STATEMENT OF HAROLD SEIDMAN, BUREAU OF THE BUDGET, WASHINGTON, D. C.

Mr. SEIDMAN. That is common in all corporations. I think there has been only one instance where they did not have that, and that is the RACC, and the Supreme Court decided that the RACC was suable. Senator MORSE. What about subsection (e)?

Mr. BURDICK. Subsection (e) is the one that you mentioned a moment ago in reading the letter from the Civil Service Commission. We understand also that Mr. Lovelady and Mr. Jones, who represent organizations of employees in the Canal Zone, will also suggest modification of that.

Senator MORSE. I will hear them as separate witnesses after the Governments puts in its case.

Mr. BURDICK. Yes, sir.

The suggestions with reference to requiring appointments under civil-service rules and regulations, of course, would not be necessary if positions are subject to the civil service; that is, it would go without saying that it would follow the rules and regulations.

So that if the present law does permit the extension of civil service to the Panama Railroad Company, and by Executive order civil service has been extended to a number of positions in the Panama Railroad Company. There are a number of positions there under which appointments are made under the schedule A of the civil-service rules. That is particularly in regard to skilled trades, where you are allowed to pick men based on their particular qualifications. I do not think there is any substantial difference between the Railroad Company and the civil service with respect to matters of that kind, and if the committee should decide that we are not to be given the authority to make the appointments without regards to civil-service laws and regulations or the Classification Act, it is completely unnecessary to refer in any way to the civil-service laws or the Classification Act in this bill.

Later in the bill there is a provision, section 250, that reads:

The corporation shall, so far as consistent with the terms of this article, be deemed subject to all provisions in treaties and in Acts of the Congress of the United States, now in force, which relate or apply to the New York corporation; and shall have all the rights, privileges, and exemptions, and be subject to all the obligations, liabilities, and responsibilities applicable to the New York corporation under or by virtue of such provision.

So that no provision in here is necessary in order to preserve the present status. On the other hand, if we put a provision in this bill such as the Civil Service suggests, it will actually change the status and it will extend these laws to a greater degree than they now apply to field service of other agencies.

Senator MORSE. What is the argument, Mr. Burdick, for your subsection (e) as you have it written?

Mr. BURDICK. The authority there was that it would give the corporation more flexibility in certain of the higher positions which are not common in the Government service as a whole. Some of these positions that do not correspond to other positions in the Government present difficulties because the nature of the business itself is different from the nature of the business of the average Government agency.

It was thought that it would enable the Government to go out and get people who are better qualified for certain of those positions from private business than it would be the other way.

Senator MORSE. What position has the Bureau of the Budget taken on this matter?

Mr. SEIDMAN. The Bureau of the Budget reviewed this bill and found it in accord with the President. I think in considering this legislation we believe that the additional flexibility was desirable not only in reference to the higher paid employees but because of the fact that you have to hire unskilled labor on the Isthmus for handling specific operations and you need a flexibility in doing that.

For example, in taking freight across the docks at the port on the Isthmus they may have to expand very rapidly or contract very rapidly. I think when we were on the Isthmus it was right after the strike, and a lot of the freight had backed up and they had a sudden piling up and they had to put on a thousand or more employees of an unskilled character to meet that demand.

Senator MORSE. How common is this proposed provision in other Government corporations?

Mr. SEIDMAN. In operating corporations of the type of the Panama corporation it is fairly common. The language is very similar to that in the TVA Act.

Senator MORSE. Would you supply the committee with a list of the various Government corporations divided into two parts, one list showing Government corporations that have this provision and another list showing those that do not?

Mr. SEIDMAN. I think we could do that readily.

Senator MORSE. It will be made a part of the record at this point. (The information is as follows:)

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington 25, D. C., May 21, 1948.

Hon. WAYNE MORSE,

United States Senate,

Washington 25, D. C.

MY DEAR SENATOR MORSE: In accordance with your request at the May 19 hearing on S. 2002, a bill to amend the Canal Zone Code for the purpose of incorporating the Panama Railroad Company, we are glad to furnish the following information concerning the applicability of the civil-service laws and the Classification Act of 1923, as amended, to wholly owned Government corporations: 1. Corporations specifically exempt by statute from both the civil-service laws and Classification Act.-Commodity Credit Corporation, Federal Farm Mortgage Corporation, Federal National Mortgage Association, Federal Savings and Loan Insurance Corporation, Institute of Inter-American Affairs (outside the United States), Reconstruction Finance Corporation, Public Housing Administration (employees paid over $1,980 per annum), Tennessee Valley Authority.

2. Corporation specifically exempt from civil-service lau's but subject to Classification Act.-Federal Crop Insurance Corporation.

3. Corporations specifically subject by statute to the civil-service laws and Classification Act.-Institute of Inter-American Affairs (within the United States), Public Housing Administration (employees paid under $1,980 per annum).

4. Corporations whose charters contain no reference to the civil-service laws or Classification Act.-Export-Import Bank, Federal Intermediate Credit Banks, Federal Prison Industries, Inc., Inland Waterways Corporation, Panama Railroad Company, Production Credit Corporations, Regional Agricultural Credit Corporation, Virgin Islands Company.

In the absence of specific statutory provision to the contrary, it has been generally held that the civil-service laws and regulations apply to employees

of Government corporations. However, the Classification Act of 1923, as amended, is not specifically applicable to Government corporations and has not been so construed, even as to employees on duty in Washington. Section 3 of the Ramspeck Act (54 Stat. 1211) authorizes the President to extend the Classification Act to offices and positions not now subject to it, but no extensions of the Classification Act have been ordered as yet pursuant to this authority. Sincerely yours,

JAMES E. WEBB, Director. Senator MORSE. What does the Bureau say about exhibit No. 2, which is the letter from the President of the Civil Service Commission, who, if I read it correctly, seems to be of the opinion that the Civil Service Commission can supply the personnel necessary for the operation of this corporation?

Mr. SEIDMAN. As I recall, the Bureau had no objection to the submission of Civil Service views.

Senator MORSE. So then it becomes a matter of judgment?
Mr. SEIDMAN. That is correct.

Senator MORSE. A matter of judgment with apparently two policies actually existing in Government corporations at the present time. Mr. SEIDMAN. That is so.

There are some under civil service and there are others that are not. There is not a uniform policy.

Senator MORSE. Go ahead, Mr. Burdick.

Mr. BURDICK. I would like to say, Mr. Chairman, that we have no intention of disturbing the present situation with respect to the application of civil service to the positions, which are now covered by the civil service, nor would we object to the extension of civil service in the future to many of the other positions. It was only that we thought that by having this provision in the bill it would give us more flexibility in assignment, as Mr. Seidman has mentioned.

In some of the highly skilled positions, for example, if we want to go out and get a coffee roaster, I doubt that the Civil Service Commission could supply us with the name of a single coffee roaster. I know that we have had difficulty for years recruiting competent coffee roasters and we have availed ourselves of all the information we could obtain from all of the Government agencies.

Mr. SEIDMAN. I might point out that the Classification Act is not now specifically applicable to any Government corporation.

Mr. BURDICK. In view of the objections of the Civil Service Commission and the objections which I understood representatives of the organizations may make, the committee may decide to make a change in the section, in which case it is entirely sufficient merely to eliminate that first clause

without regard to the civil-service laws and regulations or to the Classification Act of 1923, as amended,

merely eliminate that and then this later provision here—

Provided, That in the appointment of officials and the selection of employees for said corporation, no political test or qualification shall be permitted or given consideration, but all such appointments and promotions shall be given and made on the basis of merit and efficiency.

That particular proviso would not be necessary if we strike out this other language in the present statute:

Senator MORSE. At the present time, Mr. Burdick, if you wanted to hire a coffee roaster, you go out and hire him and you do not have to go in to Civil Service.

Mr. BURDICK. That is right. We can contact any of the coffee roasters and find the man. We try to avail ourselves of any information that any Government agency has.

Senator MORSE. If an American ship got in difficulty in the Canal for some reason where it became necessary to unload it, at the present time, do you have authority to go out and hire men to unload that ship who are not under civil service?

Mr. BURDICK. Yes, sir, we do; because those have not been placed under civil service by the President and we do not think they ever will. But, there could be some difficulties here if we write in a specific provision of law and say that the civil-service laws and the classification laws will apply to all those positions.

Senator MORSE. In what way does your proposed section (e) differ from existing rules and regulations of employment that now govern you?

Mr. BURDICK. We have no intention, Mr. Chairman, to actually change our procedure on those but it clearly gives us the authority to appoint in these higher positions, or skilled positions, highly skilled positions, where we cannot adequately recruit otherwise. We intend to recruit in those positions that are now under there and maybe some more of them through the Civil Service.

Senator MORSE. Mr. Burdick, when you say that is your intention, what is there in subsection (e), as you propose it, that would require you to carry out that intention if some future administrators of the corporation, directors of the corporation, decided not to follow that intention?

Mr. BURDICK. I do not think there is anything, Mr. Chairman. I think it would be just like the provisions that seem to be in the general corporate pattern, to give them as much flexibility here. I merely state our intention to show you that the present officials are not attempting to change.

Senator MORSE. I understand that. However, we are going to pass a law that is going to be on the books long after you and the gentleman of this committee are no longer in mortal existence.

Mr. BURDICK. That was my thought that if the committee does not want to give this maximum amount of flexibility we think they should at least leave it the way it is at the present time.

Senator BALDWIN. You have apparently been getting along with it the way it is now?

Mr. BURDICK. Fairly satisfactory, sir.

Senator BALDWIN. You say "fairly satisfactory." In what respect is it unsatisfactory?

Mr. BURDICK. Well, I mean by that that we have a lot of the men who were retained over from the construction period in both the Canal and Railroad organizations, men who proved themselves outstanding during the years of the construction of the Canal, who were retained in the key positions. Now those men are rapidly going out. We may run into difficulty in replacing in some of those positions. I am not saying we will, but we may.

Senator BALDWIN. If you are confined to the civil service?

Mr. BURDICK. Yes, sir.

Senator MORSE. But if you are confined to the existing laws, will you have difficulty?

Mr. BURDICK. I will not say that we will not and that is why I suggest that if the committee feels that way about it that they merely strike out those two things there.

Senator MORSE. So the chairman will have a question in his mind completely cleared up, I would like to have you answer this hypothetical.

Suppose that we pass subsection (e) as you propose it and suppose that some board of directors in the future should decide that all stenographers, for example, whom I assume at the present time you hire. through civil-service classification

Mr. BURDICK. Yes.

Senator MORSE. That stenographers may be hired and shall be hired outside the civil service. Would there be anything in this subsection (e) that would stop them from doing that?

Mr. BURDICK. You mean in this redraft or as I suggested in the amendment? .

Senator MORSE. In your substitute bill, subsection (e) as we have it before us in the proposed bill.

Mr. BURDICK. That is virtually the same as it is in the present bill. Senator MORSE. The board could, some new board of directors, if it decides, could decide that stenographers could be hired outside of the civil service?

Mr. BURDICK. That is right.

Senator MORSE. What other types of employees do you hire through civil service?

Mr. BURDICK. Accountants and clerks.

Senator MORSE. Some future board of directors, if we adopt your proposed language, could decide to hire people outside of the civil service for those classifications. So, the record should show, should it not, that if we adopt the language proposed in your substitute bill, some future board of directors of this corporation could in its discretion decide to hire all employees if they wanted to outside the civil service?

Mr. BURDICK. I think that is an accurate statement, Mr. Chairman. But, if you strike out this clause and this proviso as I suggested a moment ago, it will leave it as it is now; that is, that the President has extended civil service to a large number of these positions and under the bill as thus amended it would be clear that we would continue as at the present time.

Senator MORSE. I am sorry to take so much time.

Senator Baldwin, please feel free to break in at any time.
Senator BALDWIN. Thank you, Mr. Chairman.

Senator MORSE. The President, under Executive authority, has under existing law the authority to extend classification in the Zone. if he sees fit and the proposed amendment of the Civil Service Commission in exhibit No. 2 would in effect take that discretion away from the President and blanket in all employees of the corporation? Mr. BURDICK. That is right.

Senator MORSE. So we really have three proposals here, we have your proposal here as set out in the substitute bill, we have the suggestion for just leaving it in accordance with the status quo, and we have the Civil Service suggestion of blanketing all employees under the Civil Service Classification Act?