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The original documents are located in Box 8, folder "FY 1976 - 12/19/74, Transportation,
Small Agencies" of the White House Special Files Unit Files at the Gerald R. Ford
Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
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copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 8 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
1976 Budget
Session With The
President
12/19/74
1976 Budget
Session With The
President
12/19/74
FORDO is LIBRARY GERALD
MEETING WITH
ROY L. ASH
DEPARTMENT OF TRANSPORTATION
AND OTHER SMALLER AGENCIES
Thursday, December 19, 1974
2:00 P.M.
THE WHITE HOUSE
WASHINGTON
December 18, 1974
MEETING WITH ROY L. ASH
Thursday, December 19, 1974
2:00 P.M. (60 minutes)
Oval Offic
From: Roy L. Ash
I. PURPOSE
To make final FY '76 budget decisions for the Department of
Transportation and several smaller agencies.
II. BACKGROUND, PARTICIPANTS, AND PRESS PLAN
A.
Background: The FY'76 budget submissionsof the Depart-
ment of Transportation and several smaller agencies have
been reviewed and the results have been transmitted to the
affected agencies. This meeting will focus on the issues
raised in the above reviews that require Presidential con-
sideration and determinations.
B.
Participants: Roy L. Ash, Paul O'Neill, Dale McOmber
and Walter Scott.
C.
Press Plan: David Kennerly photo
FORD it LIBRARY 079839
III. TALKING POINTS
A.
Wally Scott, what is the first issue we should consider for
the Department of Transportation?
B.
Wally Scott, which of the smaller agencies to be discussed
today should we begin with?
THE WHITE HOUSE
INFORMATION
WASHINGTON
December 19, 1974
MEMORANDUM FOR
THE PRESIDENT
THROUGH:
KEN COLE
FROM:
MIKE DUVAL
SUBJECT:
TRANSPORTATION BUDGET REVIEW
Two of the items in the DOT budget you will be discussing today
with Roy Ash involve basic political/policy decisions. In both
cases, I believe you should defer any final decision until you
have heard the direct views of Secretary Brinegar and key Congres-
sional leaders. The two issues:
1. Highway Trust Fund. DOT and OMB have agreed on a broad
strategy for the Highway Trust Fund which is essentially to
continue it after its expiration date in October 1977 only
for interstate purposes. While we concur in this recommenda-
tion, it is obviously very controversial and will meet with
considerable opposition on the Hill, especially from the
Public Works Committee. We recommend that before any final
decisions are made, we solicit the views of Senators Randolph
and Baker and Congressman Jones and Harsha.
2. Aviation Trust Fund. DOT supports a basic revamping of the
Aviation Trust Fund with retention of a small discretionary
program ($40 million) and a planning grants program ($10 mil-
lion). OMB objects to both programs but is in agreement with
DOT on total funding levels. We believe that a limited dis-
cretionary grant program which combines the airport and planning
monies is absolutely essential on the merits, for the new
program to be politically acceptable, and as a means of
insuring orderly transition. This fund is essential if small
to medium cities served by such airlines as Piedmont and
North Central are to have any hope for financing new airports.
Senator Pearson will be consulted today concerning his views
on the aviation program for next year. As you know, he will
be the ranking minority member of the Commerce Committee and
a kay leader on aviation matters. My guess is he is not going
to like the DOT-OMB proposal at all, but as a rock bottom
minimum, he will insist on the discretionary fund.
Department of
Transportation
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR: THE PRESIDENT
FROM:
RONDL. ROVIL. ASH
SUBJECT:
1976 Budget decisions: Department of Transportation
The agency request and my recommendations with respect to 1976 budget
amounts for the Department of Transportation are presented in the
tabulation attached (Tab A). A summary of the principal budget
decisions reflected in my recommendation is provided as background
information (Tab B).
Two key legislative issues, five budget issues and one information
issue have been identified for your consideration (detail at Tab C).
I.
Aviation Trust Fund Strategy. DOT/OMB agree on submission of
legislation to change the airport program from a Federal project ap-
proval grant program to basically a formula grant program. Legislation
would also open aviation trust fund for operating expenses and establish
general aviation landing fees while reducing domestic passenger ticket
tax. DOT would include a discretionary grant program, separate planning
grants and continuation of Federal grants to general aviation airports.
OMB recommends all formula funding, no separate planning grants, and
a gradual shift of general aviation airport grants to the states.
Decision: Approve DOT recommendation
Approve OMB recommendation
FORDS LIBRARY 038870
See me
II. Highway Legislation. DOT/OMB agree on submission of legislation
to fund only the interstate highways from the trust fund and reduce the
gas tax 1c in 1977 if the states raise their taxes. By legislation
eliminate all deferred highway contract authorizations. DOT has
accepted OMB interstate highway long range funding recommendation.
DOT wants an increase in long range non-interstate highway program,
but has agreed to further review of OMB recommendation to hold funding
constant.
Decision: Approve DOT/OMB basic recommendation
See me
III. AMTRAK. DOT/OMB agree on submission of legislation to establish a
specific annual operating deficit ceiling for AMTRAK. Change present legis-
lation to permit AMTRAK to live within the deficit ceiling by eliminating
points served, reduce service, raise fares. DOT wants $49M in 1975 for
Northeast Corridor improvements and OMB recommends $15M
2
Decision: Approve DOT recommendation
Approve OMB recommendation
See me
IV. Tracked Levitated Vehicle Research. DOT recommends continuation
of research on tracked levitated vehicles (e.g. 300 mph trains). OMB
recommends the elimination of this program in 1975.
Decision: Approve DOT recommendation
Approve OMB recommendation
See me
V.
Intermodal Terminals. Recent legislation authorizes the Federal
Government to: (1) plan an intermodal Union Station in D.C., (2) plan
and fund several other intermodal terminals, (3) fund the preservation
of historical terminals, and (4) study high speed ground system for the
West Coast. DOT recommends initial funds for each of the four new
functions ($7.0M). OMB recommends $2M for planning of Union Station
and intermodal terminal concept.
Decision: Approve DOT recommendation
Approve OMB recommendation
See me
VI. Railroad Safety. DOT recommends an additional $500K for 52 railroad
safety inspectors and clerks. OMB recommends denial of appeal, the allowance
already includes an increase of 43 positions.
Decision: Approve DOT recommendation
Approve OMB recommendation
See me
VII. Coast Guard. DOT requests an additional 200 military personnel to
GERALD FORD LEVERAL
man a new ice breaker and new facilities. OMB believes existing resources
and personnel are sufficient.
Decision: Approve DOT recommendation
Approve OMB recommendation
See me
VIII. Regional Rail Restructuring. The U. S. Railway Association will submit
a preliminary plan to Congress in February on how to restructure the North-
east bankrupt railroad. Additional funds not included in your budget may
be required for:
- Meeting the cash flow problem of Penn Central until
Conrail becomes operational in January 1976.
- Loan guarantees beyond the $1B presently authorized
in order to pay off creditors and provide for re-
habilitating the system.
3
- Initiation of Northeast Corridor passenger improve-
ments program at a level of approximately $1.8 billion
over eight years.
Attachments
FORD
Tab A
Department of Transportation
1976 B
t
Summary Data
Employment, end of period
(In millions)
Full-time
Budget Authority
Outlays
Permanent
Total
1974 actual
17,635
8,111
69,526
71,526
1975 January budget
9,814
9,060
71,300
73,300
enacted
18,562
8,765
supplementals recommended
201
358
OMB recommends
18,763
9,123
OMB ceiling
18,691
9,045
70,128
72,128
1976 planning ceiling
10,660
9,750
-
-
agency request
11,677
10,248
74,702
76,702
OMB recommendation
6,576
9,958
71,615
73,615
agency recommendation
6,596
9,969
71,673
73,673
Transition period
agency recommendation
1,676
2,630
72,553
74,553
OMB recommendation
1,676
2,630
71,615
73,615
1977 OMB estimate
9,159
10,755
73,969
75,969
FORD
TAB A
4
LIBRA
DEPARTMENT OF 1.
SPORTATION
PROGRAM LEVEL
$ in Millions
July 1 -
1975
1976
Sept 30, 1976
1977
1974
Jan
Agency
OMB
Agency
OMB
DOT/Req.
Agency
OMB
Actual
Budget
Request
Recom.
Request
Recom.
OMB Recom.
Request
Recom.
Coast Guard
815
903
974
974
1,125
1,072
281
1,230
1,096
Federal Aviation Administration
1,907
2,120
2,144
2,144
2,349
2,301
585
2,360
2,360
Federal Highway Administration
5,012
4,800
4,810
4,810
5,623
5,413
1,346
6,115
5,615
National Highway Safety
Administration
139
220
169
168
185
168
40
175
160
Federal Railroad Administration
94
111
184
168
180
139
43
180
180
AMTRAK Request
373
279
651
617
460
460
120
485
485
Urban Mass Transportation
Administration
1,080
1,351
1,446
1,446
1,746
1,724
400
1,900
1,900
Office of the Secretary
58
92
72
72
82
74
18
73
73
St. Lawrence Seaway
Development Corporation
5
6
6
6
6
6
2
7
7
National Transporation Safety
Board
8
10
10
10
12
10
3
10
10
Total DOT
9,491
9,892
10,466
10,415
11,768
11,367
2,838
12,535
11,886
FORD
5
Tab B
TAB B
1976 Budget
6
Department of Transportation
Background Information
The OMB recommendations for the Department of Transportation (DOT) provides
for approximately a $1 billion Increase In program level. This is a very
significant increase and is primarily for interstate highways, mass transit
assistance and aviation assistance. Congressional add-ons to the Administration's
legislative initiatives in highways, aviation and AMTRAK plus additional Federal
assistance for bankrupt railroads (see Issue 8) could substantially increase
transportation programs in 1976.
A short summary by major mode follows:
United States Coast Guard: The recommendation of $1,072M provides for the
following major activities: search and rescue, maintenance of aids to
navigation, enforcement of fishing laws and treaties, marine environmental
protection, military readiness, supervision of port safety, and replacement
and improvement of capital equipment. The allowance is an increase of $98M
over 1975. It is required for increased operating and maintenance costs
for aircraft, ships and shore stations, and for continuing major programs.
Major changes in 1976 will be operation of the two new polar icebreakers,
the first since 1954; beginning replacement of the amphibious search and
rescue aircraft which have reached the end of their useful life; construction
of long-range navigation (LORAN-C) stations on the West Coast, including
Alaska and the Gulf of Mexico, to provide more precise navigation to avoid
pollution incidents; and the beginning of a replacement program for tugs used to
break ice in the Great Lakes and in major harbors.
GERALD FORD
Federal Aviation Administration: Allowance provides $2.3 billion for 1976,
an increase of $157 million from the 1975 estimate. Included is $1.5 billion
for operating expenses, primarily funding the agency's 56,000 employees.
Almost 29,000 of this staff operate the air traffic control system, and another
14,000 are engaged in maintenance and logistic support of the traffic control
and navigation systems. Increases of 900 air traffic control and 600 maintenance
staff are provided in 1976 based on projected growth in air traffic and the staffing
of new FAA facilities. The airway facilities capital program is continued at the
$250 million annual level and is extended until 1980. A more detailed discussion of
legislative proposals to convert the airport grant program to a formula basis,
adjust user fees, and broaden the uses of aviation trust funds is included in
Issue #1. $9 million is included for expansion of the passenger terminal and
other facilities at Dulles Airport.
7
Federal Highway Administration: Allowance provides $5.4 billion for 1976
compared with the 1975 program level of $4.8 billion. Included is $5.2
billion for Federal-aid highway obligations, an increase of $600M over
the 1975 program. The interstate highway program level would rise from
$2.5 billion in 1975 to $3.0 billion in 1976; the urban/rural programs
would remain level at $1.55 billion; and safety improvements would increase
$50 million to $300 million. This larger Lederal-aid program is supportive
of the Administration's highway legislation. described In Issue #2. which
will focus major Federal efforts on the interstate system. These increases
will not fully offset the impact of inflation on highway construction. It
should be noted that some Congressional review of the $10.8 billion highway
deferral is anticipated at the start of the next Congress. A significant
but reasonable program increase will be helpful in preventing release of
additional deferred funds.
National Highway Traffic Safety Administration: Allowance of $168 million
provides for the following activities: development of safety standards for
all classes of motor vehicles, provision of motor vehicle consumer information,
and assistance to the States in the establishment and development of highway
safety programs. The 1976 allowance is approximately the same as 1975 due
primarily to the completion of five motor vehicle diagnostic inspection
demonstration projects which require no further funding. These funds
which are no longer needed (12.5M) have been shifted primarily to the
state grant program for 1976.
GERALD FORD CIBRARY
Federal Railroad Administration: Allowance of $138 million provides for rail
safety enforcement, studies of conventional rail systems aimed at improving
financial viability of the industry, advanced technology research, and
restructuring of the bankrupt Midwest and Northeast rail system. Despite a
new provision of $45 million for rail branch line subsidies, the 1976 level
is $29 million lower than 1975. This is primarily due to decrease in cash
assistance to bankrupt railroads, from $82 million in 1975 to zero in 1976.
The actual need for these funds may approach $400 million, but this is not
reflected in the budget (see Issue #8 for explanation.) The thrust of rail-
road studies continues to shift away from advanced hardware development, toward
analysis and demonstration of operating improvements with near term, and less
costly, applications. For example, all research on tracked levitated vehicles
would be terminated by 1976 under the OMB recommendation (See Issue #4).
8
AMTRAK: Federal assistance to AMTRAK currently takes two forms: grants
used to cover the annual operating deficit; and 100% federally guaranteed
loans for capital improvements. AMTRAK operating losses have been rising
rapidly and are now estimated at $298M for this year, requiring an additional
1975 supplemental of $78M. Operating deficits for 1976 are $350M which
assumes continued increases in costs. The $350M will represent a ceiling
within which AMTRAK must operate in 1976. To live within the ceiling
will require management to raise fares, reduce service frequency, or
eliminate service over some routes. $100M has been allowed in 1976
for continuation of the passenger car replacement program, which will
be proposed to be financed by Federal grants in lieu of loans to reflect
true costs. $10M has also been allowed for spot improvements on track
outside the Northeast Corridor.
Urban Mass Transportation Administration: The agency requested $1,746
million, an increase of $300 million. Minor reductions of $22 million
were negotiated for a total program level of $1,724 million. This
amount is consistent with funding assumptions in the $11.8 billion,
six-year National Mass Transportation Assistance Act of 1974. Steps
are currently being taken to implement the new formula grant program
for transit capital and operating assistance in FY 1975 at the authorized
level of $300 million. The FY 1976 allowance will increase the formula
grants to $500 million and also provides $1,100 million for the existing
capital grant program - essentially this year's level. To better control
the out-year pressures on the existing discretionary transit capital grant
program, we have reached preliminary agreement with the Department to require
Executive Office concurrence in approval and funding of major projects so
that funding assumptions for such multi-hundred million dollar projects
can be reflected in the Administration's budget planning.
Office of the Secretary of Transportation: Funding of $74 million, including
$35 million for research and planning and $2 million for pipeline safety
grants to the states, is provided for the Secretarial offices. The staff of
2,030 includes about 700 for the department-wide Transportation Systems Center
in Cambridge, Ma. and 400 for department-wide administrative support activities.
Modest staffing increases for the expanding and sensitive Hazardous Materials
and Pipeline Safety offices are planned. The research and planning program
continues at the 1975 level but places increased emphasis on regulatory reform
research and the energy problem in transportation.
0 qe₁
TAB C
Issue Paper
9
Department of Transportation
1976 Budget
Issue #1: Aviation Trust Fund Strategy
Statement of Issue
What strategy should be taken concerning continuation of the Airport and Airway Trust
Fund and the related airport development program?
Background
The Airport and Airway Trust Fund finances Airport Construction and Planning
Grants ($325 M "minimum"), Airway Facilities ($250 M "minimum"), and FAA
Research and Development (about $80 M).
Trust fund receipts are primarily generated by an 8% tax on domestic airline
passenger tickets, a $3 international passenger tax, a 5% tax on air freight way-
bills, and a 7¢ per gallon general aviation fuel tax.
Since passage of legislation in 1971 restricting trust funding to capital develop-
ment programs (excluded operating expenses), tax receipts have exceeded program
expenditures. Trust fund balance at end of 1975 will be $2 B.
Air carriers, through the passenger taxes, pay their share of Federal aviation
operating and capital expenditures. General aviation (non-air carrier) pays less
than 20% of the estimated $500 M annual cost of providing them services.
As part of 1975 Budget Restraints, legislation was proposed to establish new
general aviation landing fees at airports with FAA traffic control towers and to
pen the Airport and Airway Trust Fund to finance the $1.5 B FAA operating expenses.
is proposal would eliminate the large trust fund surplus, which fuels desires
for more development projects, and reduce the general taxpayer subsidy to general
aviation. This legislation will not be acted on by this Congress.
Legislation is also required in 1976 to continue the airport grant and airway
facilities programs. Although continued Federal development of the airway system
is necessary, there are substantial concerns about the role of the Federal Govern-
ment in financing local airport construction.
Analysis
DOT/OMB have agreed in principle on an aviation legislative proposal. Key object-
tives of this proposal are to:
-Eliminate aviation trust fund "surplus" and unobligated contract authority.
Reduce Federal involvement in local airport development.
Establish principle of user responsibility for financing some part of traffic
control system operating costs.
Allocate user fees more equitably among aviation system users.
To accomplish these objectives, the legislative proposal would:
FORD LIBRAS,
Provide a $350 M airport development grant program, most of which would bè
allocated to the states and local airports by formula (present program is
$325 M of grants awarded for specific projects).
Broaden the grants to permit funding of critical passenger handling con-
struction (currently restricted to runways, lighting, etc.) and increase
funds provided to larger airports with more significant national system impact.
Reduce domestic passenger ticket tax from 8% to 7% ($110 M annual revenue loss)
while increasing international enplanement fees from $3 to $5 ($30 M revenue
increase) and instituting general aviation departure fees of $5 and $10 ($80 M
revenue increase) to distribute system cost more equitably among users.
10
-Fund maintenance costs of air traffic control system from trust fund (would
balance receipts into and expenditures from the fund).
Allow $194 M in existing unobligated contract authority to lapse on June 30,
1975 (about $130 M of this amount has been allocated to airports--this will
generate substantial oppostion, but is consistent with highway rescission).
DOT/OMB have differences regarding some aspects of the legislative proposal. Key
differences concern the desirability of a discretionary fund, long-term Federal
assistance for general aviation airports, and the necessity for a planning grant
program. There is agreement on the total annual program level of $350 M, but not
on the structure of the program.
Discretionary Fund ($40 M)
DOT recommends that approximately $40 M be included as part of the $300 M air
carrier airport program as a discretionary fund for grants to small air carrier
and reliever airports. DOT believes this would correct inadvertant inequities
in the formula distribution and permit funding of occassional large projects at
these airports.
OMB recommends that the entire $300 M be distributed by formula. If discretionary
funding is allowed, airports will seek matching Federal discretionary funds for
all projects in which local funds are used (since there are no local matching
requirements for the formula allocations). This would generate a large demand
for discretionary projects which would quickly force up the unrealistically small
40 M discretionary program and the total $300 M air carrier program. In addition,
T proposals concentrate Federal project approval at small airports with smallest
ational system impact and perpetuate an ineffective Federal bureaucracy.
General Aviation Grants ($40 M)
DOT recommends that funds be allocated to states on a formula basis with gradual
delegation to the states of administrative responsibilities for grant programs.
DOT believes Congress and general aviation users will not accept shift to local
funding.
OMB recommends that funds be allocated to states from Federal taxes for two years,
at which time Federal gas tax would be reduced in those states which instituted
local general aviation fuel taxes. States would then be responsible for funding
this essentially local development program. Anticipate some Congressional oppo-
sition, but believe general aviation users would not strongly resist lower
Federal involvement.
Planning Grant Program ($10 M)
DOT recommends a $10 M planning grant program for state, regional, and metropolitan
area-wide plans. DOT believes a separate categorical grant is necessary to assure
adequate planning.
OMB recommends adding these funds to state and airport grants and permitting
grantees to use a portion of their formula allocation for planning. Since use of
Federal construction funds is contingent on development of acceptable plans, there
is no need to force planning through categorical grants. Present categorical
planning grant program, opposed by most users, has been used to fuel extensive
'stifications for questionable capital development.
FORD LIBRARY
11
Issue Paper
Department of Transportation
1976 Budget
Issue #2: Highway Legislation
Statement of Issue
What should be the focus of the Administration's proposals for providing
Federal-aid for highway construction for the next five years?
Background
Major highway legislation is needed in 1976 to extend the highway trust
fund and provide additional contract authorizations for highway programs.
Trust fund revenues in recent years have been substantially greater than
the level of resources that were allocated to highway programs by the
Executive Branch. Congress, using "trust fund philosophy," has tended
to match authorizations fairly closely to receipts.
$10.7 billion of Federal-aid highway funds is currently deferred (i.e.
impounded). Congressional review of Administration's deferral action
anticipated early in next Congress with uncertain outcome.
Imbalance between highway program expenditures and trust fund revenues
will continue unless Federal-aid is substantially expanded or present
revenue/program structure is modified.
In addition, the present aid program is hampered by a multitude of
categorical grant programs and excessive red tape. Need to focus Federal
effort on interstate system while providing more state flexibility for
other local highway programs.
Major legislative objectives:
A. Break long term revenue/program cycle that forces excessive highway funding
B. Eliminate short term possibility of unprogrammed release of massive
amounts of deferred funds.
C. Increase efficiency and effectiveness of Federal-aid program.
DOT/OMB have reached agreement on the major objectives and concepts of the
legislative proposal as well as the 1976 program level. Funding levels for
1977-80 are not yet resolved. Specific legislative proposals are now being
developed.
A. Long Term Revenue/Funding Strategy
Alternatives
FORD LIBRARY
1. Continue present tax and program structure
2. Substantially reduce trust fund revenues and trust funded programs.
(DOT/OMB recommendation)
-- Fund Interstate from Trust Fund; other programs from general fund.
-- Shift 2¢ of gas tax receipts to general fund.
-- Rescind 1c of motor fuel tax in FY 1978 if states increase their taxes.
3. Eliminate trust fund. All revenue/programs through the general fund.
12
lysis
No outlay/receipt impacts on unified Federal Budget through FY 1977. Receipts
would be reduced in 1978 and subsequent years by about $1.2 billion annually
under Alternative 2.
Continuation of present tax and program structure would exacerbate impoundment
problem--probably forcing Congress to release some deferred funds.
Reduction in trust fund revenues would decrease the "push" that "dedicated"
revenues have on program levels.
Shift of 1 ¢ of motor fuel tax to states would give states more flexibility and
decrease Federal role in local highway funding.
Restricting trust fund program to interstate would help focus resources and
Federal attention on this "special" Federal commitment.
Other highway assistance for local road construction would be forced to compete
with other general fund programs in future.
Elimination of trust fund altogether is not necessary to redirect focus and is
probably not politically viable.
Short-Term Deferral Strategy
Alternatives
GERALD FORD LIBRARY
1. Continue increasing amount of deferrals.
2. Eliminate deferred amounts by rescinding all unobligated balances at the
beginning of FY 1977 (DOT/OMB rec.).
Analysis
Action has no direct outlay/receipt impact.
Rescission has a high political cost--Congress and states will strongly resist
efforts to "take away" highway funds.
Very difficult to justify continually increasing deferred amounts. Probable
that Congress would not permit continued deferrals (Congress can force release
of all or part of deferred funds).
No politically attractive way to rescind funds, but better to request rescission
as an overall strategy to "rationalize" highway program than be forced to have
it considered independently. This also bypasses Budget Control Act procedures
which would require Congressional action within 45 days of request.
Alternative 2 includes "hold harmless provisions" to insure that no state would
eceive lower obligational limitations in FY 1976-1977 because of the rescission.
Program Efficiency and Effectiveness
13
iternatives
1.
Continue present categorical programs.
2.
Provide four broad funding categories (interstate, urbanized, rural and safety)
with provisions to permit use of non-interstate funds off the Federal-aid
system and prioritize interstate system tunding (DOT/OMB rec.).
Analysis
Presently, categorical funding categories limit local flexibility in use of Federal
highway grants. Many restrictions needTessly interject Federal Government in local
affairs.
On the other hand, national priorities, which may differ from local objectives,
should be considered in determining what critical segments of the interstate
system should be initially completed.
Alternative 2 would greatly expand local flexibility in use of non-interstate funds
while emphasizing the national system aspects of the interstate system.
States and user groups will support broader funding categories although there will
be some Congressional reluctance to relax these constraints.
Prioritization is a delicate political call because local officials have traditionally
prioritized interstate projects within their state. DOT is currently reviewing
alternative mechanisms for encouraging completion of critical interstate links with
minimal Federal involvement in local resource allocation decisions.
D. Funding Level
ternatives
1.
Provide annual increases for all Federal-aid highway programs through 1980
(DOT initial request).
2. Provide annual interstate trust fund increases through 1980, but hold constant
non-interstate program (OMB rec.).
Analysis
FORD
Billions of Dollars (Program Level)
1975
1976
1977
1978
1979
1980
Alternative 1 - Total
4.6
5.2
5.9
6.1
6.3
6.6
Interstate
(2.5)
(3.0)
(3.4)
(3.5)
(3.6)
(3.7)
Non-Interstate
(2.1)
(2.2)
(2.5)
(2.6)
(2.7)
(2.9)
Alternative 2 - Total
4.6
5.2
5.4
5.5
5.8
5.9
Interstate
(2.5)
(3.0)
(3.2)
(3.4)
(3.6)
(3.7)
Non-Interstate
(2.1)
(2.2)
(2.2)
(2.2)
(2.2)
(2.2)
Increasing interstate contract authority is consistent with new Federal focus on
interstate.
Larger non-interstate program would increase political support, but it is incon-
sistent with new policy to deemphasize non-interstate program.
In 1978 and beyond, it is anticipated that states would be collecting an additional
$1.2 B of previously Federal motor fuel taxes, which is available to augment local
highway programs. There should be less dependence on Federal-aid funds for non-
interstate program.
DOT has agreed with OMB recommendations for the interstate program, but is still
reviewing non-interstate funding for 1977-1980. DOT agrees in principle with the
OMB non-interstate funding levels, but believes that these program levels, which
are substantially below current non-interstate authorizations, may not be
politically viable.
14
Issue Paper
Department of Transportation/AMTRAK
1976 Budget
Issue #3: AMTRAK
Statement of Issue
What should be the Administration's proposal for continuation of the AMTRAK
program?
1975
1976
1977
1974
DOT
OMB
DOT
OMB
DOT
OMB
Actual
Req.
Rec.
Req.
Allow
Appeal
Rec.
Req.
Rec.
Deficit Grant
198
298
298
240
260
+90
+90
385
385
Equipment &
Facilities
135
304
304
100
100
+10
+10
100
100
Northeast
Corridor
-
49
15
-
-
-
-
-
-
Total Pro-
gram level
333
651
617
340
360
+100
+100
485
485
ckground
Extending authorization legislation will be required for AMTRAK in 1975.
The AMTRAK program represents a large and rising drain on the budget.
Federally-assumed operating losses have soared from $143M in 1973 to
over $300M this year (an additional $78M supplemental will be required),
with over $600M in Federal loan guarantees committed for capital improve-
ments.
Control over AMTRAK has been shifting away from the Executive Branch and
towards Congress, AMTRAK management and the ICC because of DOT/OMB attempts
to cut uneconomic service and prevent congressional add-ons. AMTRAK cannot
discontinue service without ICC approval, and recent legislation has mandated
many ICC service performance standards (e.g. reservation system requirements,
number of baggage attendants).
Some key operating characteristics include the facts that Federal subsidies
exceed passenger revenues, that long-haul trains account for over 1/2 of
AMTRAK's losses, and that only a few corridor routes have any long-run
breakeven potential.
From a social benefit and energy savings viewpoint, the long-haul and
congressionally-required "experimental" services do not merit Federal
support.
In accordance with the Regional Rail Reorganization Act of 1974, DOT
and AMTRAK are preparing plans for upgrading the Boston-Washington (NEC)
rail passenger lines. Although these plans have not been finalized a
$49M program is proposed for this year to remedy certain deferred
maintenance ($15M) and to slightly improve normal running times ($34M)
15
as a preclude to the major improvements. Estimates of total improvement
project costs exceed $1.5B over the next eight years.
Requests for the AMTRAK program are made by both DOT and AMTRAK. The
table given above accurately reflects both the DOT and AMTRAK requests
in the "DOT request" columns, however, the appeal entry is DOT's only.
AMTRAK has not been informed of the OMB allowance by DOT as yet.
Alternatives
#1. AMTRAK request--Continue existing AMTRAK posture of making good all deficits
incurred. Undertake immediate Boston-Washington corridor upgrading (both DOT
and AMTRAK favor this).
#2. OMB Recommendation--seek to contain AMTRAK by establishing specific pre-
determined deficit ceilings for AMTRAK service and requiring operations to be
confined within that level. (DOT agrees to this strategy). Approve NEC track
improvements only to permit continuation of present speeds and await total up-
grading project plans (DOT favors Alternative #1 for the NEC).
AMTRAK Recommendation--Thr major portions are: (1) Operating deficits--
Continuation of the status quo, whereby substantial cost overruns which are
reestimated as the year progresses are covered by supplemental grants, (2)
NEC track improvements (DOT proposal)--Initiation of track improvements in
e NEC would begin with a $49M effort in 1975, which assumes $34M in rail
and tie procurement and roadbed improvements. This would lower running times
and begin the NEC improvement project and recognize the long lead times on
materials deliveries and heavy congressional interest in immediate action, (3)
AMTRAK also proposes all 1976 and future capital expenditures be made with
grants, rather than loan guarantees, to reduce interest payments.
FORD
OMB Recommendation-- (1) Operating Deficits: Seek legislation to establish
fixed deficit ceilings for AMTRAK and removal of ICC restrictions on service
LIBRARY
discontinuances and performance standards regulations. Once established
these ceilings would represent the maximum Federal funding which the Admin-
inistration would seek for AMTRAK in a given year, with supplemental requests
unavailable. AMTRAK management would be required to operate within the ceilings
or take whatever action required (e.g., fare increases, service frequency re-
ductions, service discontinuances) to live within the limit. In 1976 the
AMTRAK deficits are funded at $350M, which is $52M in excess of the 1975
level to allow for expected added costs and inflation. This position attempts
to apply pressure on AMTRAK management to reduce and control costs. It also
provides a means for preventing the current open-ended assumption of cost over-
runs while avoiding the pitfalls of previous Administration attempts to reduce
costs by naming specific routes to be dropped. (DOT agrees with this strategy).
(2) NEC Upgrading: Provide only sufficient funds to correct deferred maintenance
on these Penn Central lines. Deny approval of the remaining $34M since this
represents the initiation of a $1.5B project for which we have no plans. $22M
of this $34M upgrading funds were to be utilized exclusively for the New York-
ston segment of the NEC, which carries only 15% of NEC riders. This under-
ores the need for considering the $34M simultaneously with the entire NEC
plan, since we would propose emphasis on the more economically viable and
heavily-patronized Washington-New York segment first. Denial of the $34M at
16
cris time would not preclude improvements beyond the deferred maintenance this
year, since $30M in already-authorized AMTRAK loan guarantee funds can be utilized
without requiring further congressional action. (3) Agree on conversion of capital
improvements from loan guarantees to grants, since loans have no chance of re-
payment and grant funding will reflect true program costs. DOT agrees with this.
FORDO & LIBRARY DIVNI
17
Issue Paper
Department of Transportation
1976 Budget
Issue #4: Tracked Levitated Vehicle Research
(Dollars in millions)
1975
1976
1977
1974
DOT
OMB
DOT
DOT
OMB
DOT
OMB
Actual
Request
Rec.
Request
Allow
Appeal
Rec.
Request
Rec.
PL
8.6
5.9
4.2
10.6
0.1
+10.5
-
11.0
0.1
0
5.2
4.0
2.3
4.5
0.1
+ 4.4
-
8.0
0.1
Statement of Issue
Should we continue to fund Track Levitated Vehicle (TLV) Research)?
Background
During the 1975 budget review, a decision was made to terminate TLV. The
Secretary appealed, and funding of TLV was approved pending the completion
of a study of economic and social effects of implementing such a system.
Findings of Study:
- Economic viability within 20 years is low.
- Advantages relative to other modes are not demonstrated.
- Nevertheless, study called for continued program in promising
levitation technology.
Alternatives
#1. Continue the TLV research program. (DOT request)
FORD LIBITA'S
#2. Terminate TLV in 1975. $100K per year to monitor TLV efforts
in other countries. (OMB recommendation)
DOT request: Program consists of research on two kinds of TLV systems:
"Air Cushion" and "Maglev" (magnetically levitated). Both operate on
special guideways.
DOT considers vehicle levitation to be a promising technology, offering
potential payoff in high and low speed applications. Expected to reduce
maintenance cost because of minimum friction.
Would allow DOT to take advantage of large sunk cost (over $40 million since
1966). Should keep pace with TLV work in other countries, in case the tech-
nology proves useful.
18
OMB Recommendation
TLV does not offer significant advantate over existing technology.
- In low speed range (0-150 mph) conventional rail is less
costly, more energy-efficient, and can operate on existing
rights of way. Possibility of lower TLV maintenance cost
is more than offset by high initial investment. Germans
reportedly are discontinuing TLV research in this speed
range.
- In higher speed range (150-300 mph) aviation provides the
most viable alternative. Infrastructure is already in place.
Wide bodied jets and other improvements expected to provide
sufficient capacity for this market in the forseeable future.
Technical problems in the higher speed range are substantial.
For instance, entering a tunnel at high speed would lead to
sudden deceleration, due to compression of air.
- The only case in which DOT cites potential economic viability
for TLV is in the Northeast Corridor, and then under such
questionable assumptions as 1) complete replacement of air
travel by TLV and 2) saturation of high speed rail line (cur-
rently being planned).
TLV investment would be very costly to the Federal Government, both in short
and long term:
- $50M development cost through 1980.
- Pressures for Federal implementation in long term. At
least $3 billion for Northeast Corridor alone (1971 dollars).
Pueblo test center 1976 budget is decreased from $13 million (DOT request) to
$11 million, to reflect overall effect of TLV termination on the mission of the
center.
FORD is LIBRARY
19
Issue Paper
Department of Transportation/Federal Railroad Administration
1976 Budget
Issue #5: Intermodal Terminals
(Dollars in Millions)
1974
1975
1976
1977
DOT
OMB
DCT
DOT
DOT
OMB
DOT
OMB
Req.
Recom.
Appeal
Req.
Allow
Appeal
Recom.
Req.
Recom.
Program Level
-
7.2
-
-
19.0
2.0
+ 5.0
-
12.0
-
Background
The 1975 AMTRAK authorization enacted last October 8 contained $38M in authori-
zations for DOT to: 1) preserve historic rail stations, 2) design and coordi-
nate a new intermodal terminal at Union Station in Washington ($5M), 3) con-
struction of not less than 3 intermodal station demonstration projects ($15M)
and grants for state and local planning of such stations ($5M), 4) conduct West
Coast high speed railroad ground study ($8M). These authorizations were
supported by Sen. Magnuson.
On December 9 DOT submitted the following request:
Project
1975 Supplemental Request
1976 Request
Hi bric Terminal Preservation
$ 1M
$ 1M
L
Station Design
5M
--
Intermodal Demonstrations
--
15M
Intermodal Planning Grants
1M
1M
West Coast Study
.2M
2M
FORD LIBRARY
$ 7.2M
$19M
The OMB allowance provided no 1975 funds and $2M in 1976, $1.5M to be used
for the Union Station intermodal terminal design and $500K for a DOT study
on the merits of the intermodal terminal concept.
DOT Recommendation: DOT accepts the refusal of 1975 funds and the $1.5M 1976
allowance for a Washington intermodal station design. They request an additional
$5M in 1976 for application towards intermodal station demonstrations ($3M), the
West Coast study ($1M) and historic terminal preservation ($1M). DOT believes
this is a minimal level of effort which is required to pursue Congressional
desires as contained in the legislation. Also, certain second-level DOT officials
have made promises of an intermodal terminal for Seattle.
OMB Recommendation: Deny the DOT appeal. All of these projects have the potential
to be long lasting, expensive programs. The $500K provided to DOT for studying
the merits of the intermodal terminal concept should be sufficient to determine
if rail/bus or rail/mass transit connections are sound. At present DOT has made
no analysis which supports the concept. The $1M requested for historic station
preservation is not of sufficient scale to preserve more than a few small
terminals and will only build a demand for expanded funding. Moreover, approval
WC mean Federal participation in a presently strictly local activity. The
We Loast study should not be performed, given the discontinuation of tracked
levitated vehicle research (see Issue #4).
20
Issue Paper
Department of Transportation
1976 Budget
Issue #6: Rail Safety Enforcement
(Dollars in millions)
1975
1976
1977
1974
DOT
OMB
DOT
DOT
OMB
DOT
OMB
Actual
Request
Recom.
Request
Allow.
Appeal
Recom.
Request
Recom.
PL
8.0
9.8
11.7
16.5
15.8
+ 2.4
-
20.8
16.0
0
6.8
9.8
11.7
15.1
14.0
+ 2.4
-
19.8
16.0
EOY ( Inspectors
and clerks)
282
282
282
364
325
+52
-
438
325
Statement of Issue
What additional increase, if any, should be allowed for staffing and funding of
the Federal Railroad Administration's safety enforcement program in 1976?
Background
Rail safety problem generally increasing. Comparing the first half of 1974
with the same period in 1973: Accidents up 9%; derailments up 19%; injuries
up 13%; but fatalities down 13%.
CARD
rilroads: Hampered by lack of funds to maintain safe conditions; some
luction of train speeds has occurred.
Unions: Favor Federal involvement; strong pressure on Congress to increase
Federal program.
Congress: Critical of DOT efforts to date; Rail Safety Improvement Act of
1974 (pending final floor approval) would authorize a total of 430 positions
for inspectors and clerks. This is 53 more than DOT appeal and 105 more
than OMB allowance.
DOT: Current safety program consists of regulation, enforcement by field
inspectors, and research. Joint Federal/State inspection program just
begun. DOT 1976 request for safety enforcement represents a funding increase
of 230% and a 60% increase in positions since 1973, primarily as a response
to Unions and Congress. Difficult to assess impact of DOT programs to date.
Alternatives
#1. Additional increase of 52 EOY positions and $500K, representing a substantial
(but not complete) fulfillment of Congressional intent. $1.9M included in
appeal for two safety inspection cars, originally in 1975 request. (DOT request).
#2. No further increase in positions. Wait for evaluation of current efforts before
further increases. Fund safety inspection cars in 1975, using savings from
TLV program (see Issue #4). (OMB recommendation).
Age
Request: Represents "good faith" response to cope with safety problem.
Considered the minimum increase acceptable to Congress, even though it falls
short of the congressional authorization.
21
CMB Recommendation: 1976 allowance already includes an increase of 43 positions
er 1975. These were allowed on a selective basis. For example, DOT signal
inspectors were denied (only one signal-related accident in 1973). State
inspection program and use of inspection cars should offset much of need for
additional DOT safety personnel. The DOT safety program has grown rapidly over
the past four years, and should be examined carefully before further expansion
is allowed. The role of its new missions needs to be defined more clearly, and
the potential impact on DOT staffing determined.
FORU LIBRARY
22
Issue Paper
Department of Transportation
Issue #7: Additional Coast Guard Personnel
Statement of Issue
Should Coast Guard end-of-year military strength be increased by 200?
1975
1976
1977
Current
DOT
DOT
OMB
DOT
OMB
1974
Est.
Req.
Allow.
Appeal
Recom.
Req.
Recom.
Program Level
815
974
1,125
1,072
+2
-
1,230
1,096
Military
(End of Year)
37,600
37,486
38,351
37,774
+200
-
38,200
38,200
Alternatives
#1. Increase the Coast Guard military end strength by 200 to 37,974 and operating
expenses by $2 M.
#2. Require Coast Guard to stay within an end-of-year military strength of 37,774.
Analysis
DOT recommends an additional 200 positions to adequately carry out operational
rissions. Activities that would probably be decreased are: 61 to provide full
affing at Search and Rescue stations; reduction of 10 in surveil/lance of vessels
rom iron curtain countries; delay in manning second new icebreaker (96); and other
minor activities.
OMB believes Coast Guard's requirements can be met by:
--Reallocation of manpower from adjacent stations to man new Search and Rescue stations
--Awaiting the results of a comprehensive study of pollution enforcement before
increasing staffing.
--Absorbing other requirements within the total.
Agency Recommendation: Alternative 1. The Coast Guard mission will be impeded if the
appeal of 200 is denied.
OMB Recommendation: Alternative 2: Better allocation of workload should allow absorption
of all priority items within the ceiling recommended.
GERALD R. LISAARY FORD
23
Impending Issue
Department of Transportation
1976 Budget
Issue # 8: Regional Rail Restructuring
Summary
In order to implement the Regional Rail Reorganization Act of 1973, the
Federal Government is required to provide various types of financial
assistance. In certain cases, the form and amounts of assistance are
still undefined, and represent a major potential outlay threat not
currently specified in the 1976 Budget. The Act also required major up-
grading of the Washington-Boston rail passenger lines to provide 5 1/2 hr.
end to end running times. Estimates of the cost of this project exceed $1.5B.
Background
Regional Rail Reorganization Act designed to restructure bankrupt
Midwest and Northeast lines into streamlined, profitable, and private
system.
Two phases:
- Planning (January 1974 - January 1976); U.S. Railway Association
(USRA) has lead role; Congressional approval of final plan.
- Implementation ( 8-10 years following January 1976); Consolidated
Rail Corporation (ConRail) new operating entity.
No direct opportunity for Presidential control in either phase of the
restructuring process.
Federal Financing Presently Available:
- During Planning Phase
(Millions)
Planning process
$ 58 salaries and expenses
Emergency cash assistance
85 grants
Interim plant improvement
150 loan guarantees
- During Implementation Phase
BERALD
Service continuation subsidies
90/yr. grants
Labor protection
250 grants
ConRail financing
1,000 loan guarantees
General financial assistance
500 loan guarantees
for purchase and improvement
of rail property
24
Potential Additional Funding Requirements
Emergency cash assistance
- Original authorization of $85M to meet cash deficits of bankrupt
lines during planning period will be exhausted by February, 1975,
based on the current outlook.
- Will need to seek additional authorization, since planning will
last at least through January 1976.
- DOT requests a nominal amount ($20 million), to avoid "bailing out"
bankrupt estates, and meanwhile seek other ways to meet the need.
-. This need is estimated at $200-$400 million (assumes continued
economic downturn which may be partially offset by rate increases).
- DOT strategy reflected in 1976 Budget submission with
understanding that creative alternatives will be generated by DOT,
to insure that railroads have sufficient cash to maintain service.
Contingency of $400 million will be included in budget summary.
ConRail financing
- Financing authorized for ConRail ($1B in guaranteed loans) may not
be adequate.
- Updated estimate of ConRail's financial needs will appear in USRA's
Preliminary System Plan, February 26, 1975.
FORD LIBRAR,
Comme rce
Appeal
is
FORD
Department of Commerce
Appeal of Presidential Decision
GERALD
Export Promotion Services
LISEARY
Budget Authority/Outlays
July 1-Sept.
($ in millions)
1974
1975
1976
30, 1976
1977
Presidential Allowance
22
21
14
4
14
Commerce Appeal
22
21
20
5
20
Summary of Agency Appeal
Commerce is appealing your decision that experienced exporters should pay the
full cost of the export promotion services provided by the Department.
Commerce requests that it not be required to implement full cost recovery fees
for these experienced exporters, and that its 1976 budget allowance be increased
by $5.8 million to permit continuation of the subsidy to these firms. The
assumption underlying the Commerce appeal is that experienced exporters will not
use its services if full-cost fees are charged. Therefore, Commerce assumes that
this will result in fewer firms receiving Commerce assistance, and that this will
have an adverse impact on exports.
OMB Recommendation
OMB recommends no change in your decision. We believe that subsidies to
experienced exporters are not in the national interest, and that ending these
subsidies will not adversely affect U.S. trade.
The Commerce assumption that full-cost fees will adversely affect U.S. exports
has no basis in fact. Experienced exporters are aware of the availability of a
variety of alternative private export services which they can use if necessary.
The experienced exporters will decide whether to use the private services or the
Commerce services based on their evaluation of the cost-effectiveness of each.
There is no evidence that these experienced exporters will discontinue their
export efforts because of the full-cost fees.
The full-cost requirement does not apply to the Commerce programs to promote
East-West trade, or to inexperienced exporters, so Commerce will be able to
continue to promote trade with Socialist economies as in the past, and to assist
small firms develop export markets. The decision also will not prevent Commerce
from providing national leadership in encouraging international trade.
The Commerce assumption that experienced exporters will not use its services at
full-cost fees is not based on any test. There presently is no basis for
estimating the amount of demand by experienced exporters for the services at full
cost.
2
If there is substantial use of the full-cost services, then the Commerce appeal
has no substantive basis. If there is little or no use of the services, it
could result in some increase in the cost of continuing services to inexperienced
exporters because of fixed overhead costs. In the latter case we would then
review the estimates of direct appropriations needed to maintain the program
for new exporters. In this way we can avoid any reduction in services to new
exporters.
3 3 FORD LIBRARY
DEPARTMENT
OF
COMMERCE
THE SECRETARY OF COMMERCE
Washington, D.C. 20230
UNITED STATES OF AMERICA
December 13, 1974
The President
The White House
Washington, D. C. 20500
FOPD
Dear Mr. President:
Consonant with your objective to restrain Federal spending,
we are fully supportive of the adjustments in our FY 1976
budget request, with but one exception. This exception,
while small in budgetary magnitude, has such broad policy
implications that I am compelled to request your reconsidera-
tion of this item. It consists of a reduction of $5.8 million
and 153 positions in our current level of export promotion
activities, such as overseas trade centers, trade fairs and
trade missions.
Your Export Council, with whom I work most closely, has urged
in the strongest terms that we redouble our efforts under
your leadership to keep our exports as a strong factor in our
national economy. As compared with other nations, we have a
relatively modest but highly effective trade promotion apparatus.
In these critical times it deserves your fullest support for
the following reasons:
1. Our Government export services directly assist in
generating some $3 - $4 billion of U. S. export sales annually
which affect 210,000 to 280,000 jobs for U. S. workers and
return $1.2 - $2 billion in U. S. tax receipts.
2. Our Government export services provide national
leadership to the export drive spearheading the complementary
export development activities of regional, state and local groups,
trade associations and other industrial development organizations.
3. Early passage of the trade bill will provide widening
opportunities for U. S. exporters in a world setting in which
Near Eastern markets offer a vast new potential; in which the
Socialist economies are at the beginning of a new era for the
utilization of American products, and in which our principal
trading partners demand increasing usage of high technology
U. S. manufactures.
4. Our Government export services are particularly
effective in assisting medium-and small-sized manufacturers,
over 10,000 of whom utilize these services annually.
At a time when other nations are intensifying their export
promotion activities, to be curbing our international sales force
would seem to be false economy. As we consider the possibility
of creating Federal employment, it would also seem most unwise
to be cutting back in an area which is demonstrably productive
in terms of the economic welfare of the nation.
Therefore, I urge that you fully restore the proposed reductions
in our export promotion programs. I feel so strongly on this
point that I request the opportunity to review this matter in
greater depth with you personally if need be.
Respectfully,
Secretary of Commerce
Civil Service
Commission
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR THE PRESIDENT
From: Roy L. Ash
Subject: 1976 Budget Decisions. Civil Service Commission
The agency request and my recommendations with respect to 1976 budget
amounts for the Civil Service Commission are presented in the tabulation
attached (Tab A). A summary of the principal budget decisions on which
we have reached agreement with CSC is provided as background information
(Tab B).
Four key issues have been identified for your consideration (detail at
Tab c).
I. Cost-of-Living Adjustments for Civil Service Retirement
CSC and OMB concur that legislation should be submitted to remove
distortions in the present statutory formula for determining
automatic cost-of-living increases in retirement annuities. This
will reduce costs by $61 million in 1976, $412 million in 1977,
and $842 million in 1980. In view of the sensitivity of this
proposal and expected opposition from employee groups, we have
prepared an issue paper for your review.
Decision: Approve CSC/OMB recommendation
Disapprove CSC/OMB recommendation
FORD LIBRARY i GENALD
See me
II. Contribution to Civil Service Retirement
CSC would not support a legislative proposal to change employer
and employee contribution rates to the Civil Service Retirement
Fund. While they do not object to establishing a Presidential
panel to undertake a policy review of Civil Service retirement
financing, they oppose making any decision to change the rates
until further study and analysis has been completed.
2
OMB recommends that legislation be proposed to increase the
employer and employee contribution rates to cover anticipated
cost-of-living increases for Federal retirees. The increased
contributions would be phased in over a three-year period with
the proposed first step increasing the 7% contribution rate
to 8 1/4% in 1976. Actual dimensions of the legislative proposal
would await completion of review by a top level panel. Reflecting
anticipated rate increases in the budget would establish a
presumption of the need for change and demonstrate the seriousness
of the proposal. The anticipated rate increases would place the
retirement fund on a sounder financial basis and help to reduce
total budget deficits by $282 million in 1976, $1.2 billion in 1977,
and $2.2 billion in 1980.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
III. Federal Employees Group Life Insurance Premiums
CSC agrees to increase employee contribution rates to cover
actuarial costs. However, they would defer the increase until
July 1, 1975, in order to allow for consultation with employee
groups. They oppose making the increase effective in 1975 and
would prefer not to reflect a proposed increase in the budget.
OMB proposes that the Commission exercise its authority to
increase the rate effective February 1, 1975. The rates are
deficient by 17.5% even though the law requires that they be
periodically adjusted to cover the liability of the insurance
program. Increasing the rates in February would still allow
for consultation with employee groups, but would reduce 1975
outlays by $40 million.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
3
IV. Central Personnel Operations for Federal Agencies
CSC proposes that its operations budget (excluding Intergovernmental
Personnel Assistance activities) be increased from $85 million
(adjusted for nonrecurring 1975 costs) to $98 million for 1976. For
recruiting and examining activities, which account for nearly half of
the operations budget, the CSC request programs a 13% decrease in
productivity between 1974 and 1976. CSC maintains this decrease is
necessary in order to meet legal obligations placed on the Commission
by statute and court decisions.
OMB proposes that the operations budget be increased from $85 million
to $88 million, primarily for rent costs, full year operation of the
new appeals system for employees, and various commitments to improve
Federal personnel management. The OMB recommendation reflects an
assumption of 2.5% annual productivity gains for recruiting and
examining between 1974 and 1976 which should be achievable in spite
of legal requirements which were placed on the Commission prior to
1974. The resulting savings would be used to help finance increased
workload and new initiatives to achieve system improvements. We
suggest that a comprehensive study be undertaken of the effectiveness
and efficiency of the recruiting and examining system by reviewing
the policies and procedures for hiring Federal employees.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
Both CSC and OMB recommend establishing a Presidential panel to review
the comparability of total compensation (pay and fringe benefits) for
Federal employees to that being paid in the private sector (summary at
Tab B).
Civil Service Commission
1976 Budget
Summary Data
($ in Millions)
Employment
Budget Authority
Outlays
Full-time Permanent
Total
1974 actual
9,185
5,692
6,190
7,334
1975 January budget
10,322
7,341
enacted
6,255
10,322
7,440
7,341
supplementals recommended
XXX
XXX
(pay and program)
3
3
reestimates
XXX
XXX
927
19
program change
XXX
XXX
:
-40
OMB recommendation
XXX
XXX
11,252
7,323
6,363
7,848
1976 planning ceiling
12,272
8,560
XXX
agency recommendation
XXX
12,401
9,127
OMB recommendation
7,670
9,181
12,815
9,031
6,520
8,000
Transition period
agency recommendation
2,180
2,489
OMB recommendation
7,590
9,500
2,424
2,461
6,520
8,000
1977 OMB estimate
16,020
10,257
6,620
8,120
SERALD
?
FORD
LEVERY
1976 Budget
Civil Service Commission
OMB and CSC have reached agreement on budget and program recommendations
for the following:
B
1. Intergovernmental Personnel Assistance. The agency initially
requested that the IPA grant funding be increased from $15 million
to $45 million for expansion in size and scope of the program.
Administrative expenses and technical assistance were also initially
proposed to be increased from $5 million to $11 million. While
CSC would prefer to augment the IPA program which they believe to
be highly effective, they have agreed that the program should be held
to the 1975 level and the evaluation of IPA activities scheduled for
1976 should be completed prior to consideration of future expansion.
2. Compensation of Federal Employees. Fringe benefits for Federal
employees are determined by separate legislative actions and are
not taken into consideration in determining Federal pay levels.
For example, in the area of retirement benefits, more than six
benefit liberalizations, with annual amortization cost of $300 million,
were enacted by the Congress in the past two years. The 1976 budget
calls for a Presidential panel to make policy recommendations for how
the Federal Government can best determine the appropriate level of
total compensation for its employees comparable to the non-Federal
workforce. Under the Pay Reform Act, the determination of comparability
with private industry is limited solely to pay levels without consideration
of other forms of compensation such as retirement, health and life
insurance, annual and sick leave, and job security.
FORD LIBRAR i GERAL
Issue Paper
Civil Service Commission
1976 Budget
Issue #1: Cost-of-Living Adjustments for Civil Service Retirement
Statement of Issue
Should legislation be proposed to change the formula for determining cost-
of-living adjustments for Federal civilian retirees?
Background
The Civil Service Retirement (CSR) system consists of 2.6 million active
employees and 1.4 million retired employees and survivors. In 1969
legislation was enacted which significantly increased retirement benefits,
including a 1% bonus added to each automatic adjustment for cost-of-living
increases. The 1% bonus provision was added by the Congress largely to
compensate for the five month lag between the CPI increase and receipt of
annuity increases. This provision has been a significant factor in driving
up annual retirement costs which have increased from $1.8 billion in 1969
to $5.7 billion in 1974. Costs are projected to reach $9 billion in 1976
and $15 billion by 1980. Outlays for annuitants as a percentage of total
payroll have increased from 8% in 1969 to 18% in 1974 and are projected to
reach 30% by 1980.
The present formula for determining cost-of-living adjustments progressively
overcompensates annuitants in the long run. For example, if the CPI increases
by 6%, a 1% bonus is added giving the annuitant a 7% increase for the rest
of his life. Yet, the next increase assumes that the annuitant only received
a 6% increase. Assuming a 6% average annual inflation rate, the present
formula would overcompensate by an aggregate 12% over the 20 year retired life
would be 6%.
of the average annuitant. With 3% annual CPI increases aggregate overcompensation
Alternatives
FORD
1. Continue the present formula for cost-of-living adjustments for
is
CS retirement.
2. Obtain legislation to remove the distortion in the present cost-
GERALD
LIBRARY
of-living formula for CSR by requiring the effect of the 1% bonus
recommendation). to be included in determining subsequent increases (CSC/OMB
Analysis
July 1-Sept.
Benefit Outlays
1974
1975
1976
30,
1976
1977
($ in millions)
1978
1979
1980
Alt. #1
5,669
7,273
8,960
2,437
10,436
Alt. #2 (OMB rec.)
11,944
13,337
14,664
5,669
7,273
8,899
2,417
10,024
11,442
12,689
13,822
-61
-20
-412
-502
-648
-842
2
The Comptroller General reviewed the experience under the CSR system since
1969 and concluded in a February 1974 letter to OMB and CSC, that the excess
of annuity adjustments above the cost-of-living index was not the intent of
the Congress in enacting the present formula. While his review indicated
that the formula will create a sizeable and unintended increase in retirement
costs and in total Federal budget outlays, a subsequent formal report by
GAO was silent on this matter. The present formula enjoys strong support by
employee organizations and the Congress, particularly the Post Office and
Civil Service Committees. The 1% bonus provision is viewed by some as an
essential provision to compensate for the five month lag in receiving cost-
of-living increases, maintain the standard of living for Federal retirees
and allow for possible inaccuracies in CPI caluclations. Proposals to change
the formula would be viewed by employee groups as a deliberalization of
benefits.
The CSR formula under both Alternatives 1 and 2 provides for periodic
FORD
adjustment for changes in the cost-of-living since annuity increases are
granted whenever the CPI goes up by 3% for three consecutive months. Many
Federal transfer payment programs do not have automatic cost-of-living
adjustments. Others provide only for annual increases. CSR on the other
hand, goes far beyond making timely adjustments by allowing the 1% bonus
to be continued indefinitely and to compound the rates for subsequent
increases. Alternative 2 would eliminate distortions in the present system
by requiring the effect of the 1% bonus to be included in determining the
base for calculating subsequent increases. Alternative 2 would reduce outlays
by $61 million in 1976 (effective for six months) and $412 million in 1977.
Through 1980 aggregate saving would be $2.5 billion.
Since retirement systems for Military, Foreign Service Officers and some CIA
personnel have the same cost-of-living adjustment formula as CSR, the new
formula should also apply to these other systems. This could be requested
in joint or separate legislative proposals. Applying the new formula to all
of the Federal employee retirement systems would broaden the base of organized
opposition. However, such opposition would be present even if the new
formula were limited to CSR since the other groups would be fearful of later
extension.
CSC/OMB recommendation: CSC agrees that changing the cost-of-living formula
for retirees has merit. While the chances for obtaining enactment would be
modest, the persistent growth of the uncontrollable part of the Federal budget
and the exorbitant burden of the present formula on the taxpayer argue that
the proposal should be advanced to the Congress and be reflected in the 1976
budget.
Issue Paper
FORD
Civil Service Commission
1976 Budget
Issue #2: Contributions for Retirement and Disability
Statement of Issue
Should legislation be proposed to increase employee and agency contributions
to Civil Service Retirement to help finance costs of anticipated benefit
increases for cost-of-living adjustments?
Background
The Civil Service Retirement (CSR) program is partially financed by 50/50
matching contributions by employer and employee -- now 7% and 7% of payroll.
The contribution rates are set by the Congress and are intended to cover
the present value of future benefits for participating employees -- referred
to as "normal cost". The fund is also subsidized by appropriations for
partial payments on the unfunded liability.
At present, all CSR funding -- including normal cost calculations for payroll
withholdings -- exclude income from anticipated pay raises and outlays for
anticipated cost-of-living increases. Consequently, the contributions to be
paid into the fund are understated and the benefits are paid out of the fund
without commensurate income. This weakens the financial soundness of the
retirement fund and places a burden on the general taxpayer since total budget
deficits increase to the extent income from employee withholdings are deficient.
For the system to be adequately financed, employer and employee contributions
would each need to be increased to 10.75% of payroll.
The 1974 Pension Reform Act requires private pension plans to be fully funded
within 40 years and calls for Congressional committees to complete a study
of levels of participation and financing of Federal, State and local retirement
systems. Contrary to our expectation for private plans, the CSR system
(which is exempt from the Pension Reform Act) continues to face increasing
unfunded liability. Despite the 1969 Daniels amendments to arrest the
growth of CSR unfunded liability, it has increased from $55 billion in 1969
to $77 billion in 1974. Unfunded liability is projected to reach $84 billion
by 1976 and $117 billion by 1980.
Alternatives
1. Maintain the present normal cost calculation which excludes cost-
of-living increases and thereby maintain the present 7% and 7%
employer/employee contributions (Agency request).
2. Propose legislation to adjust normal cost to include future cost-
of-living increases with increased employer/employee contributions
to be phased in over three years (OMB recommendation).
2
Analysis ($ in millions)
July 1-Sept.
Income from employees
1975
1976
30, 1976
1977
1978
1979
1980
and Postal Service
Alt. #1 (Agency req.)
-2,959
-3,138
-851
-3,403
-3,635
-3,859
-4,077
Alt. #2 (OMB rec.)
-2,959
-3,420
-1,003
-4,618
-5,582
-5,926
-6,261
Total Difference
--
282
152
1,215
1,947
2,067
2,184
(From employees)
--
(230)
(124)
(990)
(1,587)
(1,685)
(1,780)
(From Postal Service)
--
( 52)
( 28)
(225)
(
360)
(
382)
(
404)
The retirement fund can be placed on a sounder basis by either reducing the
benefit levels or increasing contribution rates. A 15% reduction in present
benefit levels would be the equivalent of a 3.75% increase in contribution
FORD
rates for both employers and employees (using most recent 1972 data and
assuming a 3.5% annual inflation rate over a 20-year period).
Increasing the contribution rates is a more viable approach than reducing
benefits. While such an increase amounts to a 3.75% payroll tax hike for
Federal employees, the increases could be phased over three years: from 7%
to 8.25% in 1976, to 9.50% in 1977 and to 10.75% in 1978.
A three-step increase in contribution rates should not significantly impair
the Government's ability to attract and retain qualified employees. While
there is a paucity of good comparative data, the present CSR system is more
generous than most non-Federal plans. The BLS 1972 report on the compensation
structure of the Federal Government and private industry indicates that the
Government paid 10.6% of payroll for all sources of funding compared to 8%
paid by the private sector. The percentage of payroll for the Federal
Government does not take into account automatic cost-of-living increases
which are not covered by any funding and thus remain as a liability which
must eventually be met by the Government. If this liability were taken into
account, the effective BLS percentage for the Federal Government would
increase from 10.6% to 18.2% -- well above contributions by private employers.
The CSR compares favorably with most other pension plans only a few of which
have any cost-of-living provision.
Alternative 2 proposes establishment of a Presidential panel to undertake a
policy review of the financing of Civil Service Retirement and to determine
what indreases, if any, should be made in the contribution rates to the CSR
to cover cost-of-living increases. The panel would report in six months and
thus permit legislation to be submitted in June 1975 for enactment by
January 1976.
The report of the Presidential panel will need to review findings in the
upcoming actuarial valuation of the fund which will soon be submitted to the
Congress. The Presidential panel's recommendations need not await the
Congressional committee review which will cover State and local systems and
not be available until December 1976.
Under Alternative 2, the budget would reflect an increase in the contribution
rates from 7% to 8.25% effective in the second half of 1976 and through the
transition quarter, with the second and third steps scheduled for 1977 and
1978 respectively. These increases would: (a) increase Governmental receipts
3
from additional employee withholdings (treated as tax revenues) and (b) reduce
outlays through additional offsetting receipts from Postal Service employer
contributions -- assuming no concomitant increase in Federal subsidy to
Postal Service. Alternative 2 would reduce budget deficits by $282 million
in 1976; $1.2 billion in 1977 and by a rate accelerating above $2.1 billion
by 1980.
Agency request. The Civil Service Commission does not support a proposal
that the cost-of-living adjustments should be included in establishing
employer/employee contributions to the fund. They would not object to a
Presidential panel studying this issue, but strongly oppose reflecting a
proposal in the 1976 budget. They believe that the review should be
completed along with consultations with employee unions before arriving at
any decisions. They argue that to do otherwise would place the President
in a position of appearing to act unfairly and arbitrarily and in a manner
which would appear to foreclose chances for the Commission to be objective.
OMB recommendation: Establishing a Presidential panel would provide for a
long overdue review of the policy basis on which contribution rates should
be established; namely, whether cost-of-living increases should be included
in normal cost calculations or remain as a liability solely of the general
taxpayer. We recommend the budget estimate reflect the proposal for
increasing retirement fund contribution rates and believe this would establish
a presumption of the need for change and demonstrate the Administration's
seriousness in addressing this issue. The actual dimensions of the
legislative proposal woud, of course, await completion of the panel review
scheduled for June 30, 1975.
GERALE FORD LIBRARY
Issue Paper
Civil Service Commission
1976 Budget
Issue #3: Federal Employees Group Life Insurance Premiums
Statement of Issue
FORD
Should premiums for Federal Employees Group Life Insurance be increased?
Background
Premiums for FEGLI are collected from Federal employees (2/3 share) and
employer agencies (1/3 share). The Civil Service Commission is required
to administratively set premiums for FEGLI at the level cost. Level cost
is the biweekly amount per $1,000 coverage required to cover projected
group liability in the insurance fund.
Level cost is estimated at 50.0¢ per thousand for 1975 and 50.25¢ for 1976.
Present collections remain at the 1968 rate of 41.25c. The increase in
level cost since 1968 is attributable to: (1) decreases in the proportion
of total coverage for females and younger employees; (2) a trend toward
earlier retirements; and (3) a loss of interest income from shortfall in
collections.
In 1973, the Commission completed an evaluation of the fund, which indicated
that the rates had been deficient since 1968. CSC has deferred increasing
the rates because it wanted to allow the Congress time to consider options
for increasing minimum coverage or other benefit changes. Continued underpayment
of premiums (now 17.5% short) will continue to compound fund deficits and
increase the requirement for future income. The reduced income due to
underpayment also has the effect of increasing outlays through loss of trust
fund income from Federal employees.
The Commission believes that any increase in premiums should be accompanied
by legislation to increase minimum coverage and to provide optional family
insurance paid entirely by employees. The present minimum coverage of $10
thousand was established in 1968 and, in view of pay raises in the last six
years, the minimum should accordingly be raised to $14 thousand. Such an
increase in minimum coverage would lower the level cost by 2.2c by reducing
the ratio between projected income and group liability since a larger
proportion of total insurance coverage would be for women and younger
employees. Consequently, level cost would be 48¢ per $1,000. Employee
organizations have been seeking family insurance with the Government paying
1/3 or more of the cost. The CSC proposal for 100% employee financing of
optional family coverage would not change level cost, but would provide a
convenient payroll deduction for a family plan.
Alternatives
1. Defer increase in premiums until July 1, 1975, and submit legislation
to increase minimum coverage and allow family option, but do not
reflect the proposals in the 1976 budget (Agency request).
2. Increase premiums, effective February 1, 1975, to level cost (48¢)
and propose legislation to increase minimum coverage and allow family
option. Proposals to be reflected in the 1976 budget (OMB recommendation).
2
Analysis
July 1-Sept.
FEGLI outlays*
1974
1975
1976
30,
1976
1977
1978
1979
1980
($ in millions)
Alt. #1 (Agency req.)
-156
-244
-320
-66
-301
-330
-363
-399
Alt. #2 (OMB rec.)
-156
-284
-320
-66
-301
-330
-363
-399
* Contribution from employees and employers creates minus outlays in CSC fund.
Further delay in increasing the premium rates would compound the loss of
revenue in the fund and increase future deficits. Increasing premiums
to 48c per thousand (assuming acceptable Congressional action on proposed
benefit legislation) would cost only 75c per paycheck for the average
participating employee (GS 9-4). If no change were made CSC outlays would be
about $100 million higher per year.
An increase in the premiums will not be popular with employee unions.
However, the proposed benefit legislation should help to mollify opposition.
A legislative proposal carries some risk that the Congress might amend
the bill to require 100% Federal funding of employee life insurance (as
is already the case for Postal employees) and/or Federal cost sharing for
the family option. If so amended, the proposed benefit bill would become
unacceptable -- costing over $700 million per year.
Both CSC and OMB concur that the premium rates should be increased but
disagree over the effective date:
FORD
CSC would defer increase until July 1, 1976, to allow time for
LIBRARY
consultation with employee groups prior to announcement of any
decision. They would prefer that the proposed increase not be
reflected in the budget.
OMB believes the premiums should be increased to 48c per thousand
effective February 1, 1975, and further increased to 50c per thousand
on July 1, 1975, if the Congress has not enacted the proposed
benefit legislation. This timing would still allow for CSC consultation
with employee groups but would enable proposed benefit legislation
to be considered on its own merits. An unacceptable benefit bill
could still be opposed without rescinding the increase in premium
rates which would have already been effected administratively.
Agency request: CSC deferral of rate increase until July 1, 1976, would allow
six months for consultation.
OMB recommendation: Making rate increase effective February 1, 1975, would
allow 30 days for consultation without tying it to action on proposed
legislation. The rates could be increased further if the minimum coverage
bill were not enacted. Since the law requires that premium rates be
adjusted periodically by the Commission to recover the level cost and the rates
have been deficient since 1968, we recommend they be adjusted on February
1, 1975.
Issue Paper
Civil Service Commission
1976 Budget
Issue #4: Central Personnel Operations
Statement of Issue
What is the appropriate level of resources for Federal central personnel
operations?
Background
For directly funded Federal central personnel operations (adjusted for non-
recurring 1975 costs) the Commission is proposing a 1976 budget increase
of $13 million (from $85 million to $98 million) and a 20% increase in
personnel above the 1975 recommended level.
Over the last five years, resources for central personnel operations have
steadily increased. Between 1969 and 1974 the program level has increased
more than 40% after allowing for annual pay raises. The 1976 request (also
adjusted for pay raises and rental costs) would be about 17% above the 1974
level. The Commission's total permanent employment for all activities increased
at an average annual rate of 4.9% between 1969 and 1974. During this same
period, Government-wide civilian employment, excluding DOD civilian and military,
increased at an average annual rate of only 1.4%. For 1976, the Commission is
requesting 24.3% in personnel increase over 1974. The Commission's employment
was not reduced in the 1975 Government-wide employment cutback which affected
most other agencies.
Alternatives
1. Provide full amount of request for 1976 by allowing a decrease in
productivity in response to greater demands for documentation in
recruiting and examining and an increase in resources for new
initiatives (Agency request).
2. Provide an increase of $3 million and require increase in produc-
tivity to offset additional workload and new initiatives (OMB
recommendation).
Analysis
1974
1975*
July 1-Sept.
Budget Authority
actual
adjusted
1976
30, 1976
1977
($ in millions)
Alt. #1 (Agency req.)
68
85
98
26
103
Alt. #2 (OMB rec.)
68
85
88
24
90
*Adjusted to exclude 1975 nonrecurring costs of $2.7 million for ADP acquisition.
Nearly one-half of the resources for central personnel operations for Federal
agencies (excluding direct funding for strenthening State and local personnel
administration) are for recruiting and examining activities. The remaining
resources are spread among a wide variety of activities including: personnel
2
investigations, training, employee appeals and labor relations, and
personnel policy development. A review of the total resource and program
levels for recruiting and examining indicates that the Commission's 1976
request would result in an overall 12.8% decrease in productivity from 1974.
The decrease ranges from -5.5% to -30.0% for the various recruiting and
examining workload elements:
Productivity Index (PI) and Man-Years (MY)
(1968 Base Year)
Recruiting and
1974 actual
1975 req. *
1976 req.
1974-76
Examining:
PI
MY
PI
MY
PI
MY
change
Applications
151.20
663
136.40
706
131.90
730
-12.8%
Inquiries
123.77
552
119.25
607
116.94
619
-5.5%
Hires
73.69
533
53.46
652
51.56
676
-30.0%
Examiniations
127.70
300
114.86
353
114.21
355
-10.6%
Totals
117
2,048
105
2,318
102
2,380
12.8%
*Estimates reflect initial CSC request which proposed 1975 supplemental.
The Commission maintains that decreases in productivity must be tolerated in
order to improve the quality of recruiting and examining activities and
increase the documentation of hiring decisions. Without deliberately pro-
gramming productivity decreases, the Commission believes it could not meet
the legal obligations placed on it by the Veterans Preference Act, the Civil
Rights Act, and the Griggs decision of the Supreme Court that hiring
standards be job related and free from discrimination.
The recruiting and examining program is basically labor intensive and represents
relatively routine work. Modest annual productivity gains should be realized in
CSC's recruiting and examining activities as a result of annual pay comparability
increases and systematic within-grade promotions. Additional gains should be
expected through various CSC personnel management efforts for job enrichment and
design, training and career development, and use of cash incentives for group
performance. While the Commission is faced with many external forces (e.g.,
more active employee groups and court decisions) the same holds true for other
agencies as well -- e.g., environmental impact, protection of privacy, freedom
of information, economic conditions. There is little reason to depart from the
2.5% guideline of annual productivity gain expected for most agency activities.
The productivity decreases programmed by the Commission are not justified:
The 20 year old Veterans Preference Act, the six year old Civil
Rights Act and the five year old Griggs decision have been
impacting on recruiting and examining operations for several years
and should not now suddenly deflate productivity below the 1974 level.
The Griggs vs. Duke Power decision requires that employment examinations
must be job related unless they are demonstrated not to result in de
facto exclusion of minorities or women. In the past, the Commission has
long argued that their examinations have been nondiscriminatory and,
therefore, their program should not be appreciably affected by this
decision.
3
The Commission has not defined specific improvement objectives which
management would expect to achieve in 1976 by incurring the programmed
decrease in productivity.
Pressures on the Commission to make their recruiting and examining
more job related or clearly nondiscriminatory appear to raise
fundamental questions concerning qualification requirements and
selection criteria rather than suggesting increases in basic
resources for administering the system. The impact on CSC resources
should be primarily for developmental efforts to change the system.
While there might be some resource impact on administering examinations,
there is little evidence that these pressures should increase
resources required for the larger workload elements -- answering
inquiries, processing applications and placing new hires.
The Commission believes it is unable to achieve normal productivity gains in
its operations and in fact is proposing a program which reflects substantial
productivity decreases. Consequently, a comprehensive review of recruiting and
examining operations should be undertaken to examine major changes which could
improve effectiveness and efficiency by reviewing the policies and procedures
for hiring Federal employees. The study should be carried out under the
direction of an interagency steering group to assure responsiveness to agency
program objectives.
OMB recommendation would increase operations budget from $85 million to $88
million, primarily to allow for increased rent costs and full-year operation
of new appeals systems as well as for various commitments to improve Federal
personnel management. Workload increases and system improvements would be
funded through savings resulting from deliberate actions to increase productivity
by 2.5% per year between 1974 and 1976. Should expected productivity gains
not be fully realized, improvements could be selectively scaled down or deferred.
Agency request: CSC would respond to pressures to strengthen its central
personnel operations by requesting additional resources rather than taking
steps to increase productivity.
OMB recommendation: Holding resources for central personnel operations to
the 1975 level would require the Commission to increase productivity and
selectively reporgram its priorities. OMB recommends a comprehensive study
of recruiting and examining and believes it would be premature to increase
resources until such a review is completed. This would not rule out later
consideration of supplemental funding for 1976.
FORD LIBRARY &
Treasury
Appeal
Department of the Treasury
1976 Budget
Appeal of Presidential Decision
Budget Authority ($ Millions)
1975
1976
1974
DOT
Pres.
DOT
Pres.
Actual
Req.
Allow
Appeal
Recom.
Req.
Allow
Appeal
Recom.
Customs Service
241
282
282
--
--
301
285
+16
+7
Internal Revenue
Service
1,309
1,530
1,526
+5
--
1,651 1,586
+65
--
Other
376
475
475
--
--
535
535
--
--
Total
1,926
2,287
2,283
+5
--
2,487
2,406
+81
+7
1975
Summary of agency appeal
Secretary Simon is appealing $4.6 million to be added to a 1975 supplemental
appropriation for the Internal Revenue Service to carry out Treasury responsibilities
under the new Employee Retirement Security Act of 1974.
recommendation
OMB recommends no further additions to the $6.6 million already included in the
proposed 1975 supplemental, deferring additional resources until more precise
workload data are available. At that time OMB would entertain a request for an
additional supplemental appropriation.
1976
GERALD FORD LIBRERY
Summary of agency appeal
Secretary Simon is appealing your decisions on the Internal Revenue Service and the
Customs Service. Your decisions assumed that the 1976 program requirements of these
two bureaus could be accomplished with significantly less staff than requested by
the Treasury Department by requiring productivity improvements in their work-
force. Both of these bureaus have experienced productivity declines over the
past few years. Secretary Simon's appeal letter states that the Treasury Department
has made "great strides" in improving productivity in most Treasury operations, and
he suggests that OMB did not take these gains into account in the 1976 budget
recommendation. He questions whether productivity improvements can be forced
during the budget process by "simply reducing manpower in the face of increasing
workloads.
"
The Secretary requests restoration of $65 million and 4,365 man-years for the
ernal Revenue Service and $16 million and 644 man-years for the Customs Service.
2
OMB recommendation
OMB recommends no change in your decision for the Internal Revenue Service. The
productivity improvements cited by the Secretary as being projected throughout
the Treasury Department are not evident in the 1976 budget request for this bureau.
Treasury has presented no new information beyond that utilized to develop the OMB
recommendation. Your decision provided the IRS with an increase of $60 million
over 1975 and 2,296 additional man-years. The 2.8 percent increase in personnel
already approved for 1976 compares favorably with the projected 2.0 percent growth
in tax filings, the principal workload measure in IRS.
Customs Service
OMB recommends that you grant $6.9 million and 347 man-years of the Secretary's
appeal to recognize that it will take more than one year to move the Customs
Service from a declining to an increasing productivity. The recommended restoration
will still require a small productivity improvement in 1976. There was no additional
justification offered by the Department to support granting of any higher level of
resources.
For your information and referral, we have attached summary materials you reviewed
in making decisions on the Treasury Department budget request for 1976.
GE34L5 FORD LIBRARY
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR: THE PRESIDENT
FROM:
Roy L. Ash
SUBJECT:
1976 Budget decisions: Department of the Treasury
The agency request and my recommendations with respect to 1976 budget
amounts for the Department of the Treasury are presented in the tabula-
tion attached (Tab A). A summary of the principal budget decisions
reflected in my recommendation is provided as background information
(Tab B).
Seven key issues have been identified for your consideration (detail at
Tab C).
I.
IRS Tax Audit
Treasury proposes strengthening tax compliance by raising the level
of audit coverage to 2.6 per cent of tax returns filed, thereby generating
additional revenues and contributing to a balanced budget.
OMB recommends maintaining the 1975 level of 2.5 per cent audit
coverage which will increase the absolute number of tax audits. Tax
compliance will be encouraged by program increases in areas other than
audit.
1030
Decision: Approve agency recommendation
Approve OMB recommendation
See me
II. IRS Information Returns Processing (document matching)
Treasury proposes annually transcribing, correcting, and matching
one-fourth of all information documents and tax returns.
OMB recommends initiating a selective program of document matching
to stimulate voluntary taxpayer compliance by concentrating on documents
with the highest potential yield or greatest likelihood of reporting in-
accuracy.
2
Decision: Approve agency recommendation
Approve OMB recommendation
See me
III. IRS Data Processing
Treasury proposes adding 950 man-years in 1976, representing a 3
per cent growth in personnel, to process an estimated increase of 2 per
cent in the number of tax returns filed.
OMB recommends maintaining the 1975 level of manpower, thereby relying
on increased productivity aided by additional automatic data processing equip-
ment to process the larger number of returns.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
IV. IRS Administration of Pension Reform
Treasury proposes a supplemental appropriation of $10.0 million in
1975. For 1976 they request a further increase of $14.1 million. This
would provide funds to handle increased responsibilities under the new
Employee Retirement Security Act of 1974.
OMB recommends $6.6 million of the $10.0 million 1975 request and
a further increase of $4.1 million for the program in 1976. It defers
additional increases in 1976 pending receipt of actual workload data.
This is the same approach being recommended in the Labor Department
request for this program.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
GLRRAT FORD CEBRARY
V.
IRS Tax Fraud Investigation
Treasury proposes adding 8 man-years in 1976 to handle increased
case complexity, as part of an overall effort to demonstrate to taxpayers
that those who do not meet their tax obligations are identified and pro-
secuted.
OMB recommends investigating the same number of criminal cases which
IRS projects for 1975 and 1976, using an investigation-to-man-year standard
similar to the ratio achieved in 1973 and 1974 and budgeted for in 1975,
thereby reducing the 1976 budget 329 positions below the 1975 level.
3
Decision: Approve agency recommendation
Approve OMB recommendation
See me
VI.
Taxpayer Service
Treasury proposes adding 63 positions on top of the base of 3,956
man-years provided in the OMB alternative (which reflects an increase of
878 man-years over the 1975 base) to conduct a special assistance program
for the elderly and inner city taxpayers.
OMB recommends accomplishing the special emphasis program by redeploy-
ing some of the 3,956 man-years already provided in the 1976 budget for tax-
payer service.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
VII. U. S. Customs Service
Treasury proposes to add 311 man-years and $19 million in 1976 to
handle additional imports and people entering the United States and to
expand enforcement programs to uncover duty fraud and interdict narcotics
and other contraband.
OMB recommends handling the additional imports and people through a
2.5% increase in productivity, thereby reducing 323 positions below the
1975 level.
Decision: Approve agency recommendation
Approve OMB recommendation
See me
GEBRLO FORD LIGRARY
Attachments
Tab B
1976 Budget
Department of the Treasury
Background Information
Treasury requests $40.8 billion in new budget authority for 1976. Of this
amount, $38.1 billion is requested for uncontrollable accounts such as
Interest on the Public Debt, Payments from the General Revenue Sharing
Trust Fund, and other permanent accounts. The remaining $2.7 billion
is requested for discretionary operating programs, which fund the
Department's major activities.
The OMB recommendation provides $40.5 billion, which grants the Department's
full request for uncontrollable programs but reduces the initial request for
operating programs by $217 million. OMB and Treasury have subsequently come
into agreement on most 1976 budget recommendations, and the areas of dispute
have been reduced to $86 million. Items still in dispute, which are confined
to the Internal Revenue Service and the Customs Service, are discussed in
detail at Tab C.
The reductions in the Treasury request recommended by OMB in Treasury's
operating programs stem largely from two major concerns:
- very large staff expansion beyond the requirements of reasonable
workload increases (a requested 13 percent staffing increase
over 1975); and,
FORD LISKAN,
- failure by the Department to reflect increased productivity in
some of its major programs.
The requested 13 percent increase in staff comes on top of substantial increases
provided to the Department over the past few years. In both 1974 and 1975
employment increased by 4 percent over the previous year. These increases
were well in excess of population growth (a basic ingredient in several
Treasury programs) or workload.
The major staff expansion proposed by the Department comes in the Internal
Revenue Service and the Customs Service, which historically have accounted
for approximately 80 percent of the total Treasury work force. Over the
years, the Department has been accustomed to requesting and receiving size-
able increases for these bureaus because, as revenue producers, they have
been considered essentially costless. Treasury has maintained and continues
to maintain that rapidly increasing staff in its tax collections and compliance
forcing programs are necessary to avoid revenue losses. In several of these
programs, staffing increases have exceeded actual workload requirements, result-
ing in static or declining employee productivity.
In light of the Administration's policy of maximum budget restraint In 1976,
OMB has subjected the Treasury budget request to a more critical review than
in recent years. While OMB agrees with Treasury on the need to maintain and
improve the integrity and capability of the tax collection and enforcement
system, we have attempted to more accurately relate staffing and budget
needs to projected workload requirements and to assume productivity increases
where appropriate. Although the OMB recommendation proposes significant re-
ductions from Treasury's initial budget request for operating programs, it
does provide $118 million and 2,647 additional staff (2.4 percent increase)
over 1975 to cope with workload increases and priority program improvements.
Given the sizeable work force already in place, we believe this recommendation
is adequate to successfully accomplish the 1976 program proposed by the Depart-
ment and to continue progress toward the overall goal of the tax system:
maximum voluntary compliance.
FORD
Smaller
Agencies
Treasury
Appeal
INDEX FOR
SMALLER AGENCIES
Black
Agency
Tab
White House/Executive Office Accounts
A
Special White House Accounts
B
Panama Canal
C
Council on Wage and Price Stability
D
General Services Administration
E
Advisory Committee on Federal Pay
F
Civil Aeronautics Board
G
Federal Home Loan Bank Board
H
Federal Maritime Commission
I
Federal Trade Commission
J
Interstate Commerce Commission
K
Marine Mammal Commission
L
National Credit Union Association
M
Postal Service
N
Securities and Exchange Commission
O
National Commission on Productivity
P
U.S. Railway Association
Q
Commission on Electronic Funds Transfer Systems
R
CORD LIBRARY &
WHITE HOUSE/EXECUTIVE OFFICE ACCOUNTS
A summary of the White House
request follows. OMB concurs
with the request.
FORDO LIBRARY & GERALD
WHITE HOUSE/EXECUT
OFFICE ACCOUNTS
1976 Budget
ACTION
Summary Comparison of Agency Totals ($000)
July 1 -
1974
1975
1976
Sept. 30, 1976
1977
1978
1979
1980
Act.
Req.
Recom.
Req.
Recom.
Req.
Recom.
Est.
Est.
Est.
Est.
Executive Office of the President
Compensation of the President:
Budget authority
250
250
250
250
250
63
63
250
250
250
250
Outlays
250
250
250
250
250
63
63
250
250
250
250
Special Projects
Budget authority
414
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Outlays
659
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Unanticipated Personnel needs:
Budget authority
XX
500
500
500
500
125
125
500
500
500
500
Outlays
XX
500
500
500
500
125
125
500
500
500
500
Executive Residence:
Budget authority
1,433
1,744
1,744
1,826
1,826
457
457
1,951
1,851
1,851
1,851
Outlays
1,788
1,722
1,722
1,750
1,750
438
438
1,951
1,851
1,851
1,851
Full-time perm
70
82
82
82
82
82
82
82
82
82
82
Total employment
70
82
82
82
82
82
82
82
82
82
82
Official Residence of the
Vice President:
Budget authority
XX
315
315
104
104
26
26
61
61
61
61
Outlays
XX
300
300
100
100
25
25
63
61
61
61
Full-time perm.
XX
8
8
8
8
8
8
8
8
8
8
Total employment
XX
8
8
8
8
8
8
8
8
8
8
Domestic Council:
Budget authority
1,100
1,250
1,250
1,320
1,320
330
330
1,320
1,320
1,320
1,320
Outlays
956
1,240
1,240
1,320
1,320
330
330
1,320
1,320
1,320
1,320
Full-time perm.
30
30
30
30
30
30
30
30
30
30
30
Total employment
40
33
33
33
33
33
33
33
33
33
33
effect
July 1 -
New
1974
1975
1976
Sept. 30, 1976
1977
1978
1979
1980
Act.
Req.
Recom.
Req.
Recom.
Req.
Recom.
Est.
Est.
Est.
Est.
Office of Management and
Budget:
Budget authority
19,400
21,500
21,500
24,150
24,150
6,750
6,750
24,150
24,150
24,150
24,150
Outlays
18,350
21,898
21,898
24,162
24,162
6,750
6,750
24,150
24,150
24,150
24,150
Full-time employment
(e.o.y.)
606
618
640
640
640
640
640
640
640
640
640
Total employment (eoy)
688
700
700
722
722
722
722
722
722
722
722
Office of Federal Procurement
Policy:
Budget authority
XX
660
660
1,000
1,000
250
250
1,000
1,000
1,000
1,000
Outlays
XX
620
620
1,000
1,000
250
250
1,000
1,000
1,000
1,000
Full-time employment
XX
25
25
25
25
25
25
25
25
25
25
Total employment
XX
25
25
25
25
25
25
25
25
25
25
unds Appropriated to the President
/
Emergency Fund for the President
Budget authority
1,000
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Outlays
436
25
25
XX
XX
XX
XX
XX
XX
XX
XX
Expenses of Management
Improvement:
Budget authority
350
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Outlays
15
760
760
XX.
XX
XX
XX
XX
XX
XX
XX
Discussion of Recommendation
The above amounts represent continuation of activities at approximately the 1975 levels, including cost for the
1975 pay raise. Analysis of the estimates reflects the following:
Unanticipated Personnel Needs:
These estimates are consistent with the authorization which would be provided in Twhich the pending
LISRARY NERALD
White House authorization bill
I (H.R. 14715) is currently
awaiting Senate concurrence. House agreed on August 12, 1974, to conference report containing
Senate amendments.
Executive Residence:
These estimates were informally provided by the Department of Interior. The official submission of
this account is still pending clearance in the White House although no change is expected. An
increase of $100K is requested for 1977 to provide for painting the White House which is done four
months before the inauguration.
Official Residence of the Vice President:
The Secretary of the Navy is requesting 1976 appropriations of $104K for this account and $252K
for this activity through the Navy's own budget. At present, the residence at the Naval
observatory is vacant and final decisions on decoration are awaiting confirmation of a Vice President.
Mr. Rocke feller has not reviewed this request, although the Navy advises that if confirmed, he would ele
to reside at the observatory. The Secretary of the Navy proposes to staff the residence and grounds as
follows: 5 civilian groundkeepers (funded through Navy Operations and Maintenance Account);
3 civilian security personnel (funded through Navy Operations and Maintenance Account); and
10 Navy Stewards for food preparation, serving and domestic chores (funded through military
personnel appropriations).
The $104K requested for the Official Residence account is entirely for maintenance, repair expenses and
utilities for the residence itself. The Navy funding for nonreimbursable support will be authorized UD
enactment of the pending 1975 Militarv Construction Authorization bill.
Office of Management and Budget and Office of Federal Procurement Policy:
These estimates represent levels which were approved by the Deputy Director on 11/22/74. Estimates
for OFPP will not be included within OMB totals as they will be shown as a separate account in the
Executive Office of the President.
Expenses of Management Improvement
Congress denied the 1975 requested appropriations for this account and no funds are requested for
1976. At present, (11/29/74) $455K is available for obligation.
The estimates in this report exclude accounts for White House- Office and Special Assistance to the President
(Vice President). These two accounts are still pending in the White House and will be covered in separate
memoranda.
No funds were appropriated by the Congress for these three accounts for fiscal year 1975. The unanticipated
personnel needs account was established as alternate funding.
GERALD
P.
FORD
1188684
B
SPECIAL WHITE HOUSE ACCOUNTS
1976
dget
Summary Comparison i
jency Totals ($000)
Executive Office of the President
July 1 -
1974
1975
1976
Sept. 30, 1976
1977
1978
1979
1980
Act.
Req.
Recom.
Req.
Recom.
Req.
Recom.
Est.
Est.
Est.
Est.
White House Office:
Budget authority
11,260
16,367
16,367
16,946
16,946
4,237
4,237
16,946
16,946
16,946
16,946
Outlays
10,384
16,367
16,367
16,946
16,946
4,237
4,237
16,946
16,946
16,946
16,946
Full-time-perm.
510
540
540
500
500
500
500
500
500
500
500
Total Employment
515
555
555
515
515
515
515
515
515
515
515
Special Assistance to
the President:
Budget authority
692
910
910
1,040
990
260
248
990
990
990
990
Outlays
609
965
965
1,040
990
260
248
990
990
990
990
Full-time-perm.
30
30
30
30
30
30
30
30
30
30
30
Total employment
31
31
31
40
40
40
40
40
40
40
40
Discussion of Recommendations
White House Office:
The above amounts represent a decrease in 1976 staffing level with an increase in funding levels reflecting costs for
annualization of the 1975 pay raise and increased costs for rent to GSA. The decreased staff size is part of the
Administration's objective for a leaner Executive Office.
Special Assistance to the President (Vice-President's Office):
These estimates were informally provided. The official submission for this account is still pending clearance in
the White House. The request holds staffing level but calls for a 7.7% increase in Budget authority. The requested
$130,000 increase over the 1975 appropriated level is due to an increase of $36,000 in annual cost of the Federal
Building Fund Standard Level User Charge for GSA and annualization of 1975 pay raise. The remaining $94,000 represents
increases in; travel, printing, supplies and material, equipment and special personal service payments. The increase
is a little generous and could reasonably be trimmed by $50,000. Budget staff agrees that these cuts would be
reasonable and we are recommending a reduction of $50,000 from the request for 1976, and by $12,000 for the
Transition period.
Prepared by:
Approved by:
GERALD FORD LIBRARY
THE PANAMA CANAL
Comments
The Panama Canal enterprise is made up of
the Panama Canal Company, a revolving
fund, and the Canal Zone Government, an
independent agency financed by appropriations.
The OMB recommendation provides for program
increases to insure the health and safety of
Zone employees and to maintain the quality
of service to ships using the waterway.
The recommendation reflects a compromise on an
agency appeal on outlays.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
2,310
1,095
13,841
1975 current estimate
5,038
8,105
13,840
1976 agency request
7,027
16,940
14,283
1976 OMB recommendation
2,531
4,561
13,840
Effect of OMB recom-
mendation on agency
request
-4,496
-12,379
-443
Transition period
1,725
1,895
13,942
1977 estimate
2,500
2,500
13,942
e FORD LIBRARY
COUNCIL ON WAGE AND PRICE STABILITY
Comments
OMB recommendation provides for annuali-
zation of the anticipated 1975 appropriation.
Reduction in employment reflects a phase-
down of the Council's activities in the
latter part of 1976.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
1975 current estimate
1,000
935
41
1976 agency request
1,600
1,561
41
1976 OMB recommendation.
1,600
1,561
30
Effect of OMB recom-
mendation on agency
request
---
- 11
Transition period
---
104
1977 estimate
RALO GERALO R. LICTARY FORD
E
GENERAL SERVICES ADMINISTRATION
Comments
OMB and the agency have settled
differences between the request
and recommendation; GSA has in-
dicated that they will not appeal
to the President.
The estimates may be revised in
the future to reflect 1) 1975
rental estimates in light of the
enrolled supplemental appropriation
bill, and 2) allowances being in-
cluded in other agencies' totals for
Standard Level User Charges to GSA.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
-677
-276
36,733
1975 current estimate
-918
-1,008
36,370
1976 agency request
-338
-435
39,773
1976 OMB recommendation.
-331
-475
36,687
Effect of OMB recom-
mendation on agency
request
+7
-40
-3,086
Transition period
-107
-126
36,904
1977 estimate
-153
-279
37,421
GERALD FORD LIBRARY
F
ADVISORY COMMITTEE ON FEDERAL PAY
Comments
No change from agency request.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
130
63
1
1975 current estimate
130
106
1
1976 agency request
140
145
1
1976 OMB recommendation
140
145
1
Effect of OMB recom-
mendation on agency
request
Transition period
35
36
1
1977 estimate
140
140
1
GERALD R. LIBRARY FORD
Issue Paper
1976 Budget
Civil Aeronautics Board
1974
1975
1976
1977
Actual
Est.
Req.
Allow
Appeal
Recom.
Est.
Budget Authority ($M)
88.7
85.2
81.0
80.1
+.9
--
80.1
Salaries & Expenses
(15.6) (17.5)
(20.3)
(19.4)
(+.9)
Payments to air carriers
(73.1) (67.7)
(60.7)
(60.7)
Outlays ($M)
88.5
84.0
85.8
85.0
--
85.0
80.1
Employment
Full-time permanent
700
711
823
751
+ 72
--
751
Statement of Issue
Should the Civil Aeronautics Board significantly increase its enforcement and
audit programs?
Alternatives
CAB requests on appeal an additional $.9 million and 72 additional positions
for the enforcement and audit programs which would represent full restoration
of its origianl request.
OMB recommends no increase over the allowance of $19.4 million for salaries
and expenses and 40 new positions.
Analysis
GERALD FORD ( IBRANT
Major difference between the request and the recommendation:
CAB places the highest priority on the enforcement and audit programs and
considers additional resources to be essential to curb major compliance
problems such as illegal ticket discounting on the North Atlantic.
Restoration of tariff integrity, particularly the elimination of discounting
on the North Atlantic, is a key action item of the Administration's plan to
improve the financial situation of the U.S. flag international air carriers.
OMB considers the 1976 allowance for enforcement adequate and reasonable and
believes that the present audit capability is at a level sufficient to
carryout the Board's statutory authority.
OMB's allowance for 1976 has provided for increased enforcement at a level believed
sufficient to accomplish the Board's stated enforcement objectives. The allowance
will permit the Board to take steps to restore tariff integrity, particularly on
the North Atlantic, consistent with the Administration's action plan. Additional
information and rationale for increased audit program funding does not provide
sufficient justification to alter OMB's allowance.
H
FEDERAL HOME LOAN BANK BOARD
Comments
The estimates below assume that the
1975-1976 outlay effects of the FHLBB
part of the May 10 housing program will
be offset.
The agency has no major disagreements
with the OMB recommendations.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
-370
1,290
1975 current estimate
---
-304
1,385
1976 agency request
---
160
1,385
1976 OMB recommendation
---
-340
1,385
Effect of OMB recom-
mendation on agency
request
---
-500
---
Transition period
---
-131
1,385
1977 estimate
---
-428
1,385
FORD
if
GERALD
FEDERAL MARITIME COMMISSION
Comments
Consistent with a policy of decreasing rather
than increasing Federal regulatory activities,
the OMB recommendation would disallow a re-
quested increase in funding for expanded regu-
latory efforts.
An increase to cover mandatory costs is
recommended.
The agency has no objection.
Full-time
Budget
permanent
authority
Outlays
employment
(in thousands of dollars)
1974 actual
6,372
6,475
293
1975 current estimate
7,307
7,343
316
1976 agency request
8,255
8,272
350
1976 OMB recommendation
7,894
7,910
316
Effect of OMB recommenda-
tion on agency request
-361
-362
-34
Transition period
1,973
1,943
316
1977 estimate
7,894
7,894
316
FORDO LIBRARY &
Issue Paper
FORD
Federal Trade Commisison
1976 Budget
GERALD
LIBRARY
1975
1974
Current
1976
Actual
Est.
Request
Allowance
Appeal
Recom.
Budget Authority ($M)
32.3
39.0
50.9
44.0
+6.9
+1.6
Outlays ($M)
32.4
41.2
50.1
43.5
+6.6
+1.6
Employment (EOY)
Full-time permanent
1,560
1,569
1,727
1,569
+158
+65
Statement of Issue
In the FTC's "maintenance of competition" programs, what level of resources
should be devoted in 1976 to antitrust activities and to enforcement of the
Robinson-Patman Act?
Alternatives
Agency request: FTC requests 158 new man-years of effort for maintenance of
competition, including 128 man-years for antitrust activities and 30 man-years
for expanded enforcement of the Robinson-Patman Act.
OMB recommendation: Provides 95 new man-years of effort for antitrust activities
and no further expansion for enforcement of the Robinson-Patman Act.
Analysis
The major differences between the FTC request and the OMB recommendation are:
Antitrust activities. FTC is requesting an increase of 128 man-years
for antitrust activity. The OMB recommendation allows for an additional
95 man-years of effort in this area, targeted primarily in the "key
industries" of food, energy, and health care. These industries have
contributed over 40% of the past year's inflation. The OMB recommendation
is based on a sensitivity to the President's recent statements on the need
for antitrust as an anti-inflationary toal and on FTC's proposal to target
its efforts on high priority efforts.
Robinson-Patman Act enforcement. The FTC request would increase the effort
for this activity by approximately 30 man-years and $1 M over the 1974 level.
Since there are strong indications that this statute is anti-competitive
and contributes upward pressure on prices (especially food prices), OMB
seriously questions the advisability of any expansion in this area. OMB
recommends denying the increase and beginning a major effort to determine
the effect of this statute on costs and prices and, if warranted, develop-
ing an Administration initiative to reform it.
Other Expenses. The OMB recommendation allows only a 50% increase in
travel, rather than 100%, to $1,593 K; cuts $712 K for new space rental -
which is not required; cuts $464 K for new ADP rentals which are not
urgent; cuts $175 K for staff training increases, cuts $200 K of
the increase for supplies and equipment; disallows $477 K for previously
unbudgeted personnel; and disallows a contingency reserve of $500 K.
K
1976 Budget
Interstate Commerce Commission
The OMB recommendation for the Interstate Commerce Commission (ICC) provides a
$4.9 million increase in budget authority and total funds of $49.7 million for
1976. The Commission initially requested $51.8 million but has reached agreement
with OMB on budget and program recommendations.
Decisions on the Commission's budget were made within the context of the Admin-
istration's regulatory reform objectives. The recommended increases will permit
the Commission to improve the quality of its regulation of the surface trans-
portation industries by providing resources for:
-- The initiation of proceedings to deal with key issues effecting the national
transportation system which is the principle means of policy formulation.
-- The maintenance of a manageable case backlog in the face of constantly increasing
workload.
-- Increased emphasis on management improvements and application of ADP techniques.
The Commission and OMB have discussed the need for improvement in the
present economic regulation of surface transportation. The Commission has initiated
a special internal study to identify areas for change and to prepare recommendations
aimed at increasing productivity and improving the quality of regulation.
GREATE YORD
Interstate (
rce Commission
Is. Budget
($ Millions)
Budget Authority
Outlays
Employment
1974 Actual
$40.3
$37.7
1950
1975 Enacted
42.9
43.9
2084
Supplemental Recommended
1.9
1.6
-
OMB Recommendation
44.8
45.5
2061
1976 Agency Recommendation
51.8
53.0
2282
OMB Recommendation
49.7
51.0
2101
Transition Period
Agency Recommendation
13.0
13.5
2202
amB Recommendation
12.5
13.0
2101
1977 OMB Estimate
49.7
50.5
2101
0001
MARINE MAMMAL COMMISSION
Comments
No change from agency request.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1974 actual
412
134
6
1975 current estimate
750
735
8
1976 agency request
1,000
1,000
10
1976 OMB recommendation
1,000
1,000
10
Effect of OMB recom-
mendation on agency
request
Transition period
250
250
10
1977 estimate
1,000
1,000
10
GCRALD K. FORD
M
NATIONAL CREDIT UNION ADMINISTRATION
Comments
OMB recommends additional
requested positions to deal
with voluntary credit union
liquidations.
Budget
Full-time
authority 1/ Outlays 2/
permanent
(in thousands of dollars)
employment
1974 actual
---
-11,677
526
1975 current estimate
---
-10,355
552
1976 agency request
---
-14,070
595
1976 OMB recommendation
---
-14,632
558
Effect of OMB recom-
mendation on agency
request
---
-562
-37
Transition period
---
-3,500
558
1977 estimate
---
-17,562
558
10R0 is LIBRARY GERALD
N
Issue Paper
U.S. Postal Service
1976 Budget
Analysis
Budget Authority/Outlays
($ in millions)
1975
1976
1977
1978
1979
1980
Alt. #1 (Agency req.)
615.5
639.3
605.9
574.2
545.3
521.9
Alt. #2 (OMB rec.)
571.5
542.3
459.8
467.3
474.7
482.7
Statement of Issue
Should additional Federal subsidies be provided to extend the time period for
certain mailers to adjust to higher postage rates?
Background
Under the Postal Reorganization Act of 1970, Federal subsidies were authorized
to ease the adjustment of mailers in moving from the old rate structure to one
which more properly reflects the actual cost of the mail service provided. The
subsidies allow for phasing in the rate increases over a period of years. Phasing
veriods of five years for profit related mailings and ten years for non-profit
mailings were established. A portion of the Federal subsidies to the Postal
Service is to make up for the revenue foregone associated with carrying these
classes of mail at less than full cost recovery rates.
Under pressure from mailers, who have argued that postal rate increases are
higher than were anticipated at the time of postal reorganization, Congress acted
last June to extend the authorized phasing period. P.L. 93-328 (S. 411), as
enacted, extended the phasing periods by three years and six years. The revenue
foregone subsidies associated with this extension would cost the taxpayer at least
$753.7 million over the next 13 years. Major beneficiaries of these sub-
sidies would be magazine, newspaper, and book publishers. Nearly one-half of the
additional subsidies would go to direct support of these regular-rate second class
mail users; the balance would support preferential, library, and non-profit classes
of mail users.
Alternatives
#1. Request full funding for all authorized phasing - including all portions of
extended phasing. (Agency Request)
#2.
Continue to request funding for the originally authorized phasing schedule
set out in the Reorganization Act, but request no funding for the extended
phasing subsidies authorized by P.L. 93-328. (OMB Recommendation)
Agency request: Postal Service has requested the full level of funding authorized
or phasing. This would require an additional subsidy of $44 million in 1975 and
97 million in 1976 to cover the revenue foregone associated with extended phasing
both profit and non-profit categories of mail.
2
Under the provisions of section 3 of P.L. 93-328 the Postal Service is required
to request all authorized subsidies. These amounts are also required to be
presented in the budget along with the President's recommendation. Postal Service
has supported extended phasing in an effort to avoid a confrontation with mailers.
Extended phasing would lessen the direct impact of postage rate increases on
mailers, and from the Postal Service's perspective would probably help to hold
down strong objections to further proposed postage increases.
OMB recommendation: OMB recommends not requesting additional funding for the
extended phasing. Since the provisions of P.L. 93-328 only authorize these sub-
sidies, it is within the President's authority to request less than the full amount.
Funding for the originally authorized five and ten year phasing periods would
continue.
Although President Nixon signed the authorization bill, you decided last September
against requesting a $44 million 1975 supplemental for the first year of extended
phasing on the grounds that it was contrary to our efforts to reduce Federal
spending in 1975.
Throughout the development of S. 411 (P.L. 93-328) the Administration argued that
extended phasing was unnecessary and was a low priority use of Federal funds. The
subsidies are inflationary and provide direct Federal assistance to already profit-
able businesses. This is particularly true of the magazine publishing industry
which is a heavy user of regular rate second class mail service. The potential
avings to publishers from the authorized extended subsidy would be a very small
portion of total publishing costs (generally less than 1%), and we believe that
this will not have a critical impact on the health of the publishing industry.
The intent of the postal reorganization was to foster a self-sufficient Postal
Service in which users pay for the services they receive from the postal system.
To extend the phasing period would run contrary to that principle.
Third Class Mail Subsidy: Since 1972, the budget has not included a request to
cover the revenue foregone associated with the phasing of regular rate third class
mail (advertising matter). This policy was established to eliminate what we believe
to be an unnecessary and improper expenditure of Federal funds. This subsidy would
have directly supported an already profitable direct mail advertising business.
The Congress has agreed with the President's Budget over the years and not appropri-
ated any funding for third class phasing. Accordingly, the Postal Service has
implemented full cost recovery rates for this class of mail.
Under the Reorganization Act, one more year of phasing is still authorized for
third class mail. No extended phasing for regular rate third class mail was
provided for in P.L. 93-328 (S. 411), but the Act as noted above does require the
Postal Service to request all amounts authorized. Therefore, the Postal Service
has included $118.8M in its 1976 request for this last year of phasing. In the
past the Postal Service has excluded this amount from its request owing to existing
Presidential policy and known Congressional action.
OMB recommends not requesting funding for this last year of regular rate third
lass phasing. The Postal Service is not appealing this recommendation.
O
Issue Paper
Securities and Exchange Commission
1976 Budget
1975
1974
Current
1976
Act.
Est.
Req.
Allow.
Appeal
Recom.
Budget Authority ($ M)
36.2
44.4
51.6
47.2
+4.4
Outlays ($ M)
34.5
45.1
52.6
48.1
+4.5
Employment:
Full-time permanent (EOY)
1,798
2,086
2,270
1,960
+310
---
Statement of Issue
Should SEC staffing resources be constrained in 1976 as a means of gaining
more effective utilization of existing staff?
Alternatives
SEC requests an additional $7.2 M and 184 positions in 1976 in response to
an anticipated increase in securities registrations and to expand its efforts
in securities fraud investigations and enforcement.
OMB recommends an increase of $2.8 M in 1976 and a reduction of 126 positions
ᶜrom 1975 levels to require SEC to take actions (by increasing staff productivity
nd undertaking other management improvements) to insure more effective
utilization of existing staff.
Analysis
OMB believes that sizeable staffing increases granted to SEC over the past
few years, combined with the agency's lack of progress in updating several
inefficient management practices, have resulted in (1) staffing levels which
exceed actual and predicted workload requirements and (2) ineffective use of
staffing in several of its major programs. Several factors have contributed
to this problem:
TORD
In fiscal years 1974-75 SEC received total staff increases of
DISRARY
488 positions, 354 of which were added by the Congress.
During the period 1972-1975, securities registrations, an important
workload determinant, fell by over 25%. Productivity in the enforce-
ment program declined by 16% between 1971-1974 while staffing increased
by almost 20%.
SEC continues outdated management practices in several areas which,
if corrected, would obviate the need for staffing increases: (a)
obsolete procedures in the review of Full Disclosure Program
Statements without attempts at streamlining the review process;
(b) continued setting of shorter, arbitrary cycles for inspection
of broker dealers without sampling; (c) a "last-in, first-out"
approach to enforcement in which certain cases grow old as new
ones come in, and which involves no strategy for maximizing the
effect of the resources.
2
OMB believes that action should be taken to establish SEC employment levels
which reflect increasing productivity and are more consistent with current
workload requirements. To accomplish this, OMB recommends establishment of
a 1976 employment target of 1,960, which is 126 positions lower than the
current 1975 estimate and 310 less than SEC's 1976 request. As a means
of beginning staffing reductions in 1975, OMB had earlier considered a
rescission of 150 positions added by the Congress, but is not now
recommending this action because of the likely adverse Congressional
reaction. Instead, the OMB recommendation allows the SEC 18 months,
beginning now, in which to make the adjustments necessary to achieve the
recommended staffing reductions. This action will require the SEC to
develop a 1975 staffing plan in keeping with the reduced target for 1976.
Eighteen months should allow the agency time to design and implement improved
management systems and strategies. Assuming increased productivity, OMB
believes that SEC will be able to accomplish its budgeted program for 1976
under the reduced employment level. Even with the reduced OMB employment
recommendation for 1976, SEC employment will have increased by 162 (over 9%)
since 1974.
vero
P
NATIONAL COMMISSION ON PRODUCTIVITY
AND WORK QUALITY
Comments
Accommodation to agency appeal.
OMB recommendation provides for the
continuation of the program at essen-
tially the 1975 level.
Full-time
Budget
permanent
authority
Outlays
employment
(in thousands of dollars)
1974 actual
900
1,000
9
1975 current estimate
2,000
2,102
20
1976 agency request
4,461
3,981
43
1976 OMB recommendation
2,500
2,500
20
Effect of OMB recommenda-
tion on agency request
-1,961
-1,481
-23
Transition period
625
625
20
1977 estimate
2,500
2,500
20
FORD LIBRARY & GERALD
U.S. RAILWAY ASSOCIATION
Comments
The United States Railway Association (USRA)
was established by the Regional Rail Reorgani-
zation Act of 1973 to restructure the bank-
rupt Midwest and Northeast rail lines.
Additional funding of $15 million is required
to complete the planning process through
January, 1976. Instead of including this
entire amount in a 1975 Supplemental as re-
quested by USRA, OMB recommends that the
Supplemental be limited to $5 million, with
the remaining $10 million included in the
1976 budget.
Full-time
Budget
permanent
authority
Outlays
employment
(in thousands of dollars)
1974 actual
18,000
2,950
1975 current estimate
12,000
27,050
Not
1976 agency request
10,000
1976 OMB recommendation
10,000
10,000
applicable
Effect of OMB recommenda-
tion on agency request
+10,000
---
to
Transition period
---
---
this
1977 estimate
---
agency
FORD LIBRARY is
R
NATIONAL COMMISSION ON ELECTRONIC
FUND TRANSFERS
The enrolled supplemental appropriations bill (H.R. 16900)
provides $500 thousand for this program in FY 1975.
OMB is deferring a recommendation for FY 1976 until the
Commission has had an opportunity to organize and formulate
its own plans.
FORD LIBRARY & DENALD