With reference to the special services, the ratios are as follows:

This record shows a definite increase in the productiveness of our employees, notwithstanding the Department's unfavorable space and equipment problems.

BASIS OF 1951 ESTIMATE

The estimates are based on what I believe is a conservative increase in postal volume. The estimated increases for 1950 and 1951 with respect to this are considerably less than the experience of prior years. It has been assumed that prices on certain equipment and supplies will decline to some extent. Expansions of service will be kept at a minimum. However, the continuation of building activities results in increased service demands. Continuous adjustments of service are necessary to meet the changed conditions in the urban areas, and in the field of transportation.

The estimate of funds for personnel is even more conservative than the estimate of mail volume and special services. I want to reemphasize the fact that the estimates provide for a considerable increase in the productiveness of our employees. This is evident in the fact that the 1951 estimate is an increase of nearly 3 percent in work load with only a 12-percent increase in manpower.

SUMMARY OF FISCAL YEAR 1948 OPERATION

The revenue for fiscal year 1948 amounted to $1,410,971,284, and the expenses were $1,719,943,289, leaving a deficit of $308,972,005. That year there were handled 40,280,000,000 pieces of mail and 879,000,000 special-service transactions. The rate of increase in revenue over 1947 was 8.61 percent; in expenses, 10.08 percent; in mail volume, 7.62 percent; and, in special-service transactions, 8.98 percent. Employment increased only 2.76 percent.

SUMMARY OF FISCAL YEAR 1949 OPERATIONS

The unaudited revenue for 1949 amounted to $1,571,896,442, an all time high and an increase of $160,925,158, or 11.41 percent over 1948. As nearly as can be determined, approximately $75,000,000 of the increase is due to increases in postal rates which became effective on January 1, 1949, through the enactment of Public Law 900. The rate of increase, exclusive of the $75,000,000, is approximately 6 percent. The mail volume in 1949 approximated 43,400,000,000 pieces and 942,800,000 special-service transactions, increases of 7.71 percent and

7.24 percent, respectively, over 1948. Employment increased 6.66 percent.

The obligations for 1949 are $2,122,980,800, an increase of 23.43 percent over 1948. This increase in obligations was due primarily to increases in salary which became effective July 1, 1948, and automatic promotions. The cost of these increases in 1949 approximated $215,000,000. There are still pending before the Interstate Commerce Commission and the Civil Aeronautics Board applications for retroactive increases in rates for the transportation of mail by rail and air. To the extent such rates are increased, the expenses and postal deficits for 1948 and 1949 will be increased accordingly.

The unaudited deficiency of $551,084,358 in postal revenue in 1949 is considerably less than the uncontrollable items of expenditure which have been added to the Department's obligations since June 30, 1945. If the personal services could have been obtained at rates paid in 1945 the obligations for 1949 for this purpose would have been $584,000,000 less than those reported. The interim rate authorized by the Interstate Commerce Commission for transportation of mail by railroad cost the Department $44,000,000 in 1949. The annual payments for transportation of foreign and domestic air mails now amount to about $89,000,000 more as a result of increased rates established since 1945 by the Civil Aeronautics Board. The total of these increases added about $717,000,000 to the expenses for 1949, not including the increased cost of supplies, materials, and contractual services. Had these uncontrollable increases not taken place, there would have been a surplus of some $200,000,000 in 1949 instead of a deficit of $551,000,000.

ESTIMATED WORK LOAD AND REVENUE, 1950

The revenue for 1950 is estimated at $1,640,000,000, an increase of $68,103,588, or 4.33 percent over 1949. It is believed about $150,000,000 of this can be attributed to rates which became effective under Public Law 900 on January 1, 1949. If the revenue due to increased postal rates were eliminated from the 1949 and 1950 revenue, the revenue for 1950 would approximate that of 1949.

It is estimated that 43,900,000,000 pieces of mail and 946,000,000 special service transactions will be handled in 1950. These are increases of only 1.30 percent and 0.34 of 1 percent, respectively, over 1949. Every attempt is being made to handle this increase in volume with the funds appropriated to date. If this can be done, the employment in 1950 will be 1.33 percent less than that of 1949.

The obligations for 1950 are estimated at $2,183,517,086, or an increase of 2.85 percent over 1949. These obligations include estimates of $66,683,900 for salary increases which became effective about November 1, 1949. They also include net estimated deficiencies in appropriations of $14,581,700 which will be required for other purposes. There is available through amounts appropriated to date for 1950, and 1949 balances of appropriations available in 1950, the sum of $2,102,251,486. At this time it appears that the Department will require additional deficiency appropriations in the sum of $81,265,600 to cover the new salary increases and the requirements for increases in prices, rates and additional postal business.

The deficit in postal revenue is estimated at $543,517,086 for 1950.

ESTIMATE OF REVENUE, 1951

The estimate of revenue for 1951, $1,681,000,000 is based on prevailing postal rates. The estimate is an increase of $41,000,000 or 2.5 percent over the 1950 estimate. The President's budget presentation proposes legislation to increase postal rates to the extent of producing additional revenue of about $400,000,000.

BILLS PENDING TO INCREASE REVENUE

There is now pending before the House of Representatives a bill, H. R. 2945, which provides for increases in rates that will produce about $131,000,000 in additional revenue. A companion bill, S. 1103, is pending in the Senate. This will produce additional revenue of about $102,000,000. Both bills have been reported to the Congress by the respective committees.

I might add there, Mr. Chairman, that the bill in the Senate has been recalled for further attention in the committee and is no longer pending before the Senate.

Mr. GARY. I saw in the paper the other day a statement that the Senate bill had been recommitted to the committee for the purpose of complying with the recommendations in the President's budget

message.

Mr. DONALDSON. I understood from the chairman of the committee in the Senate that he felt that the House bill was a better bill than the Senate bill, and that he would prefer that the House bill be acted upon first. There is some feeling, I think, among members of the committee, that revenue-raising bills should originate in the House. He preferred to see what the House did with the bill before acting further on the bill which the committee reported out last year.

I recommended rates which would add some $253,000,000 in revenues; however, this will not be sufficient to meet the cost of salary legislation enacted since I made my recommendation and since H. R. 2945 and S. 1103 were reported by the committees.

The volume of mail is estimated at 45,000,000,000 pieces and special service transactions 973,500,000, increases over the 1950 estimates of 2.53 and 2.91 percent, respectively. As I have stated we hope to handle this increase in volume with an increase of only one-half of 1 percent in the manpower provided for in 1949.

ESTIMATED OBLIGATIONS, 1951

The obligations for 1951 are estimated at $2,235,607,000, an increase of $52,089,914, or 2.39 percent over the 1950 estimates. This includes $93,988,000 for salary increases which became effective on about November 1, 1949.

The postal deficiency will be $554,607,000 which will be reduced to $154,607,000 if the proposed legislation to increase postage rates becomes effective with the beginning of the fiscal year.

MANAGEMENT IMPROVEMENT PROGRAMS

For years the Post Office Department has carried on what is known today as management improvement programs. Its post offices have

been inspected annually and surveys have been made from time to time as the need thereof developed in both departmental and field activities. These surveys and studies have been made on a Nation-wide basis as well as for the purpose of solving the problems in specific postal units.

Mechanical equipment has been installed to the extent that its use today in post offices and transportation terminals probably exceeds that of commercial enterprises such as the railway express and other transportation agencies. A new mail-distributing machine has been installed in the Chicago post office for experimental purposes, and in addition to that, research is being conducted of alphabetical distribution of mail in several offices.

At the present time the Assistant Postmaster General in Charge of Transportation, with the aid of the Inspection Service, is making a complete survey and study of the operations at transportation service terminals.

There is presently under consideration a revision of the accounting rules and regulations and the motor vehicle service forms, with a view to simplifying and improving records and reports. It is also proposed to review truck overhauling and servicing schedules and standards during the current fiscal year with a view to effecting improvements, and developing maximum efficiency and economy of operations. In the past, management studies generally have been conducted by the several bureaus and by trained personnel in the inspection service. In the future, it is my plan to coordinate and direct the management improvement program more effectively. The first steps therein were taken in the President's Reorganization Plan No. 3, which became effective on August 19, 1949. It provides for a Deputy Postmaster General and an advisory board. The Deputy Postmaster General has been appointed and no doubt the President will appoint members of the advisory board in the near future. I consider this a first and major step in furthering the management improvement program.

This Congress has approved legislation authorizing a research and development program and funds have been provided for its initiation during the current fiscal year. The research and development work will be integrated with budget and planning work. Plans are now under way for enlarging this group of employees and to obtain such technical assistance as may be deemed necessary to coordinate the study of known operating problems and present methods as fast as practicable in order to determine whether improvement can be made. and costs reduced.

CHANGE IN APPROPRIATION STRUCTURE

Up to the close of the current fiscal year, the Department will operate under 58 appropriations, each of which has provided funds for specific functions or services. These appropriations were made directly to the various bureaus and not to the Department as a whole. The appropriations were more numerous in former years. They have been greatly reduced in number as a result of a continuous consolidation program.

The 1951 budget provides for the creation of a postal fund which will be made up of the postal revenue and not to exceed the sum of $554.607,000 from the general fund of the Treasury. In addition, four

appropriations are set up to provide for the expenditures of the Department. These cross bureau lines and are made to the Department, not to the bureaus directly.

The "General administration" appropriation is for the departmental service and the field inspection service payments. The "Postal operations" appropriation will provide for all field operations with the exception of payments for transportation of mails between post offices and the United States and foreign countries, and payments of claims of various types. The remaining two appropriations, "Transportation of mails" and "Claims," provide funds for these purpose.

PURPOSE OF CHANGE IN APPROPRIATION STRUCTURE

The objectives of the proposed change are to:

1. Reduce appropriation language and provide a consolidated activity schedules budget.

2. Provide more flexibility in the allocation and use of appropriated funds to meet the changing conditions in the service.

3. Reduce to a minimum the necessity for supplemental and deficiency appropriations.

4. Centralize the control of appropriated funds and expenditures. 5. Simplify and reduce the justifications of estimates.

I hope all of these objectives can be accomplished as soon as possible.

EFFECT OF NEW APPROPRIATION LANGUAGE

I feel I should make particular reference to the appropriation text of the postal fund in order that you gentlemen may be fully informed as to the manner in which it may affect operations. The effect of this language is to permit the Department to expend the totals appropriated in the four new appropriation items only in the event the revenue equals or exceeds the estimate of revenue. If the revenue exceeds the estimate, and the Department is able to maintain the service with the amounts authorized in the four appropriations, it will not be necessary to withdraw from the general fund of the Treasury the full amount authorized. Total expenditures cannot exceed the amounts authorized in the four appropriations. On the other hand, if the revenue does not equal the estimate, funds will not be available to provide for the amounts authorized in the four appropriations.

CONCLUSION

The heads of all bureaus and offices within the Department and the field have been advised that they must exert every effort to operate their units with efficiency and with the greatest economy consistent with satisfactory service to the public. It will be my purpose to continue this policy and at the same time we will supplant any known obsolete methods and equipment as fast as possible. I consider it of paramount importance to continue to give the public good service. Any economy campaign which would go so far as to destroy the present standards would bring on reactions that not only would nullify economy but, in the end, would result in greater costs. Past history of too drastic actions after national surveys bears this out. While the Department is handling these problems as promptly as possible,