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system is another example. Such practice is unfair and

unjustified and should be ended forthwith. This and other bad practices can have only one effect in the long run. Employees will be driven to seek stations elsewhere, and this vital navigation outpost will have to rely upon the services of those who may be willing to accept abuses or will be compelled through one cause or another to endure them.

Mention of the points which are entitled to special attention will include the following:


The alien cash relief payments are paid under the act of Congress approved July 8, 1937, Public Law 191, 75th Congress. This was originally paid to employees and certain former employees of the Panama Canal not coming within the provisions of the Canal Zone Retirement Act. This cash relief is limited to not to exceed $1 per month for each year of service of the employee with a maximum of $25 per month.

Section 2 of the act states "That there is hereby authorized to be appropriated annually such sums as may be necessary to carry out the provisions of this act." Section

2 of Public Law 841, 81st Congress, changes the term “The Panama Canal” to “Canal Zone Government” wherever appearing in the statutes of the United States.

It appears that the intent of Public Law 191, 75th Congress, was to pay this cash relief from appropriated funds and not make the employees pay any part of the cost.

The estimated 1954 amount for this relief charged to the Panama Canal Company is $1,145,300 and the Canal Zone Government $63,200.


In 1934 an appropriation of $150,000 was provided for the repatriation of former local rate employees and their families who have rendered at least 3 years' service to the United States Government or the Panama Railroad Company on the Isthmus. In 1952, $10,702 was spent which brought the total spent since 1934 to $168,326. The extra $18,326 came from other funds allocated for that purpose. The apparent intent of Congress in 1934 was to return these old, faithful employees to their original homes from appropriated funds and not make the employees pay any part of the cost. T'he estimated 1954 amount for this repatriation is $11,000.


The United States citizen employees who are eligible are under the United States Civil Service Retirement Act of May 29, 1930, as amended. They are subjected to the same rules and regulations as other Federal employees. A payroll deduction of 6 percent is deducted from their biweekly pay checks as is done in the case of all other Federal employees.

Section 2 of Public Law 808, 80th Congress, approved June 29, 1948, added section 252, article 3, chapter 12 of title 2 of the Canal Zone

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Code which states the Company shall reimburse the Civil Service and Canal Zone Retirement and Disability Funds for Government contributions to the retirement fund applicable to its employees.

Public Law 841, 81st Congress, places this responsibility on the Panama Canal Company. The Company in turn passes it on to the employee.

To our knowledge, no other Federal employee has to pay indirectly for the agency's share of their retirement. We do not believe it was the intent of Congress when the Retirement Act was enacted for the employee to pay both his and any part of the agencies' share. The estimated 1954 amount for reimbursement to the Civil Service Retirement is $1,437,300.


This is a parallel case to the Civil Service Retirement Fund. The recently hired employee who is not eligible to belong to the Civil Service Retirement Fund pays his social-security deductions from his biweekly pay check, the same as all other employees under social security. In addition to this, the Panama Canal Company is passing part of their cost to him, also. We do not believe it was the intent of Congress when they enacted the social-security laws for the employee to pay his share and also a part of the company's. The estimated 1954 amount for contributions to Federal Insurance Fund is $37,900.


This is also a parallel case involving the Employees' Compensation Fund, Bureau of Employees' Compensation, Federal Security Agency. The estimated 1954 amount for this item is $50,000.


We know of no other Federal agency whose employees pay for any part of the expense in their recruitment, nor do we believe it was the intent of Congress when they passed Public Law 600, 79th Congress that the employee should be charged any part of the expense covered by the law. Here again the Panama Canal Company has passed charges on to the employee that are not borne by any other Federal employee. The estimated 1954 amount for this item is $186,100.


Many years ago the Panama Railroad Company issued 24-trip passes to all United States rate employees on the Isthmus. These books were good for 1 year. This policy has been changed slightly in that now a book is good until used, but no employee is given more than 1 book in a 12-month period. I have heard many times about our free railroad transportation, but the full-rate cost of these passes when used is prorated back to the employee. The estimated 1954 amount for this free transportation is $35,500.


I have also heard many times about our cheap boat transportation from New York to the Canal Zone. Here we find we are paying a hidden charge for transportation as well as the published tariff. Under existing regulations and procedures, the employee and his family are accorded transportation for $40, $50, or $55 one way, depending on the accommodations assigned. The Steamship Division estimates the cost of transportation as $125 one way. The $85, $75, or $70 difference is charged the division the employee works for. This amount appears as an employment cost and is passed on to the employees as such. The estimated 1954 amount for this item is $391,600.

As we see it, the whole scheme of things in the Canal Zone is to syphon off from employees just about every cent that it is possible to squeeze out of him. This is anything but a live-and-let-live precept.

Mr. Hand. Thank you, Mr. Riley, for your statement. I have been interested in all of it and particularly in the references to the Civil Service retirement law.

Mr. GEORGE D. Riley. Thank you very much.
Mr. Riley. These gentlemen have given us a very clear picture.

Mr. GEORGE D. Riley. We have given you only facts. There is no imagination in these statements.

Mr. Hind. Mr. Munro, without reference to the percentage, I presume you agree some increase in rents was justified in the Canal Zone. Do you not?

Mr. MUNRO. We answered that on the Canal Zone to the Rent Panel by the fact that if increased costs indicated an increase in rents, by the same token, there should be an increase in tolls. In other words, the cost of putting ships through has gone up in the same proportion as the cost to maintain a house.

Mr. HAND. Do you favor an increase in tolls?
Nir. Munro. The present increase in shipping does not warrant it.
Mr. Hand. Does not warrant it?

Mr. Munro. No, sir. In other words, they are making about $1 million this year and only expected to make a little over $1 million.

Mr. Hand. You have two hospital services. What would be the effect if the smaller of the two hospitals on either end of the zone was in effect discontinued and the service maintained in the larger of the two?

Mr. Munro. That is not practical to be done. You have reference to closing the hospital now at Cristobal?

Mr. HAND. Yes.

Mr. MUNRO. As I stated, the Canal Zone does not have good transportation. You have people over on the Atlantic side who are isolated, and when you have emergencies over on that side, you do not have proper facilities to get them over to the Pacific side hospital.

Mr. HAND. How long, in your judgment, would it take to transport a patient from one side to the other?

Mr. MUNRO. I would rather give you an example of how long it has taken-3 hours.

Mr. Hind. What was the cause for the long period of 3 hours?

Mr. MUNRO. Lack of facilities—the fact that they have to go through the Republic of Panama, primarily.

One other bad feature of the situation that exists at the present time is that they have the clinics and outpatient services from the Gorgas Hospital. That means people from the Atlantic side must go across the Isthmus. If you have a morning appointment, you have to go across on the train, and you spend all day, and if your appointment is such in the evening that you cannot catch the evening train back, you have to stay overnight in the Tivoli until the next day. That has been partly corrected in the adjustment of the train schedules, but it is still not satisfactory.

Mr. Hand. The committee thanks you both for your testimony.

Without objection, we will include in the record the statement by Mr. Brownlow.

(The statement referred to follows:)

TESTIMONY BY THE METAL TRADES DEPARTMENT, AFL My name is James A. Brownlow, and my position that of president of the Metal Trades Department of the American Federation of Labor. This is an organization composed of 16 international unions and 2 cooperating international unions, principally representing those employees who may be engaged in the mechanical trades and maintenance and production in heavy industry, including shipbuilding and ship repair.

The skilled mechanical force on the Panama Canal is made up of members of local unions affiliated with these international unions. It is because of the close relationship between the local unions, the international unions, the Metal Trades Council, and the Metal Trades Department that I appear before you this morning.

The Metal Trades Department endorses the recommendation made by the Panama Canal Central Labor Union and Metal Trades Council. Mr. Munro bas supplied the complete data on the situation of the United States citizen employee of the Panama Canal Company and Canal Zone government. We believe his recommendations are sound and just. Mr. Riley has stated the position of the American Federation of Labor and elaborated on the conditions mentioned by Mr. Munro by comparing them with the same conditions as afforded other Federal employees.

We believe this is where conditions can and should be corrected. The placing of the charges on the employee is predicated on the wishes of former House Appropriation Committees. I would like to call to your attention the following statement on page 7, House Report 544, 82d Congress, civil functions department of the Army appropriation bill, fiscal year 1952: "The committee is well aware of the fact that in times past it was necessary to charge low rentals as an induce ment for skilled workers to live in the Canal Zone. It has been obvious for many years now that the need for such inducement no longer exists. The Secretary of the Army is, therefore, urged to take inimediate steps to increase the rentals to provide for more rapid amortization of costs of construction and the entire cost of maintenance. It would even not seem abhorrent for the Government to make a small profit on the operation and establish some sort of contingency fund for the housing operation."

The following statements appear on page 12 of House Report 1652, 82d Congress, Civil functions, Department of the Army, appropriation bill, fiscal year 1953: "The Panama Canal Company is required to be self-sustaining and to reimburse the United States Treasury for the cost of the Canal Zone government and for the interest on the direct investment of the United States in the canal. Althongh some revenue is derived from various services provided to employees, their families and other Government agencies on the isthmus, the principal source of revenue for the company is from tolls levied on vessels going through the canal.

"The purpose of the Panama Canal has always been to provide a short route for vessels plying between the Atlantic and the Pacific Oceans. The achievement of this purpose and its resulting benefit to shipping interests is universally accepted. It seems only proper that the vessels using the canal should bear their fair share of the cost of its operation and maintenance as well as the amortization of the original and subsequent Federal investments. That this is not being done is obvious to the committee. Toll rates have been revised only once, in 1937, since the opening of the canal. This revision resulted in a reduction in toll charges. During this period of time cost of operations has risen astronomi. cally. The committee realizes that there are many factors to be considered in increasing tolls, yet the lethargy on the part of the Governor and the board of directors in failing to take more definite action over so long a period of time is appalling. The Governor is directed to take prompt and immediate action on this matter in the manner provided by law. The committee will expect the Increased toll rates to be in effect prior to the submission of the budget estimates for fiscal year 1954 and to be reflected therein."

Paragraph 2 under "Administration" on page 12 of this report states : “The budget estimates considered by the committee contain a limitation of $500,000 on the funds available to the Company for administrative expenses. This is a completely unrealistic amount and does not serve to give to the Congress a true picture of the general administrative expenses of this organization. Included in the requested limitation are only the costs of the President's Office and the immediately related staff, some employment costs and the General Accounting Office audit. Anticipated expenditures for the finance bureau, personnel bureau, and the administrative branch are not included. The limitation, therefore, has been revised by the committee to reflect general and administrative expenses in the amount of $3,301,800, which is the amount set forth for these items in the Company's estimated allocations of expenses for fiscal year 1953."

In the discussion on rental of Government quarters generally, on page 13 of this report, the last paragraph states: "Such dalliance on the part of the agencies involved is inexcusable and they are directed that the new rental rates are to be placed into effect as quickly as possible and in all events not later than July 1, 1952, in the agencies involved in this bill."

It is apparent from the material submitted at the rent hearings, the Panama Canal Company has tried to live up to that part of the reports dealing with the charges discussed by Mr. Munro. Copies of this material have been supplied this committee.

I would like to again point out what the impartial rent panel said about these charges.

"Certain special charges in relation to rents: In the course of testimony by the Company compt roller, attention was directed to the high actual and estimated costs for 'division administration' and 'general administration.' In response to the question whether these figures did not suggest that the Company's operations were inefficient, the comptroller stated that the operation in the Canal Zone was definitely more expensive than it would be in the United States. The higher expense results from certain special charges which tend to load costs; the 25percent difference in salaries of United States-rate employees over stateside sal. aries; various leave privileges in excess of those allowed to Government employees in the United States; expenses of initially transporting employees to the isthmus from the United States; and repatriating them ; provisions at reduced rates of steamship transportation of employees and immediate families to the United States for leave purposes. There may be other similar expenses. There is also the requirement, relevant here, that the Company pay into the civil-service retirement fund 642 percent of the United States-rate employees' wages (a reyuirement not imposed on ordinary Government agencies).

"In applying the formula, the Company would have the United States-rate employees pay these special charges as part of the rents, to the extent that the pecial charges find their way into the several dements of cost upon which the rentals are based. Thus a housing division United States-rate employee receives .: 25-percent override in his salary; this is picked up in the cost of the housing division and goes into the computation of the rents for the United States-rate employee. The cost elements in which these special charges are reflected are not only 'division administration' and general administration' but also maintenance and general services. (To a degree they are also reflected in the depreciation and interest figures, for they tend to swell the costs of construction performed by United States-rate employees.)

“A serious question is raised whether or to what extent the special charges should be allowed to find their way into the rents for the effect of allowing this, as was said at the hearings, is to take back with one hand what is given with tre other to the United States-rate employees. There has been a certain whittling away over the years of the special treatment traditionally accorded to United States-rate employees doing vital work in the zone; and it would appear that further invasions should not be made by indirection and without deliberate consideration of their effect. The point need not be labored further; it is appreciated by the Company comptroller who said that he had given it considerable study and contemplated making recommendations on it to the board of directors. The panel recommends that the exclusion of all or part of the special charges be considered in connection with the fixing of the proposed new rents."

Insofar as the special charges find their way into other than “Employee service activities” which the employees must use, the elimination of interest and depreciation charged the employee service activities is equitable because exact amounts are obviously unobtainable.

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