the "last person" employer clause, and so on. So you can readily see that this committee has quite a job ahead of it to consider these various bills. Copies of the reports on these bills from the executive departments and agencies will, without objection, be made a part of the record at this point. (The reports follow :) EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D. C., June 14, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: This is in reply to your letter of January 26, 1955, requesting a report on H. R. 182, a bill to provide that railroad employees may retire on a full annuity at age 60 or after serving 30 years; to provide that such annuity for any month shall be not less than one-half of the individual's average monthly compensation for the 5 years of highest earnings; and for other purposes. It is also in response to your requests for reports on the following related bills which would carry out the same objectives: H. R. 858, H. R. 3607, and H. R. 3826. These bills would liberalize the present retirement provisions of the railroad retirement program by permitting employees to retire on a full annuity at age 60 or after serving 30 years. They would also provide for annuities of not less than one-half of the individual's average monthly compensation for the 5 years in which his earnings were highest. The Chairman of the Railroad Retirement Board advises that enactment of this bill would increase greatly the present cost of paying benefits under the Railroad Retirement Act. This added cost would leave the railroad retirement system in an unsound financial condition, since the bill makes no provision for additional revenue to offset the cost increase. In the circumstances, the Bureau of the Budget recommends against enactment of H. R. 182 and the related bills, H. R. 858, H. R. 3607, and H. R. 3826. Sincerely yours, DONALD R. BELCHER, The Honorable J. PERCY PRIEST, RAILROAD RETIREMENT BOARD, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. PRIEST: This is a report on H. R. 182, introduced in the House of Representatives by Mrs. St. George on January 5, 1955, and referred to your committee for consideration. This bill provides full annuities, at not less than one-half the employee's average monthly compensation for the 5 years of highest earnings, for employees who have completed 30 years of service or who have attained age 60. The enactment of this bill would increase very greatly the present cost of paying benefits under the Railroad Retirement Act; it provides for liberalization of benefits but does not provide for any additional revenue to meet the added cost of such liberalization. Such added cost, since the bill makes no provision for additional revenue to offset it, would leave the railroad retirement system in an unsound financial condition. Regardless of other considerations, therefore, the Board, for that reason alone, recommends that no favorable consideration be given to this bill. Moreover, the Board believes that no consideration should be given to bills to amend the present Railroad Retirement Act until the sixth actuarial valuation of the railroad retirement system has been completed. The Bureau of the Budget advises that it has no objection to the Board's submission of this report and concurs in recommending against enactment of this bill. Sincerely yours, RAYMOND J. KELLY, Chairman. EXECUTIVE OFFICE OF THE PRESIDENT, Hon. J. PERCY PRIEST, BUREAU OF THE BUDGET, Washington, D. C., June 14, 1955. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington 25, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your letter of January 26, 1955, requesting a report on H. R. 306, a bill "To amend the Railroad Retirement Act to provide that a railroad employee who has completed 30 years of service may retire on a full annuity, and for other purposes." The bill would permit railroad employees with 30 years of service to retire on full annuities regardless of age or physical condition. The chairman of the Railroad Retirement Board advises that enactment of this bill would increase greatly the present cost of paying benefits under the Railroad Retirement Act. Since the bill makes no provision for the additional revenue required to defray this cost, its enactment would leave the railroad retirement system in an unsound financial condition. In the circumstances, the Bureau of the Budget recommends against enactment of H. R. 306. Sincerely yours, DONALD R. BELCHER, Assistant Director. RAILROAD RETIREMENT Board, Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. PRIEST: This is a report on H. R. 306, introduced in the House of Representatives by Mr. Wickersham on January 5, 1955, and referred to your committee for consideration. The bill provides full annuities for employees who have performed 30 years of service, regardless of age or physical condition. The enactment of this bill would increase very greatly the present cost of paying benefits under the Railroad Retirement Act; it provides for liberalization of benefits but does not provide for any additonal revenue to meet the added cost of such liberalization. Such added cost, since the bill makes no provision for additional revenue to offset it, would leave the railroad retirement system in an unsound financial condition. Regardless of other considerations, therefore, the Board, for that reason alone, recommends that no favorable consideration be given to H. R. 306. Moreover, the Board believes that no consideration should be given to bills to amend the present Railroad Retirement Act until the sixth actuarial valuation of the railroad retirement system has been completed. The Bureau of the Budget advises that it has no objection to the Board's submission of this report and recommends against enactment of the bill. Sincerely yours, RAYMOND J. KELLEY, Chairman. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D. C., June 16, 1955. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This will acknowledge and reply to your requests for the views of the Bureau of the Budget on H. R. 738, H. R. 757, H. R. 857, H. R. 2026, H. R. 2591, H. R. 3416, H. R. 3719, H. R. 3743, H. R. 3796, H. R. 5272, H. R. 5361, and H. R. 5801, bills to amend the Railroad Retirement Act. These bills include a number of provisions which are similar to one or more of the provisions included in H. R. 4744. The views of the Bureau of the Budget with respect to H. R. 4744 have been set forth in our recent report to your com mittee. It is therefore requested that our views on H. R. 4744 be considered in lieu of a detailed report on provisions of the type found in the above men. tioned bills. Sincerely yours, DONALD R. BELCHER, Assistant Director. Hon. J. PERCY PRIEST, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, Washington, March 21, 1956. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: This letter is in response to your requests for reports on H. R. 738, H. R. 757, H. R. 3416, H. R. 3719, H. R. 5272, H. R. 5801, H. R. 6833, H. R. 8230, H. R. 8338, and H. R. 8399. Some of these bills contain certain provisions that are incorporated in Public Law 383, 84th Congress, approved August 12, 1955. Such bills would need to be revised to take this into account. In this letter we shall consider only provisions which would make changes in present law. These changes will be separately discussed. 1. In cases in which, under existing law, the survivor of a railroad worker is eligible for a survivor annuity or benefit under the Railroad Retirement Act, five of the bills (H. R. 757, H. R. 3416, H. R. 5272, H. R. 6833, and H. R. 8338) would, perhaps inadvertently, permit payment of the same type of survivor benefit to an individual under both programs, with each benefit being based on the same worker's earnings records, and with the worker's old-age and survivors insurance employment and self-employment, and possibly his railroad employment, being credited toward both benefits in determining eligibility (insured status) for, and the amounts of, such benefits. A more detailed analysis of these provisions is contained in the enclosed staff memorandum. H. R. 5801 would make comparable amendments applying only to individuals receiving widow's benefits. These bills would thus make drastic changes in survivor benefits payable under existing law, which provides for benefits on the combined earnings record under one system or the other but not under both. These changes would have the effect of providing dual benefits based on the same service, without dual contributions. They would result in windfall benefits, with attendant heavy costs and without any discernible social purpose, and would further dilute the contributory principle. Thus, even apart from their unfunded cost to the railroad retirement account, we believe that these changes should not be made. 2. All of the bills listed, except H. R. 5272 and H. R. 5801, would delete the provision of the Railroad Retirement Act which requires that a spouse's annuity under the railroad program be reduced by the amount of any benefit which the spouse is eligible to receive under the old-age and survivors insurance program, other than a wife's or a husband's benefit. H. R. 8338 would also delete certain reduction provisions of the Railroad Retirement Act which apply when an individual qualifies for more than one annuity under the railroad program. Apart from considerations of cost, this proposed repeal of dual-benefit restrictions on railroad retirement or survivor annuities, like earlier analogous repeals, raises questions of principle. The belief that it is inequitable to deduct from a railroad annuity other benefits for which the annuitant is eligible under the same program, or under the old-age and survivors insurance system, overlooks the fact that in both programs benefits are weighted in favor of workers in the lower earnings brackets, a feature characteristic of social insurance. One of the purposes of the dual-benefit restrictions enacted in 1951 was to recognize and compensate for this fact. We appreciate the fact that the progressive repeal of other dual-benefit restrictions by recent legislation may be said to have resulted in discrimination in favor of those, especially survivors of railroad workers, who have thus been relieved of certain dual-benefit setoffs, as against a spouse of a living railroad retirement annuitant who is subject to a comparable setoff. And the question may also be raised why, fiscal considerations aside, a spouse's annuity should be subject to such (limited) railroad-retirement-OASI coordination by way of setoff when her husband's annuity is not. This poses a dilemma. It may be doubted, however, that the dilemma should be resolved by eliminating such vestiges of this type of benefit coordination as still exist, instead of moving in the direction of more rather than less coordination of these two social-insurance systems. 3. H. R. 8230 includes a provision to amend section 3 (c) of the Railroad Retirement Act (defining "monthly compensation") so that retirement and spouses' annuities under the railroad program would be computed on the basis of the monthly average of the 5 calendar years (not necessarily consecutive) of the worker's highest earnings in railroad service up to $350 per month. This provision (which is compared with existing law in the enclosed staff memorandum) is more generous than those now in the Railroad Retirement Act, the Social Security Act, and the Civil Service Retirement Act. Apart from problems of cost, it raises a question as to the soundness of selecting from a whole working life as a basis for reflecting income loss that benefits under the act are designed (partially) to replace the 5 years which (whether or not consecutive) happen to be those of highest earnings. 4. If the proposed amendments embodied in these bills were considered desirable in principle, they would require further evaluation from the point of view of their cost. While these amendments (except those discussed in pt. 1 of this report) would seem to have no direct effect on the benefit payments made under the OASI program, and while enactment of any of these bills would seem to entail no net cost to the OASI system in view of the provisions of the Railroad Retirement Act for cost adjustments between the railroad retirement account and the OASI trust fund, the problem of financing of Federal social insurance systems is a matter of concern to us. Although the railroad retirement system is intended to be a fully financed system, it has, in recent years, not been fully financed, despite the savings to the system resulting from, among other things, the transfer of the earnings credits of less-than-10-year railroad employees to the OASI system. We believe that it is important to the welfare of railroad employees and to our economy as a whole that the railroad system should be maintained on a self-supporting basis. In reporting favorably on H. R. 4744 (now Public Law 383), your committee was "unanimously of the opinion that, regardless of the desirability of certain proposals for the liberalization of benefits under the act, no amendments to the law should be made which would jeopardize the financial soundness of the railroad retirement system." At the same time, however, having regard to past experience in the light of changing economic conditions, your committee was influenced by the hope that the estimated actuarial deficit shown by the fifth actuarial valuation would be favorably affected by the next evaluation (H. Rept. 1046, pp. 12, 13). Unfortunately, this hope is not borne out by the recently completed sixth actuarial evaluation, which estimates that the present actuarial deficit is 1.63 percent of payroll, or $86,390,000 a year, on a level cost basis, thus indicating "that an increase in the revenues is needed, if the system is to be maintained on a sound reserve basis." The table contained in the enclosed staff memorandum (based on estimates obtained from the Railroad Retirement Board) shows the additional cost to the railroad retirement system which enactment of the various changes proposed by the present bills would entail. Together they would cause an additional annual level-cost deficiency in the railroad retirement fund of either 1.9 percent of payroll or $102 million, or 4.35 percent of payroll or $230 million, depending upon which of 2 possible alternative interpretations is placed on the amendments discussed under part 1 of this report. These figures strikingly indicate the undesirability of upward changes in benefits without such adjustments in the contribution schedule as are required to restore the system to actuarial balance. We are, therefore, compelled to recommend against the enactment of the bills covered by this report. The Bureau of the Budget advises that it preceives no objection to the submission of this report to your committee. Sincerely yours, M. B. FOLSOM, Secretary. STAFF MEMORANDUM SUPPLEMENTING REPORT ON BILLS TO AMEND RAILROAD RETIREMENT ACT (H. R. 738, H. R. 757, H. R. 3416, H. R. 3719, H. R. 5272, H. R. 5801, H. R. 6833, H. R. 8230, H. R. 8338, AND H. R. 8399) 1. Five of the bills (H. R. 757, H. R. 3416, H. R. 5272, H. R. 6833, and H. R. 8338) would make substantial changes in the provisions of law under which benefits based on combined earnings records under the Railroad Retirement and OASI systems are now payable to the survivors of railroad workers. Under mittee. It is therefore requested that our views on H. R. 4744 be considered in lieu of a detailed report on provisions of the type found in the above mentioned bills. Sincerely yours, DONALD R. BELCHER, Assistant Director. Hon. J. PERCY PRIEST, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, Washington, March 21, 1956. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: This letter is in response to your requests for reports on H. R. 738, H. R. 757, H. R. 3416, H. R. 3719, H. R. 5272, H. R. 5801, H. R. 6833, H. R. 8230, H. R. 8338, and H. R. 8399. Some of these bills contain certain provisions that are incorporated in Public Law 383, 84th Congress, approved August 12, 1955. Such bills would need to be revised to take this into account. In this letter we shall consider only provisions which would make changes in present law. These changes will be separately discussed. 1. In cases in which, under existing law, the survivor of a railroad worker is eligible for a survivor annuity or benefit under the Railroad Retirement Act, five of the bills (H. R. 757, H. R. 3416, H. R. 5272, H. R. 6833, and H. R. 8338) would, perhaps inadvertently, permit payment of the same type of survivor benefit to an individual under both programs, with each benefit being based on the same worker's earnings records, and with the worker's old-age and survivors insurance employment and self-employment, and possibly his railroad employment, being credited toward both benefits in determining eligibility (insured status) for, and the amounts of, such benefits. A more detailed analysis of these provisions is contained in the enclosed staff memorandum. H. R. 5801 would make comparable amendments applying only to individuals receiving widow's benefits. These bills would thus make drastic changes in survivor benefits payable under existing law, which provides for benefits on the combined earnings record under one system or the other but not under both. These changes would have the effect of providing dual benefits based on the same service, without dual contributions. They would result in windfall benefits, with attendant heavy costs and without any discernible social purpose, and would further dilute the contributory principle. Thus, even apart from their unfunded cost to the railroad retirement account, we believe that these changes should not be made. 2. All of the bills listed, except H. R. 5272 and H. R. 5801, would delete the provision of the Railroad Retirement Act which requires that a spouse's annuity under the railroad program be reduced by the amount of any benefit which the spouse is eligible to receive under the old-age and survivors insurance program, other than a wife's or a husband's benefit. H. R. 8338 would also delete certain reduction provisions of the Railroad Retirement Act which apply when an individual qualifies for more than one annuity under the railroad program. Apart from considerations of cost, this proposed repeal of dual-benefit restrictions on railroad retirement or survivor annuities, like earlier analogous repeals, raises questions of principle. The belief that it is inequitable to deduct from a railroad annuity other benefits for which the annuitant is eligible under the same program, or under the old-age and survivors insurance system, overlooks the fact that in both programs benefits are weighted in favor of workers in the lower earnings brackets, a feature characteristic of social insurance. One of the purposes of the dual-benefit restrictions enacted in 1951 was to recognize and compensate for this fact. We appreciate the fact that the progressive repeal of other dual-benefit restrictions by recent legislation may be said to have resulted in discrimination in favor of those, especially survivors of railroad workers, who have thus been relieved of certain dual-benefit setoffs, as against a spouse of a living railroad retirement annuitant who is subject to a comparable setoff. And the question may also be raised why, fiscal considerations aside, a spouse's annuity should be subject to such (limited) railroad-retirement-OASI coordination by way of setoff when her husband's annuity is not. This poses a dilemma. It may be doubted, however, that the dilemma should be resolved by eliminating such vestiges of this |