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The Canal Zone Government is an independent agency of the United States administered by the Governor of the Canal Zone under supervision of the Secretary of the Army.

Under the general direction of the Civil Affairs Director who is responsible to the Governor, the Superintendent of Schools administers two school systems in the Canal Zone-United States (English-language) schools and Latin American (Spanish-language) schools.

CANAL ZONE LEGISLATION

Section 107 of Public Law 453, 83rd Congress (68 Stat. 335) amended Section 105 of Public Law 153, 83rd Congress which reads as follows:

"Sec. 107. Amounts expended by the Panama Canal Company in maintaining defense facilities in standby condition for the Department of Defense hereafter shall, notwithstanding any other provisions of law, be fully reimbursable to the Panama Canal Company by the Department of Defense. Amounts expended by the Canal Zone Government for furnishing education, and hospital and medical care to employees of agencies of the United States and their dependents, other than the Panama Canal Company and Canal Zone Government, less amounts payable by such employees and their dependents hereafter shall, notwithstanding any other provision of law, be fully reimbursable to the Canal Zone Government by such agencies. The appropriation or fund of any such other agency bearing the cost of the compensation of the employee concerned is hereby made available for such reimbursement."

Based upon this section of law the Department of Defense cannot operate schools in the Canal Zone.

Chairman ELLENDER. What is the estimated cost of the Panama Canal schools to the Department of the Navy for fiscal year 1972?

Dr. Benson. The cost to the Navy for fiscal year 1972 is $10.3 million.

Chairman ELLENDER. On a per pupil basis, how does that compare with the average cost in the overseas dependents schools system?

Dr. Benson. The per pupil cost in the Canal Zone schools for fiscal year 1972 is $1,512, compared with $875 in DOD schools. This is a difference of $637.

ENROLLMENT AND PERSONNEL

Chairman ELLENDER. For the record please supply a tabulation similar to that found on page 857 of last year's hearings giving pertinent enrollment and personnel information. Dr. Benson. Yes, sir; I will be happy to supply that information. (The information follows:)

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IMPACT OF MILITARY REDUCTIONS

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Chairman ELLENDER. Do you anticipate any problems as a result of military personnel reductions in various theatres?

Dr. Benson. No, sir. We do not anticipate any problems at this time.

Chairman ELLENDER. Are you able to identify any reductions in cost to the school system as a result of military personnel reductions?

Dr. BENSON. The main reduction in enrollment will fall within the Pacific area as a result of force changes. We have reflected savings of $1 million for the anticipated enrollment decrease of 2,900 students in the budget request. This is shown as an offset in item 4 of our listed fiscal

year 1972 increase.

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OVERSEAS UNIONS

Chairman ELLENDER. You refer in your statement to possible changes in union representation. Do you anticipate any problems in regard to the education of children overseas?

Dr. BENSON. No, sir.

SCHOOL DISTURBANCES

Chairman ELLENDER. What has been the situation in the past year in regard to disturbances at overseas schools?

Dr. Benson. We have not had any reports from the three area superintendents indicating student unrest or disturbances during the currant school year.

QUESTIONS BY SENATOR THURMOND

Chairman ELLENDER. Senator Thurmond is unable to be here this morning but he has asked that questions be answered for the record. The questions and the answers will appear in the record at this point.

(The information follows:)

PER PUPIL COSTS

Senator THURMOND. Doctor Benson, in your role as Director of Overseas Dependents Schools, I note in your statement you gave Fiscal Year 1972 per pupil costs of $875. How does this compare with the U.S. average ?

Doctor Benson. The average per pupil cost in the United States for the 1971-72 school year is estimated to be $927. Our per pupil cost of $875 is $52 below the estimated national average.

OVERSEAS SCHOOL NEEDS

Senator THURMOND. What do you consider to be the chief unmet needs in the Overseas Dependents School program.

Doctor Benson. I consider the lack of adequate school facilities to be the chief unmet needs.

Chairman ELLENDER. Thank you very much.
Dr. BENSON. Thank you, Mr. Chairman.

RETIRED PAY, DEFENSE

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STATEMENT OF LEROY J. SPENCE, OFFICE OF THE DEPUTY ASSIST

ANT SECRETARY OF DEFENSE (MILITARY PERSONNEL

POLICY)
ACCOMPANIED BY:
COL. THOMAS J. MONEY, USAF, OFFICE OF THE DEPUTY ASSIST-
ANT SECRETARY OF DEFENSE (MILITARY PERSONNEL
POLICY)
CARL M. DETWYLER, OFFICE OF THE DEPUTY ASSISTANT SEC-
RETARY OF DEFENSE (COMPTROLLER) (MILITARY PER-
SONNEL DIRECTORATE)

BUDGET REQUEST Chairman ELLENDER. The next item to be considered is “Retired pay, Defense" for which the fiscal year 1972 request is $3,777,134,000. This includes $33,134,000 contained in House Document 92-93 for increased pay costs.

The information on pages 2, 3, and 4 of the justifications will be included in the record.

(The material follows:)

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DEPARTMENT OF DEFENSE JUSTIFICATION OF ESTIMATES, FISCAL YEAR 1972

APPROPRIATION TITLE: RETIRED PAY

[In thousands of dollars)

Fiscal year

1970
1971

1972 Appropriation introduction: Appropration or estimate.

$2,859,000 $3, 194,000 $3,744,000 Transferred to other accounts.

-1,000 Proposed supplemental for military pay increase, Public Law 90-207..

26, 600 Proposed supplemental for increased Consumer Price Index..

166, 400 Proposed additional supplemental and budget amendment..

4,032

33, 134 Unobligated balance of appropriation...

-4,766 Total obligations..

2,853, 234 3,391, 032 3,777, 134 Note: This appropriation provides for the pay, as authorized and at rates prescribed by law, of military personnel on the retired lists of Army, Navy, Marine Corps, and Air Force and provides for payments to survivors pursuant to the retired serviceman's family protection plan. These expenses include the pay of retired officers, warrant officers, enlisted personnel, female nurses, and members of the women's medical specialist corps, Philippine scouts, and authorized personnel of the Reserve components, including retainer pay of the Inactive Fleet Reserve. The estimate excludes payments to individuals who elect to receive compensation for physical disability from the Veterans' Administration. The amount requested is also exclusive of any administrative expense. The estimate provides for the military pay increases of 8.1 percent on Jan. 1, 1970, of $26,600 for fiscal year 1971 and 7.9 percent on Jan. 1, 1971, of $4,032 for fiscal year 1971 and $33,134 for fiscal year 1972 under the provisions of Public Law 90-207, and increased retired pay costs of 5.6 percent of Aug. 1, 1970, related to increases in the Consumer Price Index.

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Chairman ELLENDER. The principal witness will be Mr. LeRoy J. Spence.

You may proceed.

PROGRAM RECIPIENTS

Mr. SPENCE. Mr. Chairman and members of the committee, I appreciate the opportunity of appearing before this committee in behalf of the Department of Defense to discuss the appropriation for retired pay for fiscal year 1972,

The appropriation requested is a consolidation of the estimates of the military departments for: retired pay of military personnel on the retired lists of the Army, Navy, Marine Corps, and Air Force; retainer pay for members of the Fleet Reserve of the Navy and Marine Corps; and payments to survivors of retired military personnel under the retired serviceman's family protection plan.

INCREASE OVER 1971

The appropriation request for fiscal year 1972 is $3,777 million compared with $3,194 million appropriated for fiscal year 1971 plus initial supplemental funds of $197 million, for a total of $3,391 million. The amount requested for fiscal year 1972 will provide for payments to an average of 870,282, an increase of 62,876 over our current estimate for fiscal year 1971.

1971 SUPPLEMENTAL: COST-OF-LIVING INCREASE AND MILITARY

PAY INCREASES

The initial supplemental funds for fiscal year 1971 are required to provide for the additional retirement costs resulting from a cost-ofliving increase and two increases in the military pay of military personnel retired during the year. Under the law, when the Consumer Price Index (CPI) for any month is at least 3 percent higher than the CPI for the month which was the basis for the last adjustment to retired pay and sustains that level for 3-consecutive months, retired pay is adjusted to the highest percent of increase in that 3-month period, plus 1 percent, to be effective on the first day of the third month following that period. Thus far, one increase of 5.6 percent in retired pay, effective August 1, 1970, has occurred since the fiscal year 1971 budget estimate was submitted to the Congress. An 8.1 percent increase

in military pay was authorized by Executive Order 11525 (April 15, 1970) issued pursuant to Public Law 90-207 (December 16, 1967) and became effective January 1, 1970. A 7.9 percent increase in military pay was authorized by Executive Order 11577 (January 8, 1971) issued pursuant to Public Law 90–207 (December 16, 1967) and became effective January 1, 1971.

Chairman ELLENDER. Is that an across-the-board increase, through all ranks?

Mr. SPENCE. The 8.1 and the 7.9 were across-the-board increases for all categories of military personnel.

NONDISABILITY AND DISABILITY CATEGORIES

Chairman ELLENDER. Page 7 of the justifications lists the nondisability retirements for fiscal years 1970, 1971, and 1972. It will be included in the record at this point.

(The table follows:)

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Mr. SPENCE, One category is nondisability. This category includes personnel who were retired for age or length of service.

It is estimated that $2,763.1 million or 73.2 percent of the total appropriation request will be required to provide for an average of 592,703 annuitants in the nondisability category in fiscal year 1972. This compares with an average of 540,612 annuitants now estimated for fiscal year 1971. · Chairman ELLENDER. Is that increase normal?

Mr. SPENCE. Yes, based on the size of the forces that we have at the present time, that is.

Chairman ELLENDER. It is close to 10 percent.
Mr. SPENCE. Yes, approximately 10 percent.

Chairman ELLENDER. And if this war keeps on as it has been going, it will be reflected in such items as this for a long time.

Mr. SPENCE. If we maintain the size of the forces which we have had, Mr. Chairman, whether or not there are actual hostilities, the nondisability category would remain relatively constant. There wouldn't be any sharp increases or decreases in that.

Chairman ELLENDER. I was referring to regular military personnel retirement costs that have grown to be a heavy burden on the taxpayer.

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