Mr. Chairman and Members of the Committee: It is my pleasure to present to you the request for an appropriation to administer the public debt in fiscal year 1973. You have been accustomed for many years to having the request presented and justified by Mr. Merritt, who retired last May. I hope sincerely that we can continue to earn the cooperation and support the Committee consistently gave to him. The appropriation "Administering the Public Debt" provides funds for the Bureau of the Public Debt and the U. S. Savings Bonds Division. The latter is a separate organization directly responsible to the Secretary for promoting the sale of savings bonds. Representatives of the Division will appear later to justify their requirements, which are separately identified in the justification material. The Bureau of the Public Debt is responsible for the administrative functions arising from the Treasury's debt management activities. Those functions relate to security issues of the United States, or agencies thereof, and of wholly or partly-owned Government corporations. The Bureau maintains offices in Chicago, Illinois, and Parkersburg, West Virginia, as well as the headquarters office in Washington, D. C. The Federal Reserve Banks and Branches conduct public debt transactions as fiscal agents of the United States. Most banks and other financial institutions act as issuing and paying agents for the sale and redemption of savings type securities. It should be pointed out that of the fiscal 1973 request, only 31.3% is for actual operating expenses of the Bureau of the Public Debt. The Savings Bonds Division is asking for 12. 1% of the total, and the remaining 56.6% is for services rendered by the Federal Reserve Banks, as fiscal agents, by commercial banks and other financial institutions which redeem savings bonds, and by the U. S. Postal Service. A As the members of the Committee are well aware, the responsibilities of the Bureau continue to grow. We must be prepared to furnish whatever administrative support is needed to implement decisions arising from the management of a debt that was about $425 billion on December 31, 1971, and is expected to be well above that figure at the close of fiscal 1973. Despite the impact on our workload of the growth in the size and complexity of the debt, we are not asking for an increase in funds above the amount appropriated for the current year. For 1973 we are requesting $76,460,000 which is $1, 030, 000 less than the $77, 490, 000 which Congress appropriated for 1972. As you know, the President ordered a 5% reduction in personnel, which reduced the amount we were authorized to obligate by an additional $962, 000. Our request for 1973 is $68, 000 below the 1972 appropriation less this reduction in personal service funds. This net decrease of $68, 000 in our 1973 estimates is a combination of $1,100,000 in reductions offset in part by program and other increases of $1,032,000. Program increases amount to $1,025, 000 and consist of $721,000 to reimburse paying agents for an anticipated increase in savings bond and note redemptions; $100, 000 to print additional securities; $72,000 to reimburse the U. S. Postal Service for increased mailings; and $132,000 for 16 additional man-years to handle the workload growth. Other increases of $7,000 will be required to maintain current levels. The largest item of increase is the $721,000 for paying agent fees. This is based on an estimated volume of savings bond and note redemptions subject to fee about 4.7% above 1972. Under the terms of a long-standing agreement with paying agents, we are obliged to reimburse them at a fixed fee for each security they redeem. The $100,000 for additional securities directly reflects an estimated increase in printing requirements. The $72,000 to reimburse the Postal Service for additional mailings is based on the anticipated rise in the volume of savings bond mailings. No consideration has been given to projected postal rate increases. The cost of rate increases in 1972 was absorbed. The added cost of $132,000 for personnel, based on the need for 16 additional man-years, stems from projected workload increases. The justification for these additional positions will be explained in greater detail below. WORKLOAD In the development of budgetary requirements, the primary consideration is the projected workload. While we can't measure precisely the impact of the anticipated growth of $55 billion in debt in the next 18 months, we can look forward to a substantial expansion in all of the elements connected with issuance, servicing and retirement. Our principal workload is generated by the savings bond program. Current estimates indicate volume increases of 2.1 million pieces in sales and almost 4 million in redemptions in 1973 over 1972. More than 3.5 billion of these securities have been issued since 1935, and almost 558 million are now outstanding. Since we must be prepared to respond to an inquiry or claim for relief in connection with any bond that has been issued, the current issue and redemption transactions are not a full measure of activity. In the past 10 years there has been a 15% increase in the volume of correspondence received from bondowners. The variety and complexity of these cases increase in relation to the size of the file and the age of the securities. The E bonds sold during World War II, for example, are now between 27 and 31 years old and the problem of servicing requests from bondowners, heirs, and other interested parties becomes increasingly difficult. To cope with the savings bond workload increases we are asking for 9 additional man-years. The other major classification of securities consists of the Treasury bills, bonds and notes that are marketable. The number of outstanding securities of this type now exceeds 5 million. During the last six years interest payments on registered bonds and notes have gone up from 448, 000 to 527,000 per year, while transactions affecting the accounts with registered owners have increased from 191, 000 to 312,000. In four years the volume of Federal estate tax redemptions has increased 40%. The rise in line entries and other workload factors in the public debt accounting system has been substantial. However, we are not asking for any personnel increases to handle other Treasury securities or maintain the public debt accounts, despite the steady growth in workload. In recent years we have discussed in detail the need for increased funds to reimburse the Federal Reserve Banks for services performed as fiscal agents. This item of expense makes up about 29% of the total appropriation request. However, in spite of the fact that we anticipate a greater workload for the Banks in handling all types of public debt transactions in 1973, we are not asking for any increase in the amount required to reimburse them. This is due in part to our joint efforts to simplify and more closely coordinate our complementary procedures and operations. One of the devices by which we are seeking to reduce costs and increase efficiency is a program of on-site visitations to the Reserve Banks, supplemented by training courses conducted by Bureau personnel for mid-level Bank employees who perform public debt functions. Through these and other kinds of management improvements we are trying to absorb added work with no increase in reimbursable expense. AUTOMATION For several years we have anticipated the need to update our computer systems in Parkersburg. We deferred the acquisition of new equipment by renting an additional computer in January 1971 to augment the existing configuration in Parkersburg. However, we are planning to update the equipment in 1974. In anticipation of such a request in 1974, we are requesting 7 additional programmers in Parkersburg in 1973. This is necessary to insure that essential system and programming revisions are completed in advance of the conversion. POSITIONS To recapitulate our personnel requirements, the 1973 estimate reflects an increase of 16 man-years, of which we will need 9 to handle the added volume of issuing, servicing and retiring savings type securities, and 7 as programmers to prepare systems changes for the computer updating. PRODUCTIVITY In the 22 years from 1950 to 1971, the Bureau's staffing has decreased from 5,080 man-years to 1, 948 man-years. During this same period the annual volume of issues and retirements of securities increased from 158 million pieces to 260.6 million pieces. This represents a productivity increase of about 430%. This increase is attributable to a variety of management improvements. The most significant of these have stemmed from the expanded automation of operations and particularly in the imaginative use of computers. We are continuing our efforts to increase productivity through further automation and other improvements so that we can absorb more work with minimal additional funding. OFFICE MOVES The 1972 appropriation contains funds to permit the accomplishment of two major moves by Bureau offices. One move involved the Washington Office, which has had to vacate space it occupied in the Main Treasury Building and in the Bureau of Engraving |