Senator HILL. We will be happy to have you proceed in your own way, sir.

Mr. CHRISTGAU. Mr. Chairman, I have two summary statements, one dealing with salaries and expenses, and the other with a construction item. I will file the statements for the record and then summarize briefly what our request is.

Senator HILL. Suppose you do that. We will place those statements in the record in full, and you may summarize them.

(The statements referred to follow:)

STATEMENT BY DIRECTOR, BUREAU OF OLD-AGE AND SURVIVORS INSURANCE, ON APPROPRIATIONS, 1962 SUPPLEMENTAL ESTIMATE FOR LIMITATION ON SALARIES AND EXPENSES, BUREAU OF OLD-AGE AND SURVIVORS INSURANCE (TRUST FUND) Mr. Chairman and members of the committee, we appreciate the opportunity to discuss with you our request for a supplemental authorization for fiscal year 1962 administrative expenses from the Federal old-age and survivors insurance trust fund.

Our need for additional funding arises from the enactment of the 1961 amendments to the Social Security Act (Public Law 87-64) on June 30, 1961. The amendments result in additional needs of $29,875,000. We are also asking for a contingency provision of $10 million in the supplemental appropriation similar to the provision in our regular appropriation in order to provide for the possibility of overrealization of the claims estimates for which our supplemental request provides.

Our financial requirements are basically determined by the size of the workloads which it is necessary to handle in the operations of the various phases of our program: Maintaining wage records, taking and reviewing claims for benefits, certifying benefit payments to the Treasury and making changes in the rolls of beneficiaries. We have no control over the volume of these workloads. Their size is determined by the provisions of the law and such factors as economic conditions, the death rate, and the age and family composition of the population. In estimating the workloads which are reflected in our budget requirements we make use of actuarial, economic, and demographic factors, Estimated production rates taking into account recent experience, as well as the effect of changes in the content of workloads, of improved procedures, and other pertinent considerations are then applied to each of the workloads to compute manpower requirements.

The 1961 amendments will result in an estimated 955,000 additional OASI claims applications in fiscal year 1962-an increase of 32 percent over the 2,916,000 budgeted in the appropriation request for 1962. Of this total increase, 650,000 claims applications will arise from the new provisions of law which permits the payment of benefits to men beginning at age 62, and to their dependents. Under the new law men can be eligible for benefits as early as age 62 instead of waiting until age 65. The benefits payable to men who claim them before age 65 will be actuarially reduced to compensate for the longer period over which the benefits will be paid. Auxiliary benefits will also be payable to dependents of these workers who file for benefits before age 65. In the 10 weeks since the enactment of this legislation, the Bureau has already received more than 212,000 claims applications from men age 62-64 and their dependents.

An estimated 160,000 OASI claims are expected to be filed in fiscal year 1962 as a result of the change in insured status requirements made in the 1961 amendments. Under the new law the insured status requirements are liberalized so that a worker is fully insured if he has one quarter of coverage for every four calendar quarters elapsing after 1950 (or age 21, if later) and up to the year of death, disability, age 65 for men, or age 62 for women, instead of one for every three quarters as previously required.

The 1961 amendments also made it possible for more people who are working to receive OASI benefits by liberalizing the rules as to how much beneficiaries may earn and still draw some benefits. This liberalization is expected to result in 145,000 additional claims for OASI benefits in fiscal year 1962.

In addition to the increase in claims applications for OASI benefits, it is estimated that 14,000 additional claims from disabled workers and 8,000 claims from their dependents will be filed during 1962 as a result of the extension

for 1 year (through June 30, 1962), of the time within which workers with long-standing disabilities may file applications for disability benefits and have the beginning of the period of disability established as far back as the onset of disablement.

Additional provisions of the 1961 amendments which have an immediate impact on the workload of the BOASI are: (1) Increasing the minimum benefits payable to a retired or disabled worker or to his sole survivor from $33 to $40 per month (related increases are also payable to the worker's dependents); and (2) increasing the aged widow's benefit from 75 percent of her husband's retirement benefit to 821⁄2 percent-an increase of 10 percent. As a result of these changes 3,260,000 beneficiaries were entitled to the higher benefit amounts for the month of August. The Bureau has accomplished this conversion of benefit amounts, and the higher amounts were reflected in the checks for August received by beneficiaries on September 5.

The effect of the amendments on the workload of the Bureau is both immediate and great. In terms of volume the amendments result in an increase of more than 13 percent in the overall workload for fiscal year 1962, which was previously expected to be of record proportions. The immediate impact of the amendments is already apparent in the large buildup of OASI claims pending completion in various work stations of the Bureau. As a result of the heavy amendment workloads received in July, the number of OASI claims pending has increased from 262,000 on June 30 to 394,000 in the first week of September. In addition to receiving the immediate increase in claims work, we completed during July and August the conversion of benefits for the 3,260,000 beneficiaries entitled to higher benefits for the month of August.

To meet the immediate increase in workload and the higher than budgeted levels projected for the remainder of the year as a result of the amendments, the Bureau will have to increase its manpower by 4,144 man-years. To accomplish this we expect to work a substantial amount of overtime-a total of 1,619 manyears of overtime is included in the supplemental estimate. The bulk of the additional manpower (2,525 man-years) will be obtained by recruiting for 3,081 positions during the fiscal year. The number of additional positions that we plan to fill in 1962 is consistent with our staffing needs for fiscal year 1963 and thus will cause no problem of adjustment in that year.

Of the total amendment needs of $29,875,000, 83.3 percent or $24.9 million, is required for personnel compensation and related benefits. The remaining $4.5 million is required for costs related to additional staff, such as space, supplies, and equipment; and costs related to added workloads such as advances to State agencies for making disability determinations, printed forms, penalty mail, and automatic data processing equipment rentals.

We have requested appropriation of a $10 million contingency reserve which will in effect restore the reserve in our original appropriation. This will be available only to the extent it is needed to handle claims loads in excess of those in which our supplemental estimates are based after maximum absorption of costs of the added claims load. The contingency reserve established by the regular 1962 appropriation is needed to process an increase in the disability claims load (not related to the 1961 amendments) which was not anticipated in the 1962 appropriation request. This unbudgeted volume of disability claims in fiscal year 1962 results from the 1960 amendments, which removed the age 50 requirement for eligibility for disability claims. The effect of this provision was underestimated in both our 1961 supplemental request and our 1962 regular budget.

APPEAL OF HOUSE ACTION

The House reduced the Bureau's supplemental request for salaries and expenses by $13,375,000, representing elimination of the requested $10 million contingency reserve and a reduction of $3,375,000 in the basic request. We are requesting restoration of both of these amounts.

The reduction of $3,375,000 in the basic request was based on the premise that improved efficiency in operations would permit the Bureau to process a 13 percent increase in workloads with an 11 percent increase in money (total funds requested amounted to a 12.4 percent increase). The relationship of an 11 percent money increase to a 13-percent workload increase would not be an unreasonable expectation if trained staff were already on hand to handle the added work on regular time. However, we are not in that favorable situation. The added work from the amendments will have to be met by a combination of

overtime work and recruitment of new personnel; both of which require higher costs in relation to output. The cost of overtime premium for the 1,619 manyears of overtime work will alone exceed the regular payroll costs for the same number of man-years by $2.62 million. Nearly half of the added staff budgeted for in the supplemental request are claims technical personnel who require at least 16 weeks of formal training and extensive on-the-job training before becoming productive.

The supplemental funds requested together with the regular appropriation will require an increase of 6.8 percent in average employee productivity over that experienced in fiscal year 1961 in order to process the total workload expected. This is an extremely large productivity increase to anticipate from 1 year to another, and it is not at all certain that it can be realized. The House reduction of $3,375,000 will decrease the amount of manpower available to do the job by 574 man-years which will necessitate a 25 percent greater increase in productivity-to 8.5 percent over 1961 experience. Because we do not believe that we can reasonably hope to achieve so great an increase in productivity in 1962, we forsee the effect of the House reduction as an increase in the backlog of OASI claims, with a consequent increase in the time that claimants and their dependents will have to wait for their first benefit payment.

The contingency reserve is a protection against short-range, unpredictable increases in claims workloads. Experience has shown that unanticipated changes in economic conditions or inability to fully assess the impact of new legislation can result in workload receipts significantly different than estimated. This was true last year when we underestimated the number of disability claims that would be filed as a result of removing the age 50 limitation. Use of part of the $5 million contingency reserve, authorized in third supplemental appropriation, fiscal year 1961, made it possible for the Bureau to end fiscal year 1961 with a lower volume of claims pending than would otherwise have been possible. Because the contingency reserve provided in the regular 1962 appropriation will be used in its entirety for higher than budgeted disability claims in 1962, the Bureau will be in a position of lacking a reserve for the remainder of the fiscal year unless a new contingency fund is provided in this supplemental request. In order to have the resources to permit timely processing of the added claims resulting from the 1961 amendments, we request restoration of the House reduction of $3,375,000 and the authorization of a contingency reserve fund.