There are three items with respect to appropriation language and limitations that require comment.

APPROPRIATION CONSOLIDATION

The first of these concerns a proposal in the budget to combine the appropriation for investigations of U.S. citizens for employment by international organizations with the salaries and expenses appropriation in order to simplify the budgeting, accounting and record keeping work.

HOUSE LIMITATION FOR INVESTIGATIONS OF U.S. CITIZENS FOR EMPLOYMENT BY INTERNATIONAL ORGANIZATIONS

The bill as passed by the House accomplished the merger but contains a specific limitation of $700,000 for this program. The Commission believes that this limitation is unnecessarily restrictive and would largely nullify the very purpose of consolidating these two appropriations into a single account. Accordingly, we request removal of the dollar limitation imposed by the House so that there will be flexibility in the financial management of all programs funded through the salaries and expenses appropriation.

Senator MAGNUSON. There is a definite feeling, I think, in both the House and the Senate that insofar as possible we ought to keep these things separate so that we could have more surveillance over so-called international organizations, perhaps with the Civil Service Commission, it is probably a little different because you are only doing what you are requested to do.

Mr. MACY. That is right. We have no discretion in the expenditure of these funds at all because the cases are referred to us.

Senator MAGNUSON. When we get from you the amount of people involved and other information, it gives us another facet of information on these international organizations. This is why they have to be separated.

Mr. WILLIAMS. They will be, insofar as our justification of materials is concerned, Mr. Chairman.

Senator MAGNUSON. I understand that would set out separately, the international organizations.

Mr. WILLIAMS. This is right. There will be no mingling of work. Mr. MACY. All we would do would be to include it in the salaries and expenses appropriation so we don't have a separate appropriation. Senator MAGNUSON. They will be broken down then.

Mr. MACY. Yes, it will be broken down in the justification.

Mr. WILLIAMS. And the workload and the dollars required will be set out separately.

CONSOLIDATION DISSATISFACTION

Senator ALLOTT. I think, Mr. Chairman, you understand this and I understand this, but I doubt if there is any single line item in here that is more misunderstood by the average Senator than this particular item that the separation of it in my opinion, helps us to keep this thing straight and actually, avoids trouble on this particular item by virtue of the fact that it is separated or has been separated.

I don't like the including-it-in-aspect of this thing myself, because, while it stands out like a sore thumb and raises a lot of questions, while it is there, you can explain it this way. When somebody finds it hidden in something else, it is just going to be twice as hard to explain; however, it is included under the "General salaries and expenses," in my opinion.

Senator MAGNUSON. John, there are too many people that think you folks go out and recruit for these positions.

Mr. MACY. I know they do.

Senator MAGNUSON. There are too many people that think that.

COMMISSION SEPARATE APPROPRIATION PREFERENCE

Mr. MACY. Mr. Chairman, let me say this. If the judgment is that this should be separate, it would be our preference to continue it the way it is now, rather than have it incorporated in the salaries and expenses appropriation and then put a dollar limitation, on it, because in effect, you are nullifying the management benefit, that we seek through consolidation. We would prefer to continue to keep it as a separate appropriation and a separate account, rather than to have a limitation.

Senator MAGNUSON. What the House is trying to do, you only have so much to do this-that would deter, it would have an indirect effect upon the employment of more people in these agencies. This is what they are thinking, I am sure.

Mr. WILLIAMS. Well, if it is a separate appropriation, and we have insufficient funds, we will simply have to come back with a supplemental request.

Senator MAGNUSON. Sure. They just tell you what they want or need.

Senator ALLOTT. Last year, you had $600,000 in this account.
Mr. MACY. We spent $588,000.

Senator ALLOTT. You spent $588,000 and in a sense-when we appropriate $600,000 for you, we in effect put a limitation on you

anyway.

Mr. MACY. Yes. As long as you place the limitation, we would just as soon leave it separate from the salaries and expenses.

The argument would be that if it were incorporated in the salaries and expenses account, we would continue to keep records and justify this, but it would permit some flexibility; it would permit us to finance this out of one appropriation. But I can understand your view.

Mr. WILLIAMS. The original purpose stems from the Bureau of the Budget, which is to reduce the number of appropriations. They had no other purpose than that in the proposed consolidation.

PROGRAM EXPLANATORY PARAGRAPH IN COMMITTEE REPORT

Senator MAGNUSON. I am not suggesting whether we do this or not do it we cannot speak for the whole committee-but in any event, I think in our report we ought to have a paragraph on this bill, under Civil Service, explaining what the duties are of Civil Service in this

particular field; so that you could try and get rid of this misunderstanding that you go out and recruit people for the international organizations, when you don't do that at all.

Mr. MACY. No. These are people who present themselves as applicants to international organizations.

Senator ALLOTT. I think there are two points here. First of all, my own personal feeling as of this moment is that by submerging this budget request itself, submerging it into the salaries and account, expenses account, somebody finds out about it someday and then it becomes twice as hard to explain. I understand it. Senator Magnuson understands it.

The other thing is that, by having it as a line item, I think it gives us a picture of what is transpiring in this field which we would in time tend to lose if it were just simply submerged in the salaries and expenses account.

Mr. MACY. I have no effective argument to counter that.

Senator ALLOTT. This is not really an argument. This is just my reaction to it.

Mr. WILLIAMS. You will find it, but you will have to look for it. Senator ALLOTT. When we go through this thing

Mr. MACY. It would not stand out in your appropriation summary. You have to get a breakdown of the salaries and expenses appropriation in order to identify it.

Senator ALLOTT. That is correct.

Senator MAGNUSON. In any event, I wish the staff and you would give us a small paragraph to explain what the Civil Service Commission's position is in this matter.

Mr. WILLIAMS. We will be very happy to.

PAYMENT FOR FBI PROGRAM INVESTIGATIONS

Mr. MACY. Some of this money, as you know, goes to the FBI.
Senator MAGNUSON. Yes.

Mr. MACY. Out of this appropriation, because they conduct a certain number of investigations.

Mr. WILLIAMS. There would be only one administrative advantage. In the event the workload actually exceeds expectation, it would eliminate the need to come back to the Congress to request more money, because if we had the funds available in our total salaries and expenses appropriation, that would not be necessary.

Senator MAGNUSON. There are certain Members of Congress that want you to come back.

Mr. Macy. All right, sir. The next item is of somewhat the same

nature.

CONSOLIDATED PAYMENTS TO TRUST FUNDS

It is also to simplify the budget process. We are combining the two separate appropriations entitled, "Government Payment for Annuities, Employees Health Benefits" and "Payment to Civil Service Retirement and Disability Fund" under one heading entitled "Payments to Trust Funds."

80-124-67-pt. 1-51

APPEAL OF HOUSE DISALLOWANCE

The House did not approve this proposal although the appropriation language provided in the budget was intended to permit the Congress to review and exercise judgment as in the past, on each of the amounts under the combined heading. Here again in the interest of simplification only, we ask favorable action by this committee to provide the appropriation language requested in the budget.

PROPOSED LEGISLATION PROVIDING INCREASED FINANCING OF RETIREMENT FUND BY GOVERNMENT AND EMPLOYEES

Senator MAGNUSON. Now, on that item-I think the title "Payment to Trust Funds" makes more sense. I mean, it is easier understood. What is the status now of the numerous records and conferences and studies and comments and everything else on the retirement fund.

Mr. MACY. On the retirement fund, Mr. Chairman, the Commission has submitted to the Congress in response to the President's request, a legislative draft providing for financing of the retirement fund. This has been printed in a committee print of the House and we have copies of that which we could provide for you. It includes an updated briefing book similar to the one that we considered in this committee a number of years ago.

This is a three-pronged approach to retirement financing. It proposes that the Congress establish a policy that in the future, all of the normal costs shall be met on a 50-50 basis by the Government and the employees.

At the present time, that level cost is 13.86 percent of payroll, and through the two 612-percent contributions, the fund is only receiving 13 percent. So this would necessitate an increase of a half of 1 percent from the Government and from the employees in order to carry out that particular purpose.

Senator ALLOTT. Let me say this, Mr. Macy. When this came in about a month and a half ago to my office, I read it, and I think you did a good job on this, and I am in accord with it. This is a question that has tended to become a political football. The chairman has said this many times. But frankly, I don't think we can afford to let it become a political football.

Mr. MACY. I don't either.

LEGISLATION BASES

Senator ALLOTT. We have to face up to it because we cannot let these people working for the Government-including Congressmen and Senators-end up with a fund that is invalid.

I hope that this is not just lost, and I hope also, that you will discuss here this morning, as you started to do before I interrupted you, the chief features of this proposal which you made.

Mr. MACY. Well, Mr. Chairman, if your schedule permits, I would be happy to run through this document with you to indicate briefly in a few minutes what the basic purposes are in this proposal.

This is an effort to try to present a very complicated problem in a relatively simple form.

This starts on page 14 of the document which has been handed

to you.

The purposes of this proposal are to achieve full recognition of retirement costs and to provide an orderly, advance preparation to

meet those costs.

The purpose is also to control the unfunded liability which now stands at nearly $50 billion and to fund a balance sufficient to assure that there is prompt and full benefit payment. The proposal, as I started to indicate earlier, is in three basic parts.

First, employees and agencies share the normal cost of present benefits and future liberalizations.

One of our problems, Mr. Chairman, in the past, has been that liberalizations have been authorized without any method for funding those liberalizations into the future.

Secondly, that the Government identify and make advance plans to cover other costs of future changes, and here, the particular need is with respect to salary increases. Every salary increase carries with it a deeper obligation against this fund.

Third, for the Government to peg the trust fund level at an adequate, predetermined point, so that the fund will never shrink below a particular level.

FUND STATUS

Senator ALLOTT. I think you will have to go over that again. I don't quite understand it.

Mr. MACY. I think as we go along I will be able to illustrate it further, on the next page.

Where are we at the present time?

The balance of the retirement and disability fund at the present time is $16.8 billion. The annual receipts are $2.8 billion, and they come from three sources. A total of $1.1 billion comes from the agencies through their annual appropriations; this is 62 percent of pay

roll.

Another $1.1 billion comes from employees, the matching 61⁄2 percent of payroll.

And roughly, $0.6 billion comes from interest.

The annual disbursement is running at $1.9 billion.

Now, this looks like a relatively favorable balance, but what it does not reflect is the tremendous increase in the level of retirement disbursement in the period ahead.

The little table on the right shows how the contributions from employees and the agencies are pooled in the fund. They are invested by the Treasury. They earn interest and the total of contributions and interest is intended to cover all retirement benefits now being earned or to be earned by future service.

Now, this is the normal cost-the normal cost: all retirement benefits now being earned or to be earned by future service. That is running at the present time at 13.86 percent of payroll.

UNFUNDED LIABILITY

Normal cost is only part of the financing story. The liabilities presently exceed assets by $48.1 billion. This is the unfunded liability that we have talked about in this committee again and again.