CONTENTS Message from the President of the United States, transmitting Reorganiza- Doherty, William C., president, National Association of Letter Heselton, Hon. John W., a Representative in Congress from the State Hughes, Rowland R., Deputy Director, Bureau of the Budget- Markham, D. W., assistant general counsel, Air Transport Associa- Marvin, Langdon P., Jr., consultant to Senator John F. Kennedy of Ryan, Oswald, Chairman, Civil Aeronautics Board. Summerfield, Hon. Arthur E., Postmaster General Letters, statements, etc., submitted for the record by- Church, Hon. Marguerite Stitt, a Representative in Congress from the State of Illinois, and chairman, Special Subcommittee on Letter and memorandum from S. G. Tipton, general counsel, Air Transport Association of America. Letter from E. L. Fisher, Acting Comptroller General of the United States, to Mrs. Church, July 16, 1953. Letter from Jesse V. Horton, legislative representative, National Association of Postal Supervisors, to Government Operations Letter from Roger B. Doulens, Pan American World Airways System, to William F. McKenna, June 23, 1953. Letter from Thomas G. Walters, Government Employees' Council, to Mrs. Annabell Zue, June 10, 1953. Letter from Thomas G. Walters, Government Employees' Council, to Mrs. Church, June 10, 1953--- Hughes, Rowland R., Deputy Director, Bureau of the Budget: Mail payments to air carriers, fiscal year 1952, with estimated division between subsidy and compensation for transportation services___ Marvin, Langdon P., Jr., consultant to Senator John F. Kennedy Excerpt from House Report 1958, 80th Congress. Extract from opinion, May 20, 1953, from Legislative Counsel, House of Representatives (Allan H. Perley) to Congressman John J. Rooney, author of H. R. 4222, one of the companion bills to S. 1360 introduced by Senators Kennedy, Aiken, Clements, Cooper, Cordon, Douglas, Ferguson, Gillette, Hennings, Humphrey, Ives, Jackson, Johnston of South Car- olina, Kefauver, Kilgore, Langer, Lehman, Mansfield, May- Extracts from an opinion by James P. Radigan, Jr., American Law Division, Legislative Reference Serv- Letter to R. C. Atkinson, May 21, 1953 Page 41 38 Letters, statements, etc.-Continued Marvin, Langdon P., Jr., consultant-Continued Memorandum concerning the interpretation of "need" under Statement of Hon. Hubert H. Humphrey, a United States Senator Statement re Reorganization Plan No. 10 of 1953 "The Cost Standard" excerpt from House Report 3041, House minority report 2439, 82d Congress "Standards for Allocating Receipts and Expenditures" House committee report of 81st Congress- "Carriers eligible for subsidy," House committee Letter from R. L. Gilpatric, Department of the Air Force, to Congressman John W. Heselton, 49 REORGANIZATION PLAN NO. 10 OF 1953 (Payments to Air Carriers) FRIDAY, JULY 17, 1953 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON REORGANIZATION, COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D. C. The subcommittee met, pursuant to call, at 9: 15 a. m., in room 1501, New House Office Building, Hon. Marguerite Stitt Church (chairman of the subcommittee) presiding. Present: Representatives Marguerite Stitt Church, Mrs. Katherine St. George, John W. McCormack, and Jack B. Brooks. Mrs. CHURCH. The subcommittee will come to order, and I do want to thank Mrs. St. George and Mr. McCormack for stepping up the meeting three-quarters of an hour. We did want to hear the Postmaster General now. I think that I shall make the same request that I did the other day: That the President's message and the plan itself be inserted in the hearings at this point. (House Resolution 264 and the President's message and Reorganization Plan No. 10 are as follows:) [H. Res. 264, 83d Cong., 1st sess.] Resolved, That the House of Representatives does not favor the Reorganization Plan Numbered 10 transmitted to Congress by the President on June 1, 1953. [H. Doc. 160, 83d Cong., 1st sess.] REORGANIZATION PLAN NO. 10 OF 1953 MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING To the Congress of the United States: I transmit herewith Reorganization Plan No. 10 of 1953, prepared in accordance with the provisions of the Reorganization Act of 1949, as amended. The reorganization plan provides for the separate payment of airline subsidies, which now are merged with payments for the transportation of airmail. The purposes of the plan are to place responsibility for subsidy payment in the agency which determines the subsidies and to enable the Congress and the President to maintain effective review of the subsidy program. The plan accomplishes these objectives by transferring from the Postmaster General to the Civil Aeronautics Board that portion of the present airmail payment functions which relates to subsidy assistance. The reorganization plan will not alter the basic national policy of promoting the sound development of air transportation through Federal aid. Nor will the plan in itself change the aggregate amount of revenue for which any airline is 1 eligible. The policy of providing financial aid for airline development was adopted in the Civil Aeronautics Act of 1938, and reflects the broad national interest in securing a system of air-transport services adequate to the needs of defense, commerce, and the postal service. Federal aid provided under that act has contributed greatly to the rapid development of commercial air transportation during the past 15 years. Continued subsidy support will be required for some time to enable certain segments of the industry to achieve the full measure of growth required by the public interest. At present, airline subsidies are provided by means of mail-transportation rates established by the Civil Aeronautics Board and paid by the Post Office Department. In essence, the Civil Aeronautics Act provides that such mail rates may be set at a level sufficiently high to overcome deficits incurred by the airlines on their total operations, including passenger and freight traffic. Total mail payments by the Post Office Department thus include, not only a reasonable compensation for the service of transporting the mail, but also a subsidy element where required to support the general program of airline development. This method of furnishing subsidy restricts the opportunity for congressional and public review and substantially inflates the reported cost of the postal service. Under the reorganization plan the Civil Aeronautics Board will continue to determine the overall level of payments to be made to the airlines, and will do so in accordance with the existing policy standards of the Civil Aeronautics Act. However, the Post Office Department will pay only that portion which represents compensation for carrying the mail on the basis of fair and reasonable rates determined by the Board without regard to the need for Federal aid. The plan will transfer to the Board the responsibility for paying any amounts in excess of such compensation, this excess being the subsidy element of the aggregate Federal payment. In the interest of prompt effectuation, the plan contains an interim provision which authorizes the Board to establish without prior notice or hearing the initial rates to be paid by the Post Office Department, subject, however, to the right of the Board or any affected party to initiate a proceeding at any time for a hearing and a determination of a new rate. The Board has already made studies estimating the subsidy element contained in airmail payments, and for some time has been setting forth in connection with its mail-rate decisions a breakdown between the subsidy and compensatory elements of the overall rate. The plan will permit the Board to base the initial rates payable by the Post Office Department on the compensatory rates contained in these studies and decisions. By providing for a complete and formal separation of subsidy from compensation for the transportation of mail, the reorganization plan will clearly fix the fiscal responsibility for the subsidy program in the appropriate agency. It will assure the Congress and the public of continuing information on the cost of this program. It will give the Congress an opportunity to review and take any appropriate action with respect to the level of subsidy aid in the course of the regular appropriation process. It will also result in a more accurate presentation of the cost of the postal service, by removing from the budget of the Post Office Department a nonpostal expenditure currently estimated at nearly $50 million a year. The basic principle of airline subsidy separation was recommended in 1949 in the Commission on Organization of the Executive Branch of the Government. Legislation to accomplish separation has been under discussion for several years. Such legislation has generally gone beyond a simple transfer of the subsidy function, and has included provisions which would change existing substantive law. Some of these proposed substantive changes have been the subject of controversy, and have been responsible for the past delays in enacting legislation on this matter. The present reorganization plan provides an opportunity to accomplish immediately the important objective of transferring subsidy payment responsibility within the framework of existing statutory policy. In view of the general agreement on the principle of subsidy separation, I trust that this plan will have widespread support. At the same time, the immediate transfer of subsidy payment under this reorganization plan should not preclude the consideration by the Congress of legislation to effect refinements and modifications in the basic law in this field. One such change, for example, would be an amendment of the Civil Aeronautics "Act to provide specifically that compensatory rates for mail transportation should be based upon the cost of rendering mail service, plus a fair return. I understand that the Civil Aeronautics Board has been following this general policy in those cases where it has established compensatory mail rates. The reorganization plan will not affect its right to continue applying such a policy in the future. However, I believe it would be appropriate to establish the cost principle as a matter of definite legislative policy. After investigation, I have found and hereby declare that each reorganization included in the accompanying reorganization plan is necessary to accomplish one or more of the purposes set forth in section 2 (a) of the Reorganization Act of 1949, as amended. The reorganization plan, by providing a sounder basis for the administration and congressional review of the affected functions, should in the long run promote increased economy and effectiveness of the Federal expenditures concerned It is not practicable, however, to itemize in advance of actual experience the reductions of expenditures to be brought about by the taking effect of the reorganizations included in the reorganization plan. DWIGHT D. EISENHOWER. THE WHITE HOUSE, June 1, 1953. REORGANIZATION PLAN No. 10 OF 1953 (Prepared by the President and transmitted to the Senate and the House of Representatives in Congress assembled, June 1, 1953, pursuant to the provisions of the Reorganization Act of 1949, approved June 20, 1949, as amended) PAYMENTS TO AIR CARRIERS SECTION 1. Transfer of functions.-There are hereby transferred to the Civil Aeronautics Board (hereinafter referred to as the "Board") the functions of the Postmaster General with respect to paying to each air carrier so much of the compensation fixed and determined by the Board under section 406 of the Civil Aeronautics Act of 1938 (52 Stat. 998, as amended, 49 U. S. C. 486), as is in excess of the amount payable to such air carrier, under honest, economical, and efficient management for the transportation of mail by aircraft, the facilities used and useful therefor, and the services connected therewith at fair and reasonable rates fixed and determined by the Board in accordance with that section without regard to the following provision of subsection (b) thereof: "the need of each such air carrier for compensation for the transportation of mail sufficient to insure the performance of such service, and, together with all other revenue of the air carrier, to enable such air carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the postal service, and the national defense." SEC. 2. Interim provisions.-The Board may fix, without prior notice and hearing, the initial rates to be paid by the Postmaster General under this reorganization plan for mail-transportation services rendered on and after the date when the plan becomes effective. At any time thereafter the Board upon its own motion may, and upon the petition of the Postmaster General or the carrier concerned shall, institute new proceedings to fix and determine, after notice and hearing, the rates to be paid by the Postmaster General in accordance with section 1 of this reorganization plan, and the rates so fixed and determined shall supersede the initial rates from the date of the motion or petition. SEC. 3. Incidental transfers.-There shall be transferred from the Post Office Department to the Board so much of the personnel, property, records, and unexpended balances of appropriations, allocations, and other funds, employed, held, used, available, or to be made available in connection with the functions transferred by this reorganization plan as the Director of the Bureau of the Budget deems to be required for the performance of those functions. Such measures and dispositions as the Director of the Bureau of the Budget shall deem to be necessary in order to effectuate the transfers provided for in this section shall be carried out in such manner as he shall direct and by such agencies as he shall designate. SEC. 4. Effective date. The provisions of this reorganization plan shall take effect on the first day of the first calendar month following forty-five days after the date they would take effect under section 6 (a) of the Reorganization Act of 1949, as amended, in the absence of this section, and shall be applicable only with respect to services rendered on and after the date on which the reorganization plan takes effect under this section. Mrs. CHURCH. Mr. Summerfield, please. |