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Mr. THOMAS. Then they have been sound asleep, haven't they? It is their job to figure rates and help you operate.

Mr. Scott. There was a group called the Communications Division which did help us, but the Utilities Division as such did not.

ULTIMATE COST OF PROGRAM

a

Mr. THOMAS. This is a downpayment. What will it cost
Mr. Boutix. Do you mean on equipment?

Mr. THOMAS. Everything. This is just a downpayment. You have 77 jobs. You are going to need 133. You have 56 now. When you get up to this $900,000, it is going to permit you to go up to what?

Mr. Boutin. We have 75 employed at present. The staff assigned to these functions here and in the regional offices is expected to level off at 133.

Mr. Thomas. You are going to level off there?
Mr. BOUTIN. Yes.

Mr. THOMAS. What will be your maintenance and repair and equipment cost in addition to this $1.5 million salary cost next year and from here on out?

Mr. TURPIN. Mr. Chairman, it is proposed to finance the cost of the communications for the civil agencies of the Government through a working fund that would be proposed next year. There would be need for capital in that fund of about $12 million. The fund would be fully reimbursed for the depreciation of equipment that was financed through the fund. The total cost of the system would be paid by the respective agencies in ratio to the use of communication facilities.

Mr. THOMAS. Regardless of who pays for it, what is it going to cost ?

Mr. TURPIN. It would be in the magnitude of $80 to $90 million. The experience has been that the communications cost to the Government has increased some percentage each year, so it is hard to say what it would be in 1963, but in the magnitude of $80 million.

Mr. Thomas. That is capital investment and salaries and expenses?

Mr. Mundy. That also includes leased lines cost; leased lines and public message costs from the various agencies.

Mr. Thomas. Well, that is the total figure you are going to charge back to the agencies. Now where is the overhead going to be taken care of, in that appropriation ?

Mr. TURPIN. It is planned to finance that from the proposed appropriation "Expenses, Federal telecommunications system.

Mr. THOMAS. What will that figure be?

Mr. TURPIN. In 1963 after annualizing the cost of the 133 positions and providing for increased contractual services for testing, pilot models, and so forth, overhead should level off at approximately $2 million each year.

Mr. Thomas. You will have no capital investments? It will all be salaries and expenses?

Mr. TURPIN. Salaries and expenses and pilot testing of new equipment or layouts would be financed from this direct appropriation.

Mr. THOMAS. And rental?

Mr. TURPIN. From the working capital fund or capital investment, we would finance on a reimbursement basis, the Government-owned

73884-61--8

equipment, such as cryptographic, all rentals including leased lines and terminal facilities and the switchboard and teletype operators.

Mr. THOMAS. How much!
Mr. BOUTIN. The capital investment is expected to total $12 million.

Mr. THOMAS. What is the nature of it? Switchboards in each of the installations or what?

Mr. Scott. The investment in Government-owned equipment would be about $4.5 million. This would be security communications equipment which you could not lease, such as cryptographic. All the rest would be leased. The switchboards and station equipment rental would be reimbursable.

Mr. THOMAS. But it all comes out of the taxpayer's pocket. What is the overall picture? What do you think you will save on an annual basis by this operation?

Mr. BoUtin. Right now the cost has been increasing at about 10 percent a year. We think we can reduce it substantially so that the net bill to the Federal Government is going to be in the vicinity of $80 million rather than being $88 million

Mr. Thomas. What was it in this past year!
Mr. BOUTIN. $80 million approximately.

Mr. THOMAS. And for the $1.5 million you think you will hold it to that next year?

Mr. BOUTIN. We think we can, and vastly improve the service at the same time, including the direct dialing.

Mr. THOMAS. It is easier to do and the fellows will talk a little bit more, will they not?

Mr. BOUTIN. But it will not cost any more because they have full use of the wire.

Mr. THOMAS. And they can talk all day on it, is that it!
Gentlemen, are there any further questions on this?

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QUALITY OF STAFF ENGAGED IN THIS ACTIVITY

Mr. BOLAND. This program seem to require a considerable degree of efficiency in engineering and a degree of technical talent. Is that available to you?

Mr. BOUTIN. What we have done, Congressman, rather than going outside of the Government was to go to other agencies of the Gorernment and recruit the best talent we could get. We have been able to pick up some topnotch people. We have gone to Navy, to FCC, to the VÅ, the Air Force, and the USIA. We haven't gone outside of the Government.

Mr. BOLAND. And you have picked the best you could get !

Mr. BoUtin. The quality has been excellent. We have been very, very pleased with what we have been able to get. By consolidating switchboards and new technological advances we have been saving $2,000 here, $3,000 here, $10,000 here and that will be repeated every single year.

Mr. BOLAND. That is all, Mr. Chairman.

Mr. Jonas. Mr. Turpin, what is the total of new positions you are asking for today in the several items?

Just put that in the record.
Mr. TURPIN. It would be 413.

Mr. THOMAS. Thank you, gentlemen, very much. We like to do business with you.

WEDNESDAY, AUGUST 9, 1961.

SMALL BUSINESS ADMINISTRATION

WITNESSES

JOHN E. HORNE, ADMINISTRATOR
PHIL DAVID FINE, DEPUTY ADMINISTRATOR, INVESTMENT DIVI-

SION
WILFRED L. WHITE, DIRECTOR, OFFICE OF MANAGEMENT AND

RESEARCH ASSISTANCE LOGAN B. HENDRICKS, DIRECTOR, OFFICE OF LOAN PROCESSING KEITH L. HANNA, ASSISTANT ADMINISTRATOR (CONTROLLER) PAUL S. HOWELL, DIRECTOR, OFFICE OF BUDGET

REVOLVING FUND, SMALL BUSINESS ADMINISTRATION

Program and financing

(In thousands)

Presently Revised Increase or available, 1962 estimate, 1962 decrease (-)

Program by activities:
1. Financial assistance:

Business loans:
Direct.

$80, 811 $95, 400

$14,589 Immediate participation..

105, 698 143, 200

37, 502 Deferred participation.

20, 705
26, 600

5,895 Total business loans..

207, 214
265, 200

57, 986 Disaster loans...

14,000 14,000
Less deferred participation business loans not ex-
pected to be purchased.

14, 494 18,600

4, 106 Total loan commitments, net.

206, 720 Administrative expenses.

260,600

53, 880

16,602 116, 602
Other...-

1,080
1,385

305 Total financial assistance...-

224, 402 278, 587

54, 185 2. Investment and developnent company assistance:

Purchase of debentures of small business invest-
ment companies.

15, 000

45.000 Loans to small business investment companies

30,000

27,000 27,000 Loans to State and local development companies... 18,900

35,000 Program operating expenses..

16, 100 15 25

10 Total investment and development company assistance.

60,915 107, 025 3. Interest expense to Treasury on funds expended.

46, 110 15, 353 18, 077

2, 724 Total obligations.....

300.670
403, 689

103, 019 Financing: Amounts becoming available: Appropriation.

20,000 150,000 130,000 Receipts from operations: Principal collection on loans: Business loans.

125, 400 110, 703 -14, 697 Disaster loans.

11, 200
10,990

-210 Loans to State and local development con.panies.. 1, 492

3, 281 Interest and other revenue on loans and investinents:

1,789 Financial assistance program.

23, 640 26, 339

2,699
Investment and development company assistance
program

2, 837
4, 629

1.792
Recovery of prior year obligations:
Loan cancellations:
Financial assistance program

24, 340
17, 300

-7,049 Investment and development company assist

ance program.
Repaymenis to banks on deferred part. loans:

4,100 Financial assistance program (disaster loans).

13
447

434
Investment and development company assist-
ance program...

151
123

-28 Total amounts becoming available...

209, 073 327, 912

118, 839 1 The increase in the estimated business loan application level from 900 to 1,000 per month may require an increase of $700,000 in the transfer to “Salaries and expenses."

4, 100

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GRANTS FOR RESEARCH AND MANAGEMENT COUNSELING, SMALL

BUSINESS ADMINISTRATION

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The increase in the business loan program estimate from an average of 900 applications to 1,000 per month may require the transfer of $700,000 from the contingency to the financial assistance activity.

Mr. Thomas. Gentlemen, will the committee please come to order. We have with us this morning the Small Business Administration, whose supplemental request totals $130,898,000 as contained in House Document No. 179. Certainly we are delighted and honored to have some distinguished gentlemen with us from the agency.

Gentlemen, you are welcome. We are certainly delighted to have all of you here. The Administrator, if he has a statement for us we will be glad to listen as long as you care to talk. I will suggest to

. you you might bear down on your research program. You might tell us about your requests.

Mr. HORNE. Mr. Chairman, I appreciate the opportunity to appear before the subcommittee. I want to thank the other members of the committee for letting us come in this morning.

I believe that at least briefly my statement--and it isn't very longtouches on each of the points that you raise and with your permission, sir, I will simply proceed to read my statement.

Mr. THOMAS. Go ahead.

GENERAL STATEMENT

Mr. HORNE. Mr. Chairman, when I appeared before Congressman Andrews' subcommittee to present our 1962 budget estimates, I stated that the heavy volume of applications in connection with the business

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