committee which had that bill under consideration, which it was contended showed that there was a tying up of the two.

Senator BONE. Do you think the language of this bill would be considered by the Court to mean an appropriation of the money? Mr. HAY. As drawn here, yes.

Senator BONE. Congress is required to appropriate moneys to the Treasury. I wonder whether the courts would construe the language of this bill to be tantamount to an appropriation.

Senator BARKLEY. Is this a vital amendment anyway? Is it necessary? Is there any question about it?

Mr. HAY. With respect to the railroad retirement account?

Senator BARKLEY. Yes.

Mr. HAY. I have great respect for the ability of you gentlemen as lawyers. If there is a serious question in your minds about it, I think we might confer on that.

Mr. FLETCHER. It follows the general language of the Social Security Act. I will be glad to discuss it briefly when my time comes to address

you.

Senator BARKLEY. Is that all you wish to say, Mr. Hay?

Mr. HAY. That is all.

Senator BARKLEY. I believe the next witness is Judge Fletcher. Senator BONE. Before you leave, Mr. Hay, will you point out this appropriation?

Mr. HAY. There is one appropriation section, or rather the authorization of an appropriation, on page 27. That is one of them, but you perhaps have in mind the section on page 24, Senator. On page 27 is the authorization for the appropriation.

Senator BONE. That is just merely for expenses.

Mr. HAY. On page 24 is the language you have in mind. It is the second sentence of section 15 (a). [Reading:]

There is hereby appropriated to the account for each fiscal year, beginning with the fiscal year ending June 30, 1937, as an annual premium an amount sufficientAnd so on. That, I think, would be construed to mean an appropriation and not simply an authorization. Senator BONE. There might even be broader language used than that.

Senator MINTON. Does not this section create this retirement account and then appropriate out of it or authorize appropriations to be made out of it?

Mr. HAY. It authorizes appropriations to it, and makes such appropriations available for annuity payments.

Senator AUSTIN.. It appropriates to the account- it does not appropriate out of the account.

Senator BONE. I wonder if another sentence might not be added which would say that Congress appropriates out of this fund created an amount sufficient. That may be crude language, but it expresses the idea. Then the courts would not have to blink so hard to see what is meant. Mr. FLETCHER. I suppose the proper way would be to appropriate to the fund such an amount as is found to be necessary to pay these allowances, and then under other language in the act say that the Treasury is authorized, out of funds so appropriated out of general funds to the railroad retirement fund, to pay these amounts which the Retirement Board certifies as being due those employees.

Senator BARKLEY. It means, under the language there, that there is a permanent appropriation to the fund, but each year there is required an appropriation out of the fund.

Mr. FLETCHER. I had not supposed, Mr. Chairman, that there would be the necessity annually to appropriate out of the fund.

Senator BARKLEY. The Board must submit annually to the Bureau of the Budget an estimate of the appropriation to be made to the account, so I assume that that means that each year the Budget Bureau must file with its budget to Congress the amount necessary to replenish this fund from time to time.

Mr. FLETCHER. That is the amount appropriated to the fund. It is not fixed here, but it is such an amount as the Budget Director works out.

Senator AUSTIN. If there were a phrase attached to that first sentence, lines 10, 11, and 12, on page 24, so that it would read:

There is hereby created an account in the Treasury of the United States to be known as the "railroad retirement account", from which shall be paid the charges created hereunder

then there would be no doubt about the purpose of that account. But as the matter stands, I think there is ambiguity as to what this section of the law does.

Senator BARKLEY. We are now ready to hear you, Mr. Fletcher.

STATEMENT OF R. V. FLETCHER, REPRESENTING THE

ASSOCIATION OF AMERICAN RAILROADS

Mr. FLETCHER. Gentlemen, my name is R. V. Fletcher. I live in Washington, and I am counsel for the Association of American Railroads.

As I have frequently said to this committee, the Association of American Railroads is a voluntary association maintained by the class I railroads of the country. In its membership is included something like 99 percent of the mileage of the class I railroads of the United States.

T

By class I railroads is meant all railroads which have a gross revenue of a million dollars a year. That is the classification prescribed by the Interstate Commerce Commission.

There are other railroads, classes II, III, and IV, many of which belong to another organization; known as the Short Line Railroad Association, which has its headquarters here in Washington.

I mention that to be in a position to state to the committee that this particular bill, which has been so fully explained by Mr. Harrison at the former hearing of this committee and by Mr. Hay this morning, has the approval of the class I railroads of the country, for which I assume to speak. I am informed that it has the approval of very nearly all of the class II, class III, and class IV railroads that belong to the Short Line Railroad Association. So, we have here a case where a bill has been agreed upon by the 21 standard labor unions that speak through their committee, as was explained by Mr. Harrison, and by substantially all of the railroad mileage of the United States. This committee has heretofore been advised of the long controversy between management and men with respect to pension legislation. This is the third bill that the Congress has been asked to enact on that subject. The first act, the act of 1934, was declared uncon

stitutional by the Supreme Court of the United States. The second act, the act of 1935, of which this proposed act is amendatory, was attacked by the railroads in the District Court of the United States for the District of Columbia, and there a decree was rendered holding that the tax provision of the plan was unconstitutional. This bill then grew out of negotiations, which have been explained rather fully by Mr. Harrison, in an effort to reach an agreement upon this very vital and important question between those who do the employing and those who are employed.

I think it might be well to say that the parties to this agreementthat is to say, the employers' group-approached the subject upon the theory that perhaps this could be worked out without troubling the Congress for legislation; that perhaps it might be worked out through an agreement between the railroads and their employees; an agreement which would be accepted by all of the railroads and which would provide for some plan of retirement allowance without the necessity of bringing the Government into the picture.

As all of you know, substantially all or very nearly all of the class I railroads of the country have for many years maintained their private pension plans. I think there are only two or three large railroads that are exceptions to that rule.

It was found after the negotiations had progressed for some time that the policing and the administration of the matter would be so difficult, if it were attempted through the medium of private contracts, that it would be absolutely necessary to ask the Government to act as the collecting and disbursing officer in connection with the plan.

This represents, as I say, what seems to me to be a very happy and fortunate termination of a long controversy. I have thought that if this bill could be enacted in this form, it would represent a departure from the controversial and would enter upon a cooperative plan, whereby the railroads and railroad labor might go forward immediately, with an improvement of conditions in the railroad industry.

I should also like to say, as you perhaps know, that this act has been so drafted that it is highly important that it should become effective on the 1st day of July of this year without fail, because on the 1st day of July and thereafter, according to the terms of this act, the existing pensions will be paid from this fund, and there are many other features of this act which will be thrown very badly out of kelter, so to speak, unless the act becomes effective on the 1st day of July. I mention that so that the committee can act promptly upon this matter as soon as hearings have been concluded.

I do not think it is at all necessary for me to go through this act to explain the various provisions, over which all of us labored so long, because that has been done quite effectively by Mr. Harrison and by Mr. Hay.

Upon the point that was mentioned some time ago by a question from, I think, Senator Brown, namely, as to the justice of excluding from the provisions of this law persons who were not in the employment relation or not actually employed on the 29th of August 1935, it has seemed to me that the exclusion of those persons from the privilege of the use of their prior service will be a benefit to them rather than a disadvantage, for this reason: Let us take a man who has severed his connection with the railroad service entirely prior to August 29, 1935. Let us then assume that he comes back and applies for reemployment

with the railroads hereafter. Under this law the railroads will suffer no loss if they take him into their service, because he will get credit only for the service which he performs after he goes back to work the second time. But I think that no railroad, if it was at all informed, would employ that man, provided it could find anybody else in the world to work for it, if it knew that by so doing it would revive all of that man's prior service and thereby increase its pension burden a substantial amount by taking such a person back into the service.

So, the present act closes the opportunity for employment of those who have severed their connections with the railroad service prior to the enactment date of the law. This law permits them to come back into the service at any time whatever, and gives them the benefit of whatever service they may accumulate subsequent to July 1, 1937.

Senator BARKLEY. Judge Fletcher, it is almost 12 o'clock, and many of us have got to be on the Senate floor. We shall now adjourn until 10:30 o'clock tomorrow morning in the Interstate Commerce Committee room in the Capitol.

(Thereupon, at 12 o'clock noon, an adjournment was taken until 10:30 a. m., Wednesday, June 2, 1937.)