1938 is submitted on that number of patients at $3 per patient-day. During the fiscal year 1933, prior to the passage of Public, No. 2, Seventy-third Congress, this contract hospital load averaged 1,904 patients. Since veterans' hospitals have not been provided in any of the insular or Territorial possessions, and the former laws concerning hospital benefits have been completely restored, it is apparent that this estimate is very conservative.

SUPPLIES AND MATERIALS

The next item of expense is "02-Supplies and materials", where the amount requested for 1938 is $18,475,400. This is an increase of $1,805,580, compared with estimated obligations for 1937. This increase is the result of mathematical calculations on expected utilization for 1938 having been applied to 1936 experienced unit costs. Actual obligations for 1936 were $15,089,980, and compared with this figure the 1938 estimate represents an increase of $3,385,420. As previously explained, operation during 1936 has indicated a decided upward trend in the utilization of available beds. Economy legislation, which restricted hospitalization and domiciliary care, resulted in bed utilization dropping from approximately 90 percent prior to the passage of Public, No. 2, to 70 percent during 1934. This utilization increased, due to liberalizing acts and regulations, to an average of 75 percent during 1935 and to 81 percent during 1936. It is estimated that this utilization will increase to 89 percent in 1937 and will reach the former level of 90 percent in 1938.

The estimated obligations for 1937 and 1938 are based absolutely upon average unit costs obtained during 1936, applied to the utilization of 89 to 90 percent of the beds estimated to be available during these fiscal years. The following table is explanatory of the method used in estimating the amounts shown under this object in 1937 and 1938:

Although it will be noted from the foregoing table that 1936 average costs have been applied in determining estimated requirements for 1938, attention must be invited to the fact that current experienced costs during the past several months have been considerably in excess of such average prices. In many instances, and particularly with reference to foodstuffs of the farm-product variety, the prices have ranged generally upward. The Department of Labor reports, as of November 25, 1936, that wholesale commodity prices have now reached the highest level since 1930 and are still soaring. The wholesale farm products prices as of that date were 1.2 percent higher than a month ago and 9 percent above the average prices for

the same period during the fiscal year 1936. Wholesale prices on miscellaneous commodities had likewise advanced on that date to a point approximating 9.6 percent higher than the cost obtaining a year ago. If these present levels continue, or prices continue to advance, the estimate under this item for 1938 will be entirely insufficient. In the absence of definite data which would indicate with accuracy what may be expected in the way of future prices, it is considered advisable and more in keeping with sound budgetary procedure to maintain the experienced average annual cost of 1936 for the purpose of estimating future requirements. In the event of insufficient funds a supplemental estimate can then be submitted, which will outline, in justification of the amount requested, the actual circumstances necessitating the action taken.

COMMUNICATION SERVICE

In the next item of expense, "05-Communication service", the amount of $276,470 requested for 1938 is an increase of $7,880 over estimated obligations for 1937. During the fiscal year 1938 there will be in operation a total average of 5,923 beds in excess of the average number in operation during 1937. Involved in this total are three entirely new hospital units which will require complete installations of PBX telephone systems. The operation of the total increased beds at existing facilities will naturally cause increased communication service as the volume of such service has a direct bearing upon the utilization of these facilities. The estimated decreased cost of $1,524 between actual expenditures for 1936 and estimated expenditures for 1937 is brought about by economy to be effected in telephone rentals due to consolidation of certain regional offices with hospital facilities.

TRAVEL EXPENSE

An increase of $34,500 over expected obligations for 1937 and an increase of $16,827 when compared with actual obligations for 1936 is expected under the next item, which is "06-Travel expenses." This increase in 1938 over 1937 is due solely to increased bed capacity of our facilities and the incidental increased patient load. Ths will naturally cause more admissions and discharges with payment of travel expenses to and from the facilities.

The decrease of $17,673 reflected between estimated travel expenses for 1937 and actual expenses for this purpose in 1936 is brought about by reduced rail fares which were made uniformly effective as of the beginning of the current fiscal year. After exhaustive study it was determined that a saving of $50,000 per annum would accrue as the result of these reductions, such saving being partially offset during 1937 by increased travel in connection with the utilization of the greater number of hospital beds now available.

This reduction in rail rates has, however, established a new base for the fiscal year 1937, in that it reduces the average cost per travel authority issued from the experienced rate of $4.96 during 1936 to $4.72 during 1937 and 1938.

Before leaving this item it is desired to invite attention to the cost of travel prior to the passage of Public, No. 2, Seventy-third

Congress, when these expenses reached a total of approximately $4,000,000 per annum. The changed pension and compensation laws and the rating procedures developed as the result of those changes have eliminated approximately 65 per cent of the travel formerly necessary in connection with reexaminations for compensation benefits among the World War veterans.

TRANSPORTATION OF THINGS

The next item of expense is "07-Transportation of things", involving charges for freight, express, and drayage on supplies and equipment. With the increased number of beds to be in operation and with the increased utilization of the total hospital and domiciliary facilities, there will be a corresponding rise in the amount of materials and supplies to be purchased. This will cause an increase in expenditures for freight, express, and drayage, in direct ratio to the increased volume of purchases and the amount requested for 1938 has been computed accordingly. The estimate for 1938 under this object, $1,332,300, is an increase of $113,940 over 1937 estimated obligations.

HEAT, LIGHT, POWER, WATER, AND ELECTRICITY

The next item is "10-Heat, light, power, water, and electricity", and there is requested for this purpose for 1938 an amount of $1,888,765, which is an increase of $174,265 compared with expected obligations for 1937 and an increase of $189,152 over actual expenses for 1936. These increases are brought about entirely through the additional beds to be in operation during 1937 and 1938, and, utilizing the unit cost obtaining in 1936, have been computed in direct proportion to the expected availability of the additional beds.

RENTS

The next item, "11-Rents", shows a decrease of $45,248 for 1938 compared with anticipated obligations for 1937. The estimate for 1937 is $2,674 less than actual expenses for 1936. These net reductions, and more as will be subsequently explained, are accounted for entirely by actual and anticipated relinquishment of rented space for regional offices when such offices are moved to Veterans' Administration hospital and home facilities so as to form a combined facility. This is a type of consolidation now generally well known and, aside from the saving in salaries accomplished by these consolidations, the item of rental operates as the largest single item of saving.

The total of $287,680 estimated for rents for 1938 consists of $226,200 for the rental of equipment, sound-picture apparatus, and. film service as a part of the recreational activity furnished beneficiaries in Veterans' Administration facilities. The remaining amount, $61,480, is for the rent of buildings and rights-of-way. Particular attention is invited to the item of building rentals which has been reduced, primarily through consolidations, from approximately $1.000,000 per annum during the fiscal year 1930 to an amount slightly in excess of $61,000 per annum for the fiscal year 1938.

REPAIRS AND ALTERATIONS TO BUILDINGS, FURNITURE, ETC.

The next item of expense is "12-Repairs and alterations", and the amount requested for 1938 represents an increase of $461,344 as opposed to estimated obligations for 1937. The major part of this item is to cover repairs, alterations, and improvements to hospitals and homes, and a total of $4,000,000 is requested for this purpose for 1938, against $3,543,656 as an estimated obligation for 1937 and $3,053,645 expended in 1936. However, during 1936 and 1937 there has been provided from emergency relief funds amounts for these general purposes which have been obligated in the totals of $269,724 and $1,036,232 for each of the fiscal years, respectively. Considering these amounts, the comparable figures would appear as follows: 1938, $4,000,000; 1937, $3,813,380; 1936, $4,089,877. Consequently, it is apparent that the funds requested for this purpose for 1938 very closely approximate the average for this purpose for preceding fiscal periods.

It is not difficult to visualize this item as one which will continue

to increase from year to year. Whenever a building is erected it becomes necessary to provide a certain amount for maintenance and repairs each year in order to keep the building in proper shape to be utilized for the purpose intended and also to protect the original investment of funds involved in structure. The number of Veterans' Administration hospital and home buildings is increasing steadily and there is no safe way to reduce this item for necessary repairs and alterations.

The item has been arbitrarily reduced administratively to the present figure, such reduction representing more than one-half from the figures submitted by the engineers who made surveys to determine essential repairs, alterations, and improvements. It is not believed that any further reduction can be safely made without serious impairment to the facilities from a structural viewpoint, which would in turn seriously interfere with their use for the care of the sick and disabled veterans.

SPECIAL AND MISCELLANEOUS CURRENT EXPENSES

Under the next item, "13-Special and miscellaneous current expenses", the amount requested for 1938 is $215,155, which is an increase of $5,745 compared with anticipated obligations for 1937. However, the amount is $1,327 less than actual expenses for 1936, the saving so reflected being one of the many minor items of reduced expenditures resulting from consolidations.

Chargeable to this item are miscellaneous contracts such as laundry and towel service; ambulance service; window cleaning; inspection and repair of elevators; inspection and repair of typewriters, adding machines, and other labor-saving devices; in short, all miscellaneous contract services where a division of cost cannot be made between the labor, materials, and other component parts of the total charge made for the service. With such expenses it is readily apparent that the increased number of beds will exert some influence in causing additional work of this character which, in part, although not entirely, offset savings accruing from elimination of some of these expenses when regional offices are combined with hospitals and homes.

REIMBURSEMENT TO STATES FOR VETERANS IN STATE HOMES

The next item, "2200-Grants to States and other political subdivisions", involves an estimate of $624,000 for 1938.

Under the provisions of the act of August 27, 1888, as amended (U. S. C., title 24, sec. 134), reimbursement is authorized to the various States at the rate of $120 per person annually for the veterans cared for in State soldiers' homes when eligible for admission to Veterans' Administration facilities for domiciliary care. During the fiscal year 1933 an average of 16,018 eligible veterans were cared for in State homes, involving a total reimbursement of $722,000. Under the provisions of Public, No. 2, Seventy-third Congress, and Veterans' Regulations issued pursuant thereto, the eligibility for domiciliary care was greatly restricted, with the result that the number of veterans in State homes was reduced to an average of 4,357 during the fiscal year 1934 and to 4,160 during 1935. The liberalizing provisions of Public, No. 141, Seventy-fourth Congress, and Public, No. 312, Seventy-fourth Congress, restored to eligibility a considerable number of these veterans, although it is not anticipated that the load will increase to the same level experienced during the fiscal year 1933.

During the fiscal year 1936 the number of veterans cared for in State soldiers' homes increased to an average of 4,733, and it is conservatively estimated that an average of 5,200 will obtain in both 1937 and 1938, involving estimated obligations at the statutory rate of reimbursement in the amount of $624,000. This is an increase of $56,040 over actual expenses for 1936 and a decrease of $98,000 compared with expenditures for 1933.

BURIAL EXPENSES

The next item of expense is "2250-Burial expenses." The estimate under this object for 1938 is in the amount of $3,450,000, which is an increase of $63,800 compared with anticipated obligations for similar purposes during the fiscal year 1937. During the fiscal year 1936 obligations for burial expenses amounted to $3,031,249, and under ordinary circumstances it must be expected that these expenses will continue to increase from year to year, as the average age of the veteran increases and the death rate becomes correspondingly higher.

However, the experienced trends of former years had to be discarded in determining the current estimate for this purpose for the fiscal years 1937 and 1938 by reason of liberalizing legislation concerning this subject enacted in Public, No. 844, Seventy-fourth Congress, approved June 29, 1936. Section 401 of this act provides that

Notwithstanding the provisions of Public II. Veterans' Regulation numbered 9 (a), as amended (U. S. C., 1934 ed., title 38, ch. 12, appendix), burial and funeral expenses and transportation of the body (including preparation of the body) to the place of burial shall not be denied by reason of the veteran's net assets at the time of death.

It has been conservatively estimated that this liberalizing legislation will result in an increased number of potential claims which will in turn cause an additional expenditure totaling $100,000 per annum during the fiscal years 1937 and 1938. The estimate otherwise is based upon available data concerning the number of living veterans and the expected death rate among the various groups.