Mr. Garrity also stated that there are no outstanding parkway bonds of the county at the present time. The fact is that there are more than $20 million of bonds still remaining to be paid. Mr. Garrity stated that the toll is being used for general purposes and not for the parkway system. The fact is that the Westchester County Toll Act (Laws of New York, 1945, ch. 594, as amended) specifically provides that the tolls must be used for certain stated purposes relating to the operation of the toll stations, the operation and maintenance of the parkways, the interest and amortization of the parkway bonds and the repayment of moneys due by reason of advances made toward the construction of the parkways. There has been no deviation from the provisions of this law, and the tolls collected have been used for the purposes stated. Mr. Garrity stated that the county has spent practically nothing on maintenance of the parkways and that the tolls and the moneys received from State aid are being used for general revenue at the present time. The fact is that in our current budget the county is spending over $5,400,000 for the maintenance of parkways and county roads, policing, repairs, capital improvements, debt service and operation of the toll stations. The total amount received from tolls, other income from the parkways and State aid is over $380,000 less than the amount expended, requiring the real property of our county to be burdened by a tax levy in that amount. I may say that they figure of $5,400,000 stated as expenditures by the county for road and parkway purposes does not include overhead, general supervision, accounting, and personnel services, as well as insurance or retirement costs. If expenditures representing the latter were included in the total expenditures, the amount of $5,400,000 would be considerably larger. I should be grateful to you if the foregoing can be inserted in the record of the hearings. Sincerely yours, JAMES D. HOPKINS, Hon. GEORGE H. FALLON, House of Representatives, AMERICAN ROAD BUILDERS' ASSOCIATION, New House Office Building, Washington, D. C. DEAR CONGRESSMAN FALLON: During the recent appearance of the American Road Builders' Association before your committee, we were requested to furnish additional information on certain aspects of the appropriating authority of the Congress. Pursuant to this request, we are transmitting herewith a supplemental statement with the request that it be made a part of the record, together with our original statement. Respectfully submitted. BURTON F. MILLER, Staff Counsel. SUPPLEMENTAL STATEMENT OF AMERICAN ROAD BUILDERS' ASSOCIATION Mr. Chairman and gentlemen of the committee, the American Road Builders' Association was privileged to appear before your committee on May 25, 1955. Among the questions asked at the conclusion of our direct testimony were several relating to (1) the legal right of one Congress to enact appropriation measures of a continuing nature, thus binding subsequent Congresses; (2) the legality of an appropriation measure earmarking revenues from a given tax to a specific purpose; and (3) can Congress engage in a long-term credit financing without resorting to the legal device of corporate structure? The foregoing questions were prompted by the financing provisions of H. R. 4260 and other related legislation. The proposed legislation would set up a Federal Highway Corporation authorized to issue obligations in an amount not to exceed $21 billion, with maturities running up to 30 years. Interest rates would be determined by the Corporation with the approval of the Secretary of the Treasury. The assets of the Corporation would consist of a continuing appropriation which annually would be equal to the amounts of revenue in excess of $622,500,000 collected each fiscal year from taxes imposed by sections 4001 and 4041 of the Internal Revenue Code of 1954 on gasoline and special fuels. In addition, the Corporation would have the power to issue to the Secretary of Treasury its obligations in such amounts as may be necessary to provide for the debt service of the Corporation but not exceeding an aggregate amount of $5 billion outstanding at any time. It is further provided that the obligations of the Corporation are not guaranteed by the United States nor constitute a debt or obligation thereof. Funds thus derived would be utilized for the accelerated development of the National System of Interstate Highways and completion within a contemplated period of 10 years. Also, $600 million annually would be provided for a continuation of the present regular Federal-aid programs at current levels. While such a financial device at the Federal level (as embodied in the administration bill) is perhaps quite novel, nevertheless, there is no apparent constitutional prohibition against its employment. Similar credit devices have been frequently used by States and have repeatedly stood the test of legality. Admittedly, such State cases are not controlling as to the United States. But they do clearly delineate the legal techniques employed in earmarking specific State revenues to service bonded indebtedness. One of the most illuminating cases in point is that of Ziegler v. Witherspoon (49 N. W. 2d 318). In this case the court held that certain State revenues could be legally earmarked for servicing bonds of a special authority, the proceeds of which were used for expressway construction in a metropolitan area. For other cases in point see State v. Highway Commission (28 P 2d 770); State v. Connelly (46 P 2d 1097); Scott v. Alabama Bridge Commission (169 Southern 273); State v. Florida Improvement Commission (37 Southern 2d 443); State v. Jones (23 N. W. 2d 54); Watrous v. Golden Chamber of Commerce (219 P 2d 498); McLucas v. Bridge Authority (77 S. E. 2d 531); and State v. O'Brien (82 S. E. 2d 903). Article I, section 8 of the Constitution of the United States limits the taxing power of the United States "to pay the debts and provide for the common defense and general welfare of the United States." With regard to appropriations at the Federal level, the Constitution in article I, section 9, provides "no money shall be drawn from the Treasury but in consequence of appropriation made by law." No constitutional restriction relating to the continuation or duration of appropriations exists other than article I, section 8, which provides that no appropriation for the armies shall be for a longer term than 2 years. In general, Congress can lawfully enact an appropriation measure which by its very terms will be applicable for a period of years. Of equal certainty it may be said that a subsequent Congress may repeal or otherwise modify such a law. In a recent opinion as to the authority of a given Congress to bind a subsequent Congress, Mr. John Simms, Chief of the Legislative Counsel, United States Senate, said, "It seems elementary that one Congress, or one law enacted by a Congress, cannot completely foreclose action by a subsequent Congress or by a subsequent law of the same Congress. To so hold would be to say that once a policy had been enunciated by a Congress it is not susceptible to change. That is not to say, however, that a subsequent Congress is always left with an unlimited realm of action. Rights may be accrued under a law which cannot be validly divested. But the power of each Congress to enact legislation for future application cannot be eliminated by action of a prior Congress." In those cases where corporations or other such instrumentalities of the State have issued obligations which have been purchased by third persons, it has repeatedly been held that revenue measures supporting the securities in question cannot be repealed or modified in such a manner as to diminish or destroy the value of such securities. Such actions have been held to be unconstitutional as violating section 10 of article I of the Constitution prohibiting the States from enacting laws impairing the obligation of contract. It should be noted, however, that this constitutional prohibition is not applicable to the United States. However, a somewhat parallel protection is found under the due process clause of the Constitution. The question of the authority of Congress to earmark revenues for a specific purpose appears to present no real problem. A good example is the recently enacted law dedicating receipts from the duck stamp tax and certain other tax revenues to the Fish and Wild Life Service of the Department of the Interior. Similarly, revenues under the social security program are likewise earmarked. Other examples include appropriation of amounts equal to revenues derived under the Railroad Tax Act; and the appropriation of an amount equal to 30 percent of custom duty collections to be used by the Secretary of Agriculture; The legality of dedication of revenues in appropriation measures was passed upon in 1937 by the Supreme Court of the United States. In the case of Cincinnati Soap Co. v. United States (301 U. S. 308), the Court held that future revenue from a processing tax on coconut oil produced in the Philippine Islands should be made available to the Philippine Government. In sustaining this law the Court said in substance that, if the Congress in its wisdom chose to adopt such a method of measurement of the appropriation, it saw no valid reason for challenging its right to do so. More specifically the Court said, "But if the tax, qua tax, be good, as we hold it is, and the purpose specified be one which would sustain a subsequent and separate appropriation made out of the general funds of the Treasury, neither is made invalid by being bound to the other in the same act of legislation. The only concern which we have in that aspect of the matter is to determine whether the purpose specified is one for which Congress can make an appropriation without violating the fundamental law. If Congress, for reasons deemed by it to be satisfactory, chose to adopt the quantum of receipts from this particular tax as the measure of the appropriation, we perceive no valid basis for challenging its power to do so." With regard to the borrowing authority of the United States and the present state of indebtedness of the Federal Government, the following quotation from a report of the Comptroller General of the United States submitted to the Committee on Appropriations, House of Representatives, February 28, 1955, constitutes a brief but authentic answer: "Article I, section 8, of the Constitution gives the Congress the power 'to borrow money on the credit of the United States.' The Congress has delegated that authority with wide discretionary powers to the Secretary of the Treasury, subject to the approval of the President for most types of securities. The only authority the Treasury now has to borrow from the public is provided by the Second Liberty Bond Act, as amended, which was initially enacted into law on September 24, 1917 (40 Stat. 288). Public debt obligations outstanding at any one time issued under that act plus the face amount of all obligations guaranteed by the United States that are not owned by the Treasury may not exceed $281 billion (41 U. S. C. 757b). This limitation has been in effect since August 28, 1954, when the act of that date temporarily raised the previous limitation by $6 billion. The increase is effective until June 30, 1955, when the limitation reverts to $275 billion (68 Stat. 895). This latter amount has been in effect as a limitation since June 26, 1946. Before that date the debt limitation had been gradually increased until it reached a peak of $300 billion during the period April 3, 1945, to June 26, 1946. "Since its inception, the Government has always financed its activities in part from borrowed money. Until World War I, however, revenues over the years were approximately equal to expenditures so that the outstanding public debt never exceeded $3 billion. Deficit financing during World War I increased the public debt to slightly in excess of $25 billion, but the balance outstanding was reduced to approximately $16 billion by 1930. Since then, however, the Government's activities have been financed from borrowings from the public on an increased scale, particularly since the beginning of World War II. Public debt and guaranteed obligations subject to the debt limitation reached an all-time peak of $279,764,369,000 on February 28, 1946. The highest amount outstanding since the limitation was temporarily raised in August 1954 was $278,439,442,000, reached on October 2, 1954." It is thus obvious that the United States has ample authority to borrow money on the credit of the United States either directly or through utilizing the corporate device. When borrowing directly, of course, there is no question whatsoever of the obligation being a debt of the United States. On the other hand, there are instances where instrumentalities of the United States can borrow funds for public purposes without per se creating a legal debt-that is, a debt within the meaning of existing statutory limitations. Similarly, the financing method suggested in H. R. 4260 would not create a legal liability on the part of the United States for the payment of said bonds in the event of defaultation by the Corporation. However, these are distinctions in law only and would have little effect upon the ultimate responsibility of the Federal Government. Deviating from the technicalities of the questions involved and looking at Federal responsibility from the practical viewpoint, it is concluded that the United States would have to make good the obligations incurred by the Federal Highway Corporation regardless of legal liability. Certainly a strong moral obli gation exists on the part of the United States to make good any securities issued in its name or by an instrumentality thereof. This viewpoint was advanced by the Comptroller General of the United States in testifying before the Senate Committee on Public Works on March 28, 1955. In connection with S. 1160, he said, "The legislation provides that the Secretary of the Treasury may advance to the Corporation in any fiscal year an amount not in excess of the estimated appropriation for that year and, in addition, the Corporation would be authorized to borrow from the Secretary of the Treasury not to exceed $5 billion outstanding at any one time. "Both of these provisions coupled with the permanent appropriation would apparently be to assure the investors of ability to meet obligations, and tend to have the effect of a Government guaranty of the highway obligations, at least in the minds of the investing public. "As a practical matter, the obligations would be moral and equitable obligations of the United States, since they would be issued by a Corporation entirely owned by the Government. "While the obligations would specifically provide that they are not guaranteed by the Government, it is highly improbable that the Congress could allow such obligations to go in default when one considers that the credit standing of the Federal Government would be involved." In conclusion, and in keeping with the foregoing observations regarding certain provisions of the United States Constitution, we would like to make the point that the United States has a clear constitutional responsibility to provide for post offices and post roads as well as the common defense and general welfare of the Nation. An adequate highway system is essential to these requisites. Obviously, to provide for a program of highway development of the proportions now being considered by your committee, vast expenditures of Federal funds will be required and ways and means of raising revenues to support such expenditures presents many problems. Nevertheless, the responsibility remains, and, if it is not feasible to meet the established financial requirements from current revenues then, of necessity, the Government must resort to credit financing. Certainly, the United States has ample authority to borrow money for highway purposes. Mr. FALLON. If there is nothing further to come before the committee at this time, the committee stands adjourned until 10 o'clock tomorrow morning. (Whereupon, at 3: 15 p. m., the meeting was adjourned.) NATIONAL HIGHWAY PROGRAM THURSDAY, MAY 26, 1955 HOUSE OF REPRESENTATIVES, The committee met, pursuant to adjournment, at 10:10 a. m., in room 1302, New House Office Building, Hon. George H. Fallon presiding. Mr. FALLON. Ladies and gentlemen, the Subcommittee on Roads meets this morning in a continuation of the hearings on H. R. 4260. It is the intention of the committee to run through until 1 o'clock today, if possible. We have representatives of the American Association of Railroads, and also the utility companies. We are going to try to divide the time this morning between these two groups of people. However, first I would like to recognize Mr. Edward Falck, who would like to extend his remarks in the record. Mr. Falck, will you please identify yourself for the reporter? STATEMENT OF EDWARD Mr. FALCK. Thank you, Mr. Chairman. My name is Edward Falck. I am appearing here in behalf of a number of electric and gas utilities who favor the principle of reimbursing utilities for the cost of relocation caused by Federal-aid to highway programs. The companies for whom I appear are: The Kansas City Power & Light Co.; the Virginia Electric & Power Co.; the Consolidated Natural Gas Co.; the Southern California Gas Co.; the Southern Counties. Gas Co. of California; the Indiana Gas & Water Co., Inc.; the Commonwealth Natural Gas Corp.; the Portland Gas & Coke Co.; the Washington Gas Light Co.; the St. Joseph Light & Power Co. I would appreciate very much the courtesy extended to me by the chairman of this committee to have this statement, which I have previously given to the clerk, made a part of the record. Mr. MCGREGOR. Do you favor the wording as set forth in the Gore bill, which passed the Senate yesterday, relative to utilities? Is that the wording you would like to have considered? Mr. FALCK. Yes, sir. Mr. DEMPSEY. Mr. Chairman, I would like to ask a question. Do you prefer that to the respective States having authority to grant whatever relief they think is necessary? |