to be used only where needed, and not in excess of the amount appropriated, to carry out some phase of law.' 89 Cong. Rec. 10362. "An appropriation act thus places an upper and not a lower limit on expenditures. The duty of the President to see that the laws are faithfully executed, under Article II, Section 3 of the Constitution, does not require that funds made available must be fully expended. This principle has received statutory recognition in the Anti-Deficiency Act, 31 U.S.C. 665(c), which authorizes the executive branch to effectuate savings of appropriated funds, and in 31 U.S.C. 701, which provides that unexpended appropriated funds shall revert to the Treasury. "Many factors must be weighed by the Executive in determining the extent to which funds should be expended. Consideration must be given not only to legislative authorizations and appropriations but also to such factors as the effect of the authorized expenditures on the national economy and their relation to other programs important to the national welfare." The Comptroller General also, in an opinion dated February 24, 1967, No. B-160891, independently arrived at the following conclusion which is quoted from his opinion: "The permanent provisions of law governing the Federal-Aid highway program are contained in title 23, United States Code. We find nothing in title 23 which specifically requires the Executive Branch to obligate in fiscal year 1967 all the Federal-Aid highway funds available for obligation during that fiscal year, if it is determined not to be in the best interest of the United States to do so, nor are we aware of such a requirement in any other law." (Emphasis added). I believe that a fair summary of each of these conclusions is that by its very nature the appropriations process is permissive rather than mandatory. I hope the foregoing will be of some assistance to the Committee. Hon. SAM J. ERVIN, Jr., Chairman, Subcommittee on Separation of Powers, PAUL C. WARNKE. Mr. SCOTT. Mr. Chairman, I wish to submit, for the record of your current Committee hearings on the Executive impoundment of appropriated funds, the following letter sent to me by the Dravo Corporation of Pittsburgh, Pennsylvania. The letter outlines the severe financial and related problems which this firm now faces as the result of an Executive decision to withhold funds otherwise allocated for work on a contract which the Dravo Corporation negotiated in good faith with the U.S. Army Corps of Engineers. I believe this situation serves as an excellent example of the problem with which your Committee is now dealing. Re: Wynoochee Dam, Contract DACW 67-70-C-0005. Washington, D.C. DRAVO CORP., February 15, 1971. DEAR SENATOR SCOTT: In 1969 Dravo Corporation entered into a contract with the Department of the Army, U.S. Corps of Engineers for the construction of Wynoochee Dam at Aberdeen, Washington, at a cost of $13,318,001. The Corps has allocated to this project through June 1971 an amount of $7,300,000. We have submitted progress payment estimates as of January 1, 1971 of $6,934,400, leaving a balance of $365,600 to continue the work for the remainder of the fiscal year, i.e. June 30, 1971. On the basis of testimony in 1970 by Dravo officials before both the House and Senate Appropriations Committees relative to underfunding of the project, the Congress added $1,900,000, which amount would barely see us through the fiscal year. At the direction of the Executive Department, these funds were placed in budgetary reserve. We have been advised by the Corps they will not be released until the beginning of the next fiscal year. On this basis, the amount of funds left ($365,600) will not permit continuation of the project beyond February, 1971. Under the payment clauses of our contract several options are open to us: 1. Suspension of the contract until funds are available; 2. Continue work and fund the project ourselves; 3. Stop work and give notice of intention to terminate after 30 days. None of these alternatives are satisfactory from our standpoint. In the matter of suspension, shut-down costs and start-up costs are for our own account and the government is only obligated to grant us a time extension. In the matter of continuing the work and funding the project at our own expense, this means borrowing money with no reimbursement by the government for interest costs. In the matter of termination of the contract, there is a legal question as to the interpretation of the contract clauses which the government lawyers are the first to admit has not heretofore been at issue and is uncertain as to their meaning. Termination means a later rebidding and these costs together with new start-up costs involve increased expenditures to both a contractor and the government. We entered into the contract with good faith and feel strongly that the government should not permit us to be stuck with costs not contemplated by either party for lack of funding. The remedy most easily arrived at would, of course, be the release of the budgetary reserve. In lieu thereof, a transfer of funds, sufficient to continue the project, from within the Department of the Army should be considered. I am sure you realize the burden we carry, but there are additional ones in the form of unemployment and uncertainty for the employees on the project and our suppliers of material. Should the project be suspended or terminated, it is our estimate that project costs would increase by approximately $1,000,000 and extend the project into late 1972, whereas it is presently scheduled for completion in early 1972. We would deeply appreciate anything you can do to help us in this dilemma. Sincerely yours, CLYDE H. SLEASE, Dravo Corp., Counsel and Assistant to the President. SECURITIES AND EXCHANGE COMMISSION, OFFICE OF THE CHAIRMAN, Washington, D.C., February 28, 1969. Hon. SAM J. ERVIN, Jr., Chairman, Subcommittee on Separation of Powers, Washington, D.C. DEAR SENATOR ERVIN: In response to your letter of February 5, 1969 regarding the withholding of appropriated funds from government agencies by direction of the President, the following information is submitted: 1. In fiscal 1951, a reserve of $150,000 was established as a result of the operation of Section 1214, Public Law 759, approved September 6, 1950. This Act is cited as the “General Appropriation Act, 1951." Section 1214 reads as follows: "Appropriations, reappropriations, contract authorizations and reauthorizations made by this Act for departments and agencies in the executive branch of the government shall, without impairing national defense, be reduced in the amount of not less than $550,000,000 through the apportionment procedure provided for in Section 1211 of this Act." All Commission programs were affected. 2. In fiscal 1968, a reserve of $125,000 was established pursuant to Public Law 90-218 approved December 18, 1967. This Act is cited as "Making Continuing Appropriations For The Fiscal Year 1968, And For Other Purposes." Title II deals with reductions in obligations and expenditures. All Commission programs were affected. 3. In fiscal 1969, a reserve of $199,000 has been established as a result of the operation of Section 201 of Public Law 90-364. This Act is cited as the "Revenue and Expenditure Control Act of 1968." All Commission programs are affected. During the years 1945 to date, except for the three instances cited above, the Commission's appropriated funds were available for use in fulfilling its statutory responsibilities. DEAR SENATOR ERVIN: This is in further reference to your request of February 5, 1969, for specified information pertaining to those instances since 1945 in which funds appropriated for the Small Business Administration have been withheld by the Bureau of the Budget. We understand that the exclusion set forth in category (1) of your letter is applicable to reserves that were established to obtain reductions of Governmentwide spending such as the type required in fiscal year 1968 by Public Law 90218 and in fiscal year 1969 by Public Law 90-364. Excluding reserves of the type mentioned above, other reserves have been established since this Agency was created in fiscal year 1954 only under category (3). "Instances in which reserves were established by the Bureau of the Budget under the Anti-Deficiency Act affecting a specific program or project." Reserves for savings as would be applicable for reporting under category (3) were established by the Bureau of the Budget in fiscal years 1960, 1961, and 1967. Such reserves covered funds available for "salaries and expenses" and were established in amounts mutually agreed to by SBA and the Bureau to recognize that actual workload was less than that projected in the budget estimates for the respective years. Taking into consideration the amount released for pay increase costs in 1961, actual savings in all three years exceeded the amounts reserved, as follows: The funds reserved were derived in part from annual direct appropriations to the salaries and expenses account for certain of our activities and in part from transfers to this account from our revolving funds, as authorized by the annual appropriation acts, to cover administrative expenses of the loan programs. At the end of the year, the portion of the unobligated balance in the account (including the reserve) as was allocated to the revolving funds was returned to such funds while the portion allocated to the direct appropriation lapsed. Since the reserves in total were tentative when established dependent upon actual workload as it eventually developed and the part thereof as was derived from the revolving funds was available for carryover for use in succeeding years, it was not appropriate to recommend recision language as is referred to in the pertinent part of the Anti-Deficiency Act. As stated above, that part of the unobligated balance derived from the annual direct appropriation and subject to recision merely lapsed at the end of the year. We trust the foregoing will be found satisfactory for the purposes of your request. If we may be of further assistance, please let us know. Sincerely, Hon. SAM J. ERVIN, Jr., HILARY SANDOVAL, JR., Administrator. DEPARTMENT OF STATE, Washington, D.C., April 30, 1969. Chairman, Subcommittee on Separation of Powers, DEAR MR. CHAIRMAN: This is in further response to your letter to the Secretary dated February 3, 1969 requesting information on instances since 1945 in which the Bureau of the Budget, in the name of the President or under the Anti-Deficiency Act, has impounded funds or established specific type reserves against Department of State appropriations. Since acknowledging your letter on February 18, 1969, we have reviewed all records reasonably available to identify any such cases. We were unable to review records prior to 1951. In a recent telephone conversation with your Chief Counsel, Mr. Lawrence M. Baskir, I indicated there was a possibility of only one instance since 1951 when the Bureau of the Budget withheld funds under any of the categories mentioned in your letter. The case involved a reserve of $6.1 million in fiscal year 1953, in the no-year appropriation, "Acquisition, Operation, and Maintenance of Buildings Abroad." However, further research |