DEAR MR. CHAIRMAN: This is in further regard to Mr. Spilman's letter to you of February 7, 1969, acknowledging your letter to the Secretary of February 3, 1969. For the Secretary I am responding to your request for information on presidential or executive impoundment of funds.

A detailed analysis has been made of the instances in which reserves were established against funds appropriated to the Treasury Department bureaus and offices: the bureaus of Accounts, Customs, Public Debt, Mint, Engraving and Printing, the Internal Revenue Service, the United States Secret Service, the Office of the Treasurer of the United States, and the Office of the Secretary of the Treasury. The analysis has gone as far back as records are availableto and including fiscal year 1956. We regret that the records prior to this date have been destroyed under continuing records disposal procedures.

You letter requested information in four categories and our response is made accordingly :

1. Those instances in which reserves were established by the Bureau of the Budget in the name of the President affecting specific programs or projects but not including instances of general reductions of spending in a group of related projects or programs.

We found one instance that may be of this kind although it was associated with a policy of general retrenchment. In July 1966, $5 million of funds appropriated in fiscal years 1965 and 1966 for construction of a new Mint in Philadelphia were placed in reserve for obligations to be incurred in subsequent years-the funds being without fiscal year limitation. This action was in response to Presidential memoranda restricting travel and employment, eliminating and deferring construction and curtailing lower priority programs. The funds reserved had been intended to be obligated for procurement of specially designed equipment, for moving from the old Mint, for installations and for contingencies. While it appeared at the time the funds were impounded that completion of the Mint would be delayed thereby, subsequent strikes of construction workers, shortages of materials, etc., have proven to be the real factors which have postponed the completion date.

2. Instances in which reserves were established by the Bureau in the name of the President affecting a series of related projects by a fixed percentage. In fiscal year 1968 the Bureau of the Budget acted on the President's decision

to reduce expenditures by establishing a ceiling on expenditures for Treasury activities and required that reserves be established for savings. This requirement was translated by the Department into reserves for savings against all Treasury operating appropriations. The reserve action required of Treasury was a general one affecting those departments and agencies which had received appropriations early in fiscal year 1968. This early action was superseded by application of the limitations of P.L. 90-218. Under these limitations, which reduced the availability of the amounts included in the 1968 budget estimates of obligation by 2% for personnel compensation and benefits and 10% for other objects, previously established reserves of the Treasury Department were revised and continued in an amount of $19 million. These reserves were ultimately released by the Second Supplemental Appropriation Act, 1968 in order to minimize supplemental funds requirements resulting from P.L. 90-206 pay and postal rate increase costs.

In fiscal year 1967 reserves were established against the appropriations of all Treasury bureaus in furtherance of the President's objective of reducing expenditures by restricting travel, deferring construction and the filling of vacancies and making program cutbacks. The expenditure reductions were to assist in meeting Vietnam war costs and in combatting inflation. While fixed percentages of reduction were not used, a target for savings for the Department was established by Bureau of the Budget and actions were taken to the extent of $11.3 million program level reductions and $11.6 million expenditure reductions. The bulk of the reserves so established (except for construction funds) were ultimately released for application to the increased pay costs required by P.L. 89-504. The construction funds were made available in the next fiscal year. 3. Instances in which reserves were established by the Bureau of the Budget under the Anti-Deficiency Act affecting a specific program or project.

In the years under review, there were a number of instances in which Bureau of the Budget initiated specific reserves of appropriated funds. In some of these instances reserves were established for short periods and then released. All of these instances of funds impoundment reflected changes taking place in Treasury operations and did not result in involuntary curtailment of program activities by Bureau of the Budget. Thus, reserves for savings were established when recruiting efforts were unsuccessful in filling authorized positions, when workloads were less than estimated in the budget, when re-evaluation of needs reduced the requirements for equipment or space, when savings were made in processing costs, when services planned to be contracted for were able to be accomplished in-house by regular staff, when functions were discontinued such as discontinuance of United States currency in favor of Federal Reserve Notes in fiscal year 1964 and the use of tobacco product excise stamps was discontinued in fiscal year 1960.

These funds reserving actions did not restrict the performance of budgeted programs. Dollar amounts of reserves of this type were usually small.

4. Instances in which reserves were established by the Bureau under the Anti-Deficiency Act reducing spending in a series of related programs or projects by a fixed percentage.

The only situation we have had which at all fits this category is that of the reserves established in fiscal year 1969 by Bureau of the Budget. However, the requirements for impounding funds have stemmed directly from the Congressionally-initiated requirements of P.L. 90-364. This law provided for reductions of expenditures and obligations, limitations on filling vacancies in permanent positions and limitations on temporary employment.

The reserves established have been to hold savings generated in operating appropriations with the intent of requesting Congressional approval for their application to pay increase costs of P.L. 90-206.

In the period of this review we have found no instances of rescision of appropriations other than four instances in fiscal year 1967 and fiscal year 1958 of transfers between Treasury appropriations to meet pay increase or other. costs under authority of the language of a supplemental appropriation. We hope that you will find this information responsive to your inquiry. Sincerely yours,

ERNEST C. Betts, Jr., Deputy Assistant Secretary for Administration.

60-337-71- -36

Hon. SAM J. ERVIN, Jr.,

OFFICE OF THE SECRETARY OF TRANSPORTATION,
Washington, D.C., April 28, 1969.

Chairman, Subcommittee on Separation of Powers,
Committee on the Judiciary,

U.S. Senate,

Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your letters of February 5 and March 13 requesting information relating to instances since 1945 in which funds appropriated to Department programs have been impounded or deferred by order of the Bureau of the Budget or the President.

Although we did not become a Department until April 1967, we asked those administrations that existed as separate entities before the Department was formed to search the records that are still available. The National Transportation Safety Board was advised that any reportable items pertaining to those activities previously in the Civil Aeronautics Board will be included in the CAB report, if applicable. The Federal Aviation Administration, the Federal Railroad Administration, the St. Lawrence Seaway Development Corporation and the Urban Mass Transportation Administration had no reportable items. In addition to the basic data requested and the history of the funding of the Highway Trust Fund since 1966, which is enclosed, you asked for the following documents which were submitted to the joint hearings of the Committees on Public Works in February 1967:

(1) Memorandum from Acting Attorney General Clark to Secretary of Transportation Boyd on the legality of the November 1966 order to "freeze" funds of the Highway Trust Fund;

(2) The November 1966 order of Secretary of Transportation Boyd (Note: This order was issued by Rex M. Whitton, Federal Highway Administrator at that time); and

(3) Document from Director of the Bureau of the Budget Shultz listing "150" steps taken between June 1966 and February 1967 to defer or postpone certain obligations, of which the Highway Fund deferment was one.

Copies of the first two documents were available and are enclosed. We do not have a copy of Director Shultz's document and suggest you request a copy from the Bureau of the Budget.

Enclosed are those instances that appear to meet the criteria established in your letter of February 5. Our records do not make a distinction between Bureau of the Budget and Presidential actions on placing reserves in the various appropriations, so we have combined the first two categories. We have no record of any reserves established by the Bureau of the Budget under the Anti-Deficiency Act.

Your request specifically asked for FY 1969 appropriation rescission data. The only rescission in FY 1969 for the Department of Transportation was $30,000,000 from Federal Aviation Administration's Civil Supersonic Aircraft Development appropriation. However, this rescission was not the result of "the withholding of appropriated funds from government agencies by direction of the President" but was rescinded by Congress as part of the Department of Transportation Appropriation Act of 1969, Public Law 90-464 (82 STAT. 654). Based on the criteria established in your letter of February 5, we have not included funds put into reserves that fall into the following categories:

(1) Funds put into reserve in compliance with Congressional directives, i.e., Public Laws 90-218 and 90-364,

(2) Amounts placed in reserve to reflect savings achieved through improved management techniques, and

(3) Amounts placed in reserve for subsequent years due to late passage of legislation, delays in construction, delays in procurement, etc.

We trust that the data contained herein is responsive to your request. Inasmuch as the Department is only two years old, and many of the functions and activities were parts of other Departments and Agencies, we have some difficulties in locating records. If you have any additional questions, please contact the Director of Budget, Mr. Robert G. Prestemon.

Sincerely,

CHARLES D. BAKER.

EXHIBIT 1

DEPARTMENT OF TRANSPORTATION, DATA REGARDING APPROPRIATIONS, APPORTIONMENTS, RESERVES, AND

RESCISSIONS

(For Senator Sam Ervin, Jr., Chairman, Subcommittee on Separation of Powers)

69-20X8102(05)-Federal Aid Highways, 818, 000, 000 Amount reserved in recognition of the need Trust Fund.

for reducing nonmilitary Federal expenditures as a contribution to the Vietnam effort and the resultant program to reduce inflationary pressures.

578,000,000 Amount reserved for control of inflationary pressures.

EXHIBIT 2

DEPARTMENT OF TRANSPORTATION
FEDERAL HIGHWAY ADMINISTRATION

FEDERAL-AID HIGHWAYS

HISTORY OF FUNDING PROGRAM
FROM NOVEMBER 1966 TO DATE

In November 1966, the President directed a deferral of obligations for construction programs including the Federal-aid Highway program in recognition of the need for reducing non-military Federal expenditures as a contribution to the Vietnam effort and to reduce inflationary pressures. Since then successive releases of those funds were made in the following amounts and on the following dates: $750 million on January 1, 1967, $175 million on February 28, 1967, $1,100 million on April 1, 1967, and $515 million on April 10, 1967. This released all funds authorized through the 1968 apportionment except $2,089 million. On July 1, 1967 $1,614 million was released. As of the start of fiscal year 1968, $475 milion was unreleased.

In January 1968 the national program for control of inflationary pressures required a reduction of $600 million from the projected level of obligations intended to have been incurred during the calendar year 1968.

The $600 million figure was to be absorbed in the amount of $350 million during the first half of the 1968 calendar year and $250 million in the second half.

Accordingly, each State was limited to 95% of the amount obligated during calendar year 1967 or a total of $4,115.

In order to reduce $200 million in fiscal year 1969 expenditures under the Revenue and Expenditure Control Act of 1969, obligations were suspended on September 7, 1968 until December 1968. The States were allowed to obligate $100 million in December 1968 and to obligate $600 million for each succeeding month in fiscal year 1969 to bring the total obligations to the original estimate of $4,769 million.

EXHIBIT 3

OPINION OF THE ATTORNEY GENERAL OF THE UNITED STATES

FEDERAL-AID HIGHWAY ACT OF 1956-POWER OF

PRESIDENT TO IMPOUND FUNDS

Appropriation acts are of a fiscal and permissive nature. They authorize but do not compel the executive branch to expend funds.

Under the Federal-Aid Highway Act of 1956 (June 29, 1956, c. 462, 70 Stat. 378, as amended, 23 U.S.C. 101 note), the States have no inchoate right to funds apportioned to them prior to the actual approval of a project by the Secretary of Transportation.

The hortatory declaration of congressional policy set forth in 23 U.S.C. 101(b) does not constitute a mandate to approve all qualifying projects for which funds are available.

The highway taxes imposed under the Highway Revenue Act of 1956 (June 29, 1956, c. 462, 70 Stat. 387, 397) are not paid directly into the Highway Trust Fund, and the assets in that fund are neither directly nor automatically available for the payment of Federal contributions to the States.

The President has the power to impound Federal-aid highway funds after they have been apportioned to the States but before they have become obligated as the result of the approval of a specific qualifying project.

THE SECRETARY OF TRANSPORTATION.

FEBRUARY 25, 1967.

DEAR MR. SECRETARY: This is in reply to your letter of February 21, 1967, requesting my opinion as to the legality of a reduction in the amount of Federal-aid highway funds which may be obligated during the Fiscal Year ending June 30, 1967.1

The facts underlying your inquiry are as follows: President Johnson's message to Congress of September 8, 1966, Transmitting Proposals for Measures for Curbing Inflation and Preserving our National Economy, announced that a reduction or deferral of lower priority Federal expenditures by approximately $3 billion was required in order to assure the continuing health and strength of our economy (H. Doc. 492, 89th Cong., 2d sess., pp. 1, 4). Pursuant to this mandate the Director of the Bureau of the Budget by letter dated November 7, 1966, advised you, in your then capacity of Under Secretary of Commerce for Transportation, that the Federal-aid highway program would have to bear a fair and feasible share of the deferrals.

In line with subsequent discussions with and instructions from the Bureau of the Budget, the Federal Highway Administrator advised his division and regional engineers on November 23, 1966, that the Federal-aid highway program was being limited to $3.3 billion in total project obligations during Fiscal Year 1967. The instructions indicated that the limitation was in recognition of the need for reducing non-military Federal expenditures in order to curb inflationary pressures.

Prior to this action it was anticipated that $4 billion would be made available for obligation during Fiscal Year 1967. The effect of the action is to defer to fiscal years subsequent to fiscal 1967 the obligation of funds in excess of $3.3 billion for Federal-aid highway projects. The reduction of funds was limited to the approval of future projects and did not affect the availability of funds for projects which already had been approved and which, pursuant to 23 U.S.C. 106 (a), constitute contractual obligations of the United States.

An understanding of the legal problems raised by your inquiry will be facilitated by an outline of the pertinent provisions of the Federal-aid highway program. The program involves successive, and distinct, stages of authorizations, apportionments, programs, projects and appropriations.

The basic authorizations for appropriations for the Interstate Highway system relating to the 15-year period ending with Fiscal Year 1972 may be

1 Although the Department of Commerce is still technically responsible for the administration of the Federal-aid highway program, 23 U.S.C. 101, these functions are in the process of being transferred to the Department of Transportation pursuant to section 6(a)(1) (A)-(G) of the Department of Transportation Act. October 16, 1966. P.L. 89-670, 80 Stat. 931, 937.

Vol. 42, Op. No. 32.