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$1,257,416.53, a decrease of 22.27 percent. In St. Croix, the revenues were $515,383.28, an increase of 96.20 percent over the preceding year, the largest revenue in its history, due directly to the rum profits of the Virgin Islands Co. As a result, long-neglected municipal services were improved. Prospects of revenues, for the coming fiscal year, however, are not bright in St. Thomas and St. John, and St. Croix faces an acute situation.

The department of social welfare in St. Croix distributed minimum monthly grants of $2.50 to more than 400 indigents. These grants were once as low as $1. In St. Thomas comparable grants of $5 were made to a like number of indigents. There was considerable improvement in the social services, especially in child-welfare work. Unemployment in both islands was relieved in great measure by local public works appropriations.

By June 30, 1945, there were 688 inductees from the Virgin Islands in the armed forces. In most instances, their military pay plus allowances to dependents exceeded previous family incomes.

Increased Self-Government Recommended A definite policy on political status should be developed for the islands. Every effort must be concentrated on helping the islanders develop the governmental techniques which will enable them to assume increasing responsibility in the management of their local affairs and in helping them increase their economic self-sufficiency. In addition to the Department of the Interior's policy of employing qualified local persons whenever they are available for Federal positions in the islands, certain features of the Organic Act should be amended. Suggestions for such amendments are now being drafted by a local committee.

THE PHILIPPINE ISLANDS Following the American landings in the Philippines, the highest officials of the Japanese-sponsored puppet government were transferred from Manila to Baguio. Most of these men were captured and are now held in the custody of the United States Army pending trial after the war by the Commonwealth Government on charges of collaboration with the enemy. Three of these officials escaped in Japanese planes to Tokyo-José P. Laurel, the so-called President of the puppet Republic; Camilo Osias, Secretary of Education and ex officio President of the Kalibapi (the Japanese sponsored Fascist Party), and Benigno S. Aquino, Director-General of the Kalibapi and Speaker of the puppet National Assembly. Manuel A. Roxas, recently chosen President of the Commonwealth Senate, who had also been transferred to Baguio, was released from custody by the military authorities as an unwilling office holder whose loyalty to

the Philippines and to the United States had been thoroughly established.

While the great mass of Filipinos have heroically resisted the Japanese during the occupation, it is a matter of concern to the

United States that those individuals who have taken leading parts · in the puppet regime are for the most part men who were formerly

high in the councils of the prewar Philippine Government. On this subject the late President Roosevelt stated on June 29, 1944, that "those who have collaborated with the enemy must be removed from authority and influence over the political and economic life of the country.

After the recapture of Manila in February 1945, General MacArthur formally restored to the Commonwealth Government "full powers and responsibility.” Immediately President Sergio Osmeña set about reestablishing the executive and administrative functioning of the national government. He did not call into session the legislative branch, which was involved in an extraordinary situation, until June 9, 1945, after his return from an urgent trip to the United States.

The possible political implications of the status of the present Philippine Legislature are obvious and, in the light of President Roosevelt's statement, of deep concern to the United States. On June 9, 1945, when the special session convened, only 13 were available in the entire Senate; and of the 24 original members, all but 17 are known to have been connected in some capacity with the puppet regimes. If conditions in the Philippines, however, are stable enough to hold the election planned for November 1945, the Filipino people will have an opportunity to choose a legislature to its liking with the possible exception of the third of the Senate allocated 6-year terms.

Occupation Leaves Problems In view of the imminence of independence and the economic and financial bankruptcy of the Philippines, the United States Government is deeply involved in the future welfare of the Islands. American reoccupation has found the sugar industry paralyzed, many mills destroyed or damaged, hardly more standing cane in the fields than should be saved for seed, and with less than half of the necessary work animals surviving. Members of the industry estimate that before the war sugar supported, directly or indirectly, about 4 million of the Islands' 17 to 18 million population. Reconstruction of this industry is largely dependent on American decisions as to future trade preferences and war damage compensation.

The Japanese occupation has saddled the Commonwealth with a mass of currency problems. The Japanese had put into circulation some 40,000,000 pesos ($20,000,000) in Philippine bank notes previously redeemed by the Commonwealth, which they found in the vaults of the treasury, and against which there is no reserve. An unknown quantity of treasury warrants had been issued in the name of the Commonwealth by the puppet government. After the fall of Manila, President Quezon had authorized branches of the Philippine National Bank in areas not yet occupied to issue emergency notes and Emergency Currency Boards had been empowered to issue local currencies up to the amounts of unencumbered provincial balances in the bank. As the occupation period stretched out and the need of funds grew, various units of the resistance forces issued scrip under their own civil affairs administrations. There are unknown quantities of the old prewar peso still in circulation and, added to these various currencies for which the Commonwealth has more or less responsibility, the American armed forces brought with them the new victory peso with which it pays United States troops, Filipino labor, etc.

The end of the occupation period also found the Islands flooded with Japanese pesos and suffering violent inflation. Although these notes were declared null and void upon the return of Commonwealth authority, the great increase in other currencies remaining in circulation-augmented by heavy expenditures of American forces-has combined with the dire scarcity of food, clothing, and the essentials of daily living to sustain inflation and a widespread black market.

The foregoing are illustrations of but a few of the many critical problems with which the Filipino and American people are faced as a result of the war. Statesmanship of a high order on both sides will be required to solve them.

THE EQUATORIAL ISLANDS Although war in the Pacific terminated the Division's field development project on the islands of Baker, Howland, and Jarvis in the equatorial group, the use to which the islands were put by the United States armed services proved conclusively the value of such pioneering work. Early in the war the air strip which had been built on the island of Howland for a possible emergency landing by Amelia Earhart was destroyed by the Japanese. The Army moved into Baker in force in 1943 and constructed a Marston Mat air strip. The installations on Jarvis were rendered useless by a United States destroyer in order to prevent their possible utilization by Japanese forces.

The islands of Canton and Enderbury, which the United States holds in condominium with Great Britain, also played an important part in the war. At Canton the air facilities were greatly expanded and the island will undoubtedly remain an important link in transPacific air routes,

BENJAMIN W. THORON, Administrator 1

THE Puerto Rico Reconstruction Administration was established by

Executive Order No. 7057 of May 28, 1935, to "initiate, formulate, administer, and supervise a program of approved projects for providing relief and work relief and for increasing employment within Puerto Rico.” President Roosevelt emphasized that the main objective of the program should be permanent reconstruction of the island's economy in terms of agricultural rehabilitation, rather than mere temporary palliative relief. For this purpose funds aggregating approximately $70,000,000 were made available to the Puerto Rico Reconstruction Administration by allotments from appropriations contained in the Emergency Relief Appropriation Act of 1935 and later relief acts, and by direct appropriations for the Puerto Rico Reconstruction Administration through the fiscal year 1941. Thereafter financing has been exclusively through funds allotted by the President out of the Puerto Rico revolving fund. That fund created by the act of February 11, 1936, consists of income and the proceeds of the disposition of property derived entirely from the Puerto Rico Reconstruction Administration's operation of projects which were financed with funds originating in the Emergency Relief Appropriation Act of 1935. The advent of the Work Projects Administration in the island, large expenditures for defense and war activities, and assumption by the insular government of much of the responsibility for the employment relief had removed the necessity for large expenditures by the Puerto Rico Reconstruction Administration which existed when it was the only agency equipped to alleviate the ever present unemployment problem. Accordingly the comparatively small amounts which have been available to the Puerto Rico Reconstruction Administration each year since 1942 out of the revolving fund have necessarily limited the Puerto Rico Reconstruction Administration's activities principally to protection of investments previously made, and to conservation of the most essential features of its former broad program of rural rehabilitation.

1 Resigned effective June 30, 1945, and was succeeded by Edwin G. Arnold.

Expenditures during the fiscal year 1945 out of the Puerto Rico revolving fund were authorized by the President for the following projects:

Operation and maintenance of housing projects--------- $225,000
Management of lands and leases connected with the La- -
fayette project----------------------------------- 68,000
Operation of Castaner farm project------------------- 56, 500
Supervision of and making and servicing of loans to co-
operatives--------------------------------------- 97, 000
General administration------------------------------ 160,000
Construction of rural houses, etc.--------------------- 400,000
Operation of Central Service Farms------------------- 150,000
Subdivision and sale of lands in Lafayette district for
food crop production------------------------------ 13, 000
Purchase of 5 small parcels of land in San Sebastian---- 324
Storm-water sewer and drainage at the Eleanor Roosevelt
development------------------------------------- 20, 500
Total.------- ~ ------------------------------- 1,190,324

A summary of the year's principal activities, differing little in essential features from those of the preceding 3 years, follows:

HOUSING MANAGEMENT

Rental collections amounted in round figures to $343,000 as against the outlays authorized for management and maintenance of $225,000. This income came from the Puerto Rico Reconstruction Administration's 1,210 urban family dwelling units, nominal rentals from 4,610 rural parcels of about 3 acres each on which no houses have been built, 6,254 rural houses built in previous years, and 235 additional rural houses constructed during the year. Transportation and shipping difficulties in procuring some needed materials prevented completion of all of the houses planned, but the 235 constructed added 700 acres of formerly unproductive land to the raising of subsistence crops by resettled farm laborers as a supplement to their meagre work earnings. All of the urban houses and 98.6 percent of the rural homesteads were occupied as of June 30, 1945. Under the policy of encouraging tenants to become owners, 312 occupancy agreements in the urban zone and 4,526 in the rural districts had been converted by June 30, 1945, into long term purchase agreements. Final conveyances of 40 parcels without houses and of 5 rural homesteads were executed.

RURAL REHABILITATION

Like the 6,489 rural houses and their adjacent parcels devoted to the cultivation of minor food crops, the Central Service Farms project is a most important part of the Puerto Rico Reconstruction Administration's continuing rural rehabilitation program. The insular government through its war emergency program added $42,132.86 to the

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