tioned "Program Reductions and Terminations" in the President's 1974 budget-beginning on page 47. Through a number of management actions that improve cash flow without affecting program operating levels, it is estimated that $6.5 billion in program reductions and terminations are needed to attain the spending level of $250 billion in this fiscal year. This reduction includes $2.3 billion already approved by the Congress in the limitation it placed on grants for social services under public assistance programs in the act of October 20, 1972-Public Law 92-512-General Revenue Sharing Act.

It is against this background that we will be reporting in a few days the information on "impoundments" called for by the Federal Impoundment and Information Act-title IV of Public Law 92–599. To the extent that items within the $6.5 billion of reductions previously referred to are reserved or "impounded," they will be included in the forthcoming report. This report will be submitted on or before February 10, the date established in House Joint Resolution 1. The compilation of the report--as well as the legally required preparation of the budget for next year, which has now just been sent to you-is a complex and time-consuming task, and our objective is to present a full and fair disclosure of the actions we have taken in the way of reserving funds.

You will find that many of the reserves to be reported are for purposes of routine financial management, such as those established pending the development of an organization to administer a new activity, or pending the development of plans, designs, and specifications for construction or procurement purposes. These cases simply involve an executive function of determining how the statutes may be most efficiently, economically, and effectively carried out. Other reserves are explicitly required by statute, such as Agriculture funds for fire ant control which are reserved for matching purposes for States which may come into the program.

All of the reserves which will be reported are reflected in the system of apportionments established in compliance with the so-called Antideficiency Act (31 U.S.C. 655). Some have been established under the explicit authority of that act: viz, "to provide for contingencies, or to effect savings whenever savings are made possible by or through changes in requirements, greater efficiency of operations, or other developments subsequent to the date on which such appropriation was made available." Reserves which may be required or authorized by other statutes will also be reflected in that apportionment system and reported accordingly.

Although "impoundment" or reserving of funds has been a practice which began at least as early as the administration of President Thomas Jefferson, it is subject to much misunderstanding. The authority for some reserves or "impoundments" in the past has been derived from the President's constitutional authority in the area of foreign affairs. his role as Commander in Chief, and his constitutional duty to "take care that the laws be faithfully executed." The position of the executive branch is that upon consideration of all the applicable historical precedents, facts, and statutes-including appropriation acts, past statutory spending ceilings, the limit on the public debt, and the Antideficiency Act-action in reserving funds from time to time is fully consistent with the President's constitutional duties.

The total of all funds held in reserve at the end of last June was $10.6 billion. This is exactly the same as the total at the end of June 1967. But the 1967 figure was 6.7 percent of all budgetary outlays in that year, while the 1972 reserves were only 4.6 percent of 1972 outlays. In fact, the June 1972 percentage was the smallest in 8 years. Over most of the last decade, a range in the neighborhood of 6 percent has been normal.

We also appreciate the opportunity to express our views on S. 373, a bill "to insure the separation of Federal powers and to protect the legislative function by requiring the President to notify the Congress whenever he impounds funds, or authorizes the impounding of funds, and to provide a procedure under which the Senate and House of Representatives may approve the President's action or require the President to cease such action." All of the information on impoundments which section 1 of S. 373 requires to be reported by special message from the President to the Senate and House of Representatives is already required to be reported to the Congress by the Federal Impoundment and Information Act-Public Law 92-599. This statute also requires the reports to be made to the Comptroller General and to be published in the Federal Register, as would be provided by S. 373. Apart from this unnecessary duplication of the reporting requirements of present law, S. 373 would fundamentally alter the longestablished relationships between the legislative and executive branches of the Government, and would constitute a serious infringement upon the executive's responsibility to "execute" the laws enacted by the Congress. The establishment of reserves, within appropriations, and their release, is an action of an executive nature, fully consistent with the President's constitutional duty to "take care that the laws be faithfully executed."

As we see it, the procedures prescribed by S. 373 would substitute financial chaos for financial management. Considerable effort has been expended by the Congress and the executive branch for over a century to develop effective financial management in the government. The Antideficiency Act is an important product of this effort. Yet the definition of "impoundment" in section 3. along with the other provisions of S. 373, are so broad that the bill would render that act meaningless and would destroy the progress made over the years in financial management and control. The practical effect of this bill would be to free all appropriated funds for immediate spending without regard to considerations of commonsense efficiency, economy, and effectiveness.

Thank you, Mr. Chairman.

Senator CHILES. Senator Percy, I recognize you.

Senator PERCY. I want to thank my colleagues. I am going to the Foreign Relations Committee with my colleagues, to greet Mr. Heath from Great Britain, and I will be very brief.

Mr. Ash, I hope you always will look forward to testifying in the Congress and I assure you that this committee will always provide you with a courteous reception, but also we have many areas in this twilight zone that we need help and clarification on.

I was very much interested when the housing funds were impounded and called immediately the chairman and the ranking minority member of the Banking, Housing and Urban Affairs Committee.

I was rather shocked to find that Senator Tower had not been consulted. He has worked for years on that committee and taken action at the executive level which would go right to the heart of the work of the committee and Congress that goes over a period of years, seemed to me rather abrupt, and I think it made them feel it was difficult to be put in a position not to be able to explain adequately the program the administration is on. Do you think it would avoid some the problems of confrontation and unnecessary ruffled feelings between the executive and legislative branch if when the national interest in the judgment of the executive branch seems to require impounding of funds and changing of programs that at least some consultation, if it is only 24 hours or 5 hours or an hour, some prior consultation to picking up a newspaper and reading about it would help avoid some of the problems we now are confronted with?

Mr. Ásн. As Senator Muskie observed earlier, I haven't yet learned everything about everything in this whole business and I don't know the particulars of what may have transpired leading up to the actions that have now been taken over the last month or two.

I do know and I have been a recent part of a number of consulting activities with Members of the Congress, and I know many subjects have come up which certainly added to my own experience, so there has been considerable consultation on many issues. I am sure that the President does believe that consultation does offer considerable advancement. I can't comment on the particular incident that you suggest because it took place, or it might have taken place or didn't take place, at time before I had any such knowledge.

Senator PERCY. I commented this morning on the expression to me by a White House official that they didn't feel consultation was necessary or desirable because it wouldn't have made any difference anyway, the implication being we are not rational men here, we are not subject to persuasion or reason, we have our minds set in concrete or cement. I have never experienced that attitude here. When we did require consultation on reorganization plans and the creation of these new super Cabinet posts. I think it was an entirely different attitude than if we had read about it in the newspaper and had no prior notice whatsoever.

I would only respectfully suggest that in the future of impoundment of funds-this goes right to the heart of the prerogatives that the Congress has that prior consultation would save a great deal of time. Senator Humphrey this morning, or yesterday, indicated that there was quite a difference, and Senator Fulbright, in the distinction between temporary and permanent impoundment. Temporary could be better understood, but if it looked like it was a more permanent, a changing of the priorities into perpetuity that he would like something entirely different.

Would you want to draw a distinction between the temporary or permanent nature of some of the delay in expending funds, how long the period of time might be. I understand in housing it was clearly stated it was an 18-months moratorium.

Mr. Asн. I was going to suggest that area as probably one of the best examples we could concentrate on for this very point that you are making.

Given the complexities and difficulties in this whole housing area. and the long leadtimes and the tremendous amount of work in the pipeline, it seemed quite appropriate to explicitly state that there would be an 18-month moratorium, for not only would the rate of expenditures from past commitments maintain a relatively high level of housing activity during that time, but this would allow the kind of study necessary to find those improvements that are necessary in some of these areas where we all know things are not fully well. There was a very explicit time, and I think this probably has served the purposes of all interests.

Senator PERCY. Mr. Ash, by your feeling that consultation is desirable, is the administration taking a position that we have no objection to the reporting features of the Ervin bill?

Mr. ASH. The data requested in the Ervin bill for reporting is, as I indicated, identical to that which is even now in the process of preparation, at least as we best understand it.

Senator PERCY. So you have no objection to that being part of the legislation?

Mr. ASH. We feel no need to report a second time that which is already reported once, so, therefore, we would object to a dual reporting of the same thing.

Senator PERCY. Your point is this is a redundant feature in the bill. Mr. ASH. I would make two points about the reporting required in S. 373. First, it is redundant, or appears to be virtually completely or substantially redundant, to that called for, in terms of information.

Second, the definition of what constitutes an impoundment in S. 373 is such that it is impossible to determine what is actually required. By one interpretation there would be thousands of items reported each day because, as you know, every contracting officer on behalf of the Government, every auditor as his actions bear upon payments under Government contracts, every administrative officer of various kinds, make their individual judgmental decisions not to pay an amount today for one of many reasons-maybe never pay it because it isn't duly owed-or maybe pay it at some later time. If each and every one of those thousands of transactions every day had to be reported we would have, of course, not only an onerous requirement in terms of preparing a report, but it would be difficult to understand what to do with the information as that report was received.

There are two basic points: One, it would be substantially redundant, and two, we are not certain of the definition, and because of the definition used and its lack of clarity we are not really sure what is expected of that report under S. 373.

Senator PERCY. My last question can be just a yes or no, hopefully, so that my colleagues can continue.

In Elmer Staats' letter or testimony to us yesterday-perhaps you are familiar with it-he listed the history of impoundment of funds starting with 1942, starting with Presidents Roosevelt, Truman, and all the way through President Johnson's administration when it impounded moneys from the highway trust fund and in 1966 the highway trust fund had cut back some housing, health, education, welfare, and interior.

Do you feel that any of those actions taken by those Presidents were illegal or unconstitutional as you understand them?

Mr. Ash. As I understand them, and I have spent some time coming to understand them, I think they were quite proper given the circumstances of those times, some of which are similar to the circumstances of these times.

Senator PERCY. And those were in the national interest at the time? Mr. Asи. Yes, sir.

Senator PERCY. Thank you very much.

Thank you very much, Mr. Chairman.

Senator ERVIN. This bill hasn't the slightest relation to a contracting officer determining that someone is not doing something on a contract. The bill only relates to the action of the executive, and impoundment of funds, and not spending them. It gives a definition of impounding, and there is no reference to method of carrying out Government contracts, or the situation where someone didn't complete the contract according to its provisions, and therefore funds were withheld for that purpose. At least the Government there is still concerned with carrying out the object of the appropriation.

This is a bill with reference to the executive refusing to spend funds to carry out programs established by Congress.

Mr. ASH. Yes, sir. Now, as I read section 3, second paragraph, it says that the impounding of funds includes any type of executive action which effectively precludes the obligation or expenditure of the appropriated funds. It was from that that I came to such an interpretation. I realize there are many other possible interpretations as well, but short of a more explicit one in the bill, we do feel that it is quite uncertain as to what is required.

Senator ERVIN. Well, section 3 says:

For the purposes of this Act, the impounding of funds includes, one, withholding or delaying the expenditure or obligation of funds, appropriated or otherwise obligated for projects or activities, and the determination of authorized projects or activities for which appropriations have been made.

Two, any type of executive action which effectively precludes the obligation or expenditure of the appropriated funds.

Congress doesn't appropriate funds in order to have a contracting officer see that they are paid to someone who is not entitled to them. Mr. Asn. I agree with that. To take a specific example-and there are many different kinds of examples-let's assume that it is determined that the most efficient way to spend funds appropriated is not to pay a contractor all of those moneys the moment the contract is let, but to have that determination made according to various measures of progress and paying them at that time. Those are executive decisions taken on the spot by evaluation of work progress.

Senator ERVIN. That is carrying out the objective of the appropriation.

In other words, what this definition is intended to cover, and what I think it savs, in fairly plain English, is situations in which the President refuses to carry out the objective of the appropriation. So I don't think every time a contracting officer knocks out 15 cents from an armed services housing project because he says it is not due, that that is an impoundment of funds within this definition.

Mr. Asн. I think the point you raise is a very good one. I interpret that any type of executive action which effectively precludes obliga: tion or expenditure of funds also includes period of delay that take place each day.

90-538-73-19