this provision is $4,628,250 for the fiscal year 1935 and $5,182,252 for the fiscal year 1936.

To attempt a detailed analysis of the effect of all liberalizing features would require a complete review of compensation and pension legislation prior to the passage of Public, No. 2, Seventy-third Congress, approved March 20, 1933, and each regulation issued by the President and each act of Congress with reference to pensions and compensation enacted subsequent to March 20, 1933. It is also diffisult to obtain a comparative picture of the effect of these various changes in the law inasmuch as they occur during the course of the fiscal year, so that there is no full fiscal period in which disbursements reflect a stationary method of payment.

The changes in the basic pension and compensation laws as embodied in the acts of March 20, 1933, June 16, 1933, March 28, 1934, and June 28, 1934, and the veterans' regulations issued by the President pursuant thereto were so far reaching in fundamental effect that former trends and statistical data upon which previous estimates had been made were for the most part rendered useless. Great care has been taken, however, in the study of all data available concerning the progress of reviews of claims under the new laws and this estimate for 1936 and the expected obligations for 1935 have been computed with the idea constantly in mind of using reasonably minimum calculations in instances where the reviews have not yet developed to the point of indicating accurate final trends. It is believed that this estimate represents a minimum requirement in total and in an appropriation of this size, covering the volume of individual claims of various degrees and types involving a multitude of indefinite factors to be determined through examination and rating by widely separated and different groups, the slightest variation in the trends which are utilized in the formulation of the estimate will result in a far different conclusion as to the extent of annual disbursements. At this point your attention is invited to charts 7, 8, and 9, which show by months in detail the estimated disbursements for 1935 and 1936. By reference to these charts and to the classification of obligations by projects, both of which are prepared classifying the amounts by periods of service, it is believed that a reasonably accurate picture of the effect of recent legislation may be obtained. The estimated amounts shown for the fiscal year 1935 are, in all cases where the law is applicable, reduced to cover the statutory reduction of 5 percent. The estimate for 1936 is in accordance with instructions from the Bureau of the Budget prepared on the basis of 100-percent expenditures, excluding any legislative reduction.

ESTIMATED DEFICIENCY, FISCAL YEAR 1935

The total amount appropriated for pensions for the fiscal year 1935 is $296.291,997. By again referring to charts 7, 8, and 9, you will note that anticipated obligations during the fiscal year 1935 indicate that disbursements for this purpose are expected to reach the total of $394,704,247. It is therefore apparent that it will be necessary to submit a request for a supplemental appropriation in the approximate amount of $98,412,250 to meet this anticipated deficiency. The original estimate for the fiscal year 1935 was based entirely upon the

restrictive provisions relative to pensions as embodied in Public, No. 2, Seventy-third Congress, approved March 20, 1933, and Public, No. 78, Seventy-third Congress, approved June 16, 1933. Public, No. 141, Seventy-third Congress, enacted March 28, 1934, greatly liberalized these restrictive provisions and Public, No. 484, Seventythird Congress, enacted June 28, 1934, provided an entirely new benefit in the form of compensation to widows and children of veterans. who died while receiving monetary benefits for disabilities incurred. directly in active military or naval service during the World War or for disabilities which were aggravated by such active service, regardless of whether death actually resulted from those disabilities. The anticipated deficiency is due to these liberalized statutes.

The following is a summary of the principal liberalizing features of Public, No. 141, Seventy-third Congress:

1. Decreased the legislative reduction in payments from 10 to 5 percent in Civil War, Indian war, and peace-time pensions.

2. Restored pensions to Spanish-American War veterans and their dependents in non-service-connected cases through the provisions of section 30 thereof, which reads as follows: "Notwithstanding any of the provisions of Public Law No. 2, Seventy-third Congress, no pension being paid on March 19, 1933, to any veteran of the Spanish-American War, including the Boxer Rebellion and the Philippine Insurrection, or to the widow, as long as she remains unmarried, and/or dependents of any such veteran, shall be reduced more than 25 per centum, except in accordance with the regulations issued pursuant to Public Law No. 2, Seventy-third Congress, pertaining to hospitalization

Public, No. 141 further provides:

* *

All laws in effect March 19, 1933, granting monetary benefits to veterans of the Spanish-American War, including the Boxer Rebellion and the Philippine Insurrection, are hereby reenacted in their entirety and such laws shall be effective from and after the effective date of this act, subject to the limitations of this Act and to such reductions in pensions as may be made here."

In view of those provisions, it is assumed that the gains to the pension rolls with reference to Spanish-American War cases will follow the general trend established prior to the enactment of Public, No. 2, Seventy-third Congress.

3. Section 26 of Public, No. 141, provides:

Notwithstanding any provision of law to the contrary, in no event shall the compensation being paid on March 19, 1933, under subsections (3) and (5) of section 202 of the World War Veterans Act, 1924, as amended, to veterans for the loss of both eyes where such veterans were, except by fraud, mistake, or misrepresentation, in receipt of compensation on March 19, 1933, be reduced or discontinued, except in accordance with the regulations issued under the Act entitled "An Act to maintain the credit of the United States Government ", approved March 20, 1933, pertaining to hospital cases.

Public, No. 141, also provided for the restoration to the rolls of all veterans on the rolls as of March 19, 1933, subject to certain limitations, including period of service, reduction in basic pay, and so forth. Public, No. 141, restores for the most part the regulations and procedure in effect prior to the enactment of Public, No. 2. Therefore it may be assumed the trend of increase in active awards as established prior to March 19, 1933, will be continued.

In the study of all data available concerning progress of reviews of claims under the new laws, great care has been taken to compute estimated expenditures at minimum rates applied to revised min

imum trends. These reviews have not yet developed to the point of indicating accurate final figures. However, it is believed that the estimate represents a very conservative prognostication. detailed information will be available and will be furnished at the time the supplemental appropriation estimate is submitted.

MILITARY AND NAVAL INSURANCE

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This appropriation covers payments arising from contracts with World War veterans for what was known as war-risk insurance.' The payments now being made are those to veterans who suffered a permanent and total disability as the result of war service or during the period they carried this type of insurance; payments to beneficiaries of soldiers who died in service or during the period in which this type of insurance was carried; and payments to the Government life-insurance trust fund to meet obligations sustained by that fund incident to extra hazards of military or naval serviceof persons so engaged while protected by Government life policies.

EXPLANATION OF THE 1936 ESTIMATE

The amount requested for 1936, $116,910,000, is an increase of $4,610,000 over the appropriation provided for the fiscal year 1935. and an increase of $13,641,726.17 over actual expenditures for the fiscal year 1934. However, it is estimated that the appropriation for the fiscal year 1935 is inadequate to the extent of approximately $6,081,000. Compared with the expected expenditures for the fiscal year 1935, $118,381,000, the estimate for the fiscal year 1936 represents an actual decrease of $1,471,000. The subject of this anticipated deficiency will be treated in a separate paragraph.

The increased trend reflected in the estimate for the fiscal year 1936 compared with actual disbursements for the fiscal year 1934 is accounted for entirely by the effect of the decision of the Supreme Court of the United States dated June 4, 1934, declaring unconstitutional section no. 17 of Public, No. 2, Seventy-third Congress, approved March 20, 1933, which eliminated the adjudication or trial by the courts of claims incident to war-risk-insurance contracts, with the exception of those cases in litigation at the time the amendatory legislation became effective. At the time Public, No. 2 became effective there were approximately 23,000 claims pending, allegedly arising from contracts for war-risk insurance. It was estimated at the time the Supreme Court rendered the decision that the total cost of the action would approximate $40,028,850. However, the period of time over which this cost will be extended due to the progress of adjudication and litigation makes it impossible to state with any reasonable degree of accuracy the periods during which the actual disbursements will be consummated.

Based upon the experience during the first 3 months of the fiscal year 1932 prior to the enactment of the restrictive provisions concerning adjudication and litigation, compared with operations during the same period of the fiscal year 1934, subsequent to the enactment of the restrictive legislation, and continuing this trend as the only reasonable basis obtainable for measuring the effect of the Supreme Court.

decision during the fiscal years 1935 and 1936, the following table is a summation of approximate costs by purposes incident thereto :

Including this additional cost resulting from the Supreme Court decision, together with the decreasing trend in disbursements for other purposes normally occurring, the following table summarizes comparatively, by major purposes, the estimated requirements under this appropriation for the fiscal year 1936 compared with estimated expenditures for 1935 and actual expenditures for 1934:

In brief explanation of the major purposes shown in this summary, it may be stated that "disability awards" are the monthly disbursements made directly to those veterans who became permanently and totally disabled while carrying this form of insurance, and such monthly payments are determined on the basis of $5.75 per month for each $1,000 of such insurance carried at the time the disability was incurred.

"Death awards" are the monthly disbursements to beneficiaries of deceased veterans, determined at the rate of $5.75 for each $1,000 of this form of insurance carried and in force at the time of death.

"Lump-sum payments" are those disbursements made to the estate of deceased veterans for the commuted value of the remaining installments upon the death of the named or recipient beneficiary. This is the only type of disbursement from this appropriation, showing an increase over preceding years. Upon the death of the named or recipient beneficiary, it is provided that the remaining unpaid installments due under the contract of insurance shall be commuted to exclude unearned interest to date, and paid in a lump sum to the estate of the deceased veteran for distribution under the law of the State of residence of the veteran at the time of his death. Inasmuch as the eligible class of beneficiaries was definitely restricted by law, the greater number of beneficiaries named involved the parents of the veterans. These beneficiaries are being decreased in greater numbers each year by death as the result of advancing age. Consequently, lump-sum payments are continuing to increase slightly.

"Transfers to Government life insurance trust fund" are those payments made from this appropriation to the trust funds specified to meet obligations sustained by that fund incident to the extra hazards of military or naval service of persons so engaged while protected by Government life policies.

"Refunds" represent the disbursements made in returning to the veteran any premiums paid by him through dates which are later found to be subsequent to actual proof of permanent and total disability which matured the policy.

"Retroactive awards" involve disbursements of accrued amounts for a period of time elapsed between the current determination that permanent and total disability actually exists and the effective or beginning date of such disability. These payments are largely involved in litigated cases although they do arise in other cases where there is submitted to the Veterans' Administration inadequate original proof of such disability.

ESTIMATED DEFICIENCY FISCAL YEAR 1935

During the fiscal year 1934 when the provisions of section no. 17, Public, No. 2, Seventy-third Congress, approved March 20, 1933, were in effect disbursements under this appropriation amounted to $103.268.273.83. Extending the experience of 1934 through the fiscal year 1935, it is estimated that expenditures for 1935 would have approximated a total of $103,105,552 as opposed to an appropriation available in the amount of $112,300,000. Had the law remained undisturbed, there would have accrued under this appropriation for the fiscal year 1935 an unobligated and unexpended balance of approximately $9,194,448. However, the decision of the Supreme Court of the United States dated June 4, 1934, previously referred to, declared unconstitutional the restrictive provisions of section no. 17, Public, No. 2, Seventy-third Congress, pertaining to the denial of adjudication or right to suit in connection with pending claims under the act. As previously explained, the only basis for anticipating the apportioned annual payments to be expected of the total estimated cost resulting from the decision, is to compare the ratio of expenditures for similar periods before and subsequent to enactment of the restrictive legislation. Based on this method of computation the following table of expected disbursements incident to the Supreme Court decision during the fiscal year 1935 shows an unanticipated cost of $15,275,444:

Applying to this increased cost the estimated unobligated balance of $9,194,448, which would have normally obtained, it is determined that an estimated deficiency of $6,080,996 will be experienced and when estimates of supplemental appropriations for the fiscal year 1935 are requested, an additional appropriation under "Military and naval insurance" in this approximate amount will be submitted.

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