for retirement on account of age they are not going to be thrown out on the world. It is hard for people on salary, even on the salary Members of Congress are receiving, to save money. I thank the committee for its courtesy, and hope to be able to go into the matter more fully in a short time.

The CHAIRMAN. What does your bill provide as to a man leaving the service before the retiring age either on account of disability or inefficiency?

Mr. BROWN. A person may retire at any time and draw his savings with the interest his savings have earned. If he has been in the service for twenty years, he may have the benefit of any one of the options named in the bill.

The CHAIRMAN. Do you mean to say that he would get the 11 per cent?

Mr. BROWN. No, sir. He may purchase such annuity as the funds to his credit will buy. If it is found that a given rate for an annuity at a given age is not sufficient, the Secretary of the Treasury is authorized to adopt a new mortality table and increase the rate to an amount that will make it safe.

Mr. HARDY. When a man retires voluntarily or at the end of his period, he is given his actual contribution plus 4 per cent interest? Mr. BROWN. Yes, sir.

Mr. HARDY. One option is to take that money and the other option is to let the Department, according to the proper tables, estimate what annuity that would buy in an insurance company?

Mr. BROWN. Yes, sir; he could take his money in one sum, or in lieu of one sum receive an annuity from the Government. The amount of his annuity, if he elected to take an annuity, would depend upon the amount of money to his credit at the time of retirement and upon his age. The annuity rates charged by the Government would probably be somewhat lower than those charged by insurance companies, for the reason that there would be no loading in the premium for expense.

The CHAIRMAN. Is not this the proposition: a computation is made when he goes into the service and it is made to be due only when he gets to be 70 years of age, so as to pay him 13 per cent?

Mr. BROWN. Yes, sir.

The CHAIRMAN. But suppose he goes out of the service when he is 40 years of age, and the fund is not big enough to pay him 11 per cent, what does it give him?

Mr. BROWN. The annuity would be for such an amount as his savings would purchase at the age when he retired from the service. If his salary had been $100 a month during his entire period of service, and he entered the service at the age of 20, his deduction from salary would have been $3.57 a month, and this deduction, improved by 4 per cent compound interest, would amount in that time to $1,303.19. The price charged by a number of the leading insurance companies for an annuity of $100 at age of 40, first payment in one year, is $1,693. Therefore, on this basis, the amount of annuity which his savings would purchase would be determined by dividing $1,303.10 by $1,693, which gives us $78.67. Of course, if the price charged by the Government were lower, the annuity would be somewhat greater, and it probably would be lower, since the price charged by the Government would contain no loading for expense.

Mr. Cocks. Mr. Mann's idea, as I gatherd from his question and my own question, was as to whether it had been taken into account in making these computations that quite a large portion of these men are in what we call semihazardous service?

Mr. BROWN. That was taken into account in this way: Hazardous service necessarily means an early retirement, and therefore when it comes to deductions from salary it will be necessary to take a larger amount. For instance, a person entering the service at 20 years of age and retiring at 60, would serve forty years. The cost of an annuity of $100 payable throughout life beginning at 60 years of age is $1,066. If the person in question receives $1,200 a year straight through, 1 per cent of his salary would be $18. Now, he serves forty years, and accordingly he would be entitled to an annuity equal to forty times $18, or $720. The cost of an annuity of $100 beginning at the age of 60 is $1,066, and therefore the amount he would have to accumulate would be 7.2 times $1,066, $7,675. That amount of money will buy the required annuity of $720 at age 60. One dollar per month improved by interest at 4 per cent compounded annually for forty years would be $1,165, and by dividing $7,675 by $1,165 we get $6.59, which would be the monthly deduction required from a person entering the service at 20 years of age and who contemplated retirement at 60 years of age and who received a salary of $100 a month.

The CHAIRMAN. Suppose he goes out at 50 years of age?

Mr. BROWN. Then, whatever money he had to his credit could be converted into an annuity, if he so selected, or withdrawn in cash. The CHAIRMAN. But he would not get an annuity?

Mr. BROWN. No, sir; if the amount to his credit on retirement was less than $1,000.

The CHAIRMAN. You have provided in the bill that the Government shall pay for all employees now in the service?

Mr. BROWN. Yes, sir.

The CHAIRMAN. Which you give us in the aggregate as $60,000,000. Mr. BROWN. Yes, sir: or less.

The CHAIRMAN. Could not that be eliminated and could the bill be changed not to apply to those in the service and only to those coming into the service?

Mr. BROWN. Part 2 of the bill, as we call it, refers to annuities payable by the Government for services up to the time the bill becomes a law and is not in any way essential to the operation of the plan. Part 2 simply hastens the results. Without part 2 the benefits under the plan would not be fully realized for thirty or forty years.

The CHAIRMAN. So if the committee should think that the Government could not afford to go into this plan of paying to the present clerks the same rate they would pay in the future to those who themselves had contributed, they could make the plan take effect and apply simply to future clerks as fast as they come in?

Mr. BROWN. Yes, sir.

Thereupon the committee adjourned.

THE COMMITTEE ON REFORM IN THE CIVIL SERVICE, Friday, March 20, 1908. The committee this day met, Hon. Frederick H. Gillett in the chair. The CHAIRMAN. You may proceed, Mr. Goulden.

STATEMENT OF HON. JOSEPH A. GOULDEN, A REPRESENTATIVE FROM THE STATE OF NEW YORK.

Mr. GOULDEN. Mr. Chairman and gentlemen of the committee, I desire to call the attention of the committee to House bill 17969, introduced by me on February 25. This measure was the subject of a special message by the President of the United States under date of February 21, and was based on the report of the Assistant Secretary of the Department of Commerce and Labor and the Chief Forester. I desire to quote some paragraphs from that report:

WASHINGTON, D. C., February 18, 1908. GENTLEMEN: Your subcommittee on personnel has the honor to submit the following report on the question of superannuation :

Suitable provision for the retirement of aged civil employees of the Government is desirable on two grounds:

(1) As a means of improving the public service, since the possible loss to the Government through the superannuation of its employees is estimated by the National Civil Service Reform League to be about $400,000 in the Departments at Washington and about $800,000 outside of Washington; or, in the whole classified service of the United States, $1,200,000.

(2) As an act of justice to the faithful employees.

The salaries paid are seldom sufficient to admit of laying aside anything for old age, especially in Washington, where the expenses of living are now out of all proportion to the compensation received. The average salary paid by the Government, according to Census Bulletin No. 12, is only $1,072, a sum sufficient perhaps for celibates that cherish but a paltry ambition, but most assuredly not adequate for persons of commendable aspirations or encumbered with the responsibilities and obligations of family ties.

And your subcommittee believes that a provision for retirement can be made efficient, just, and successful only by reserving to the Government itself the administration of the plan.

The plan contemplates two methods of settlement for the employee on arrival at the age of retirement. He may convert his savings with the increment of interest into one of the following options:

The question naturally arises, How much will the adoption of this plan cost the Government? From the time of the passage of such a law all employees would begin to provide for themselves, so that ultimately the plan would be no expense to the Government beyond the payment of salaries to the necessary clerical force to handle the accounts. In the meantime, however, the Government would have to take care of the old employees as they reach the retiring age, for services rendered prior to the adoption of the plan, until about fifty years from now, when the last one would have been paid off. The sum required to do this annually would gradually increase for a few years, reaching its maximum about thirty years after passage of the law. From the twentyfifth to the thirty-second year after the adoption of the plan the amount each year is about the same. After the thirty-third year the amount each year drops off very rapidly until in fifty years the plan would be self-sustaining and there would be no more need of making appropriations for the superannuated.

In 1904 the Bureau of the Census made a report on the Executive Departments, which is the latest authoritative information that we have regarding the personnel of the civil service. It is known as Bulletin 12 and covers the service as of July 1, 1903. In order to ascertain definitely the maximum amount

of money that the Government would have to pay during the next fifty years or so if this plan of retirement should be adopted, tables based on Bulletin 12 were prepared for all ages at which people are employed in the classified civil service, showing the annuities payable the year of the adoption of the plan and each year thereafter until all present employees are dead and their sum total, or what it would cost the Government to put the plan in operation and carry it through to completion. They show that the maximum cost of this retirement plan to the Government will be as follows:

Maximum amount of annual appropriation by the Federal Government necessary to provide a monthly annuity to each person in its classified civil service July 1, 1903, upon attaining the retirement age of 70 years (the amount of annuity to be 1.5 per cent of the employee's salary July 1, 1903, for each year of service completed prior to that date).

It should not be forgotten that this is a maximum cost, and that the real cost will probably be greatly less, since many employees who enter into this competition will leave the service before reaching the age of 70. Compare this maximum cost of considerably less than $2,000,000 annually for a term of forty years with that of any other plan ever proposed, and it will be seen how little is asked of the Government.

These quotations, from one of the best and most conclusive reports that I have ever read, will do much to give a proper conception of the purposes of the bill referred to. It settles the question of a civil pension list, to which I would be unalterably opposed as such, and makes it possible to provide relief for a deserving class of Government employees. This measure is a humane one and in keeping with the spirit of a free, God-fearing, liberty-loving people.

To turn out on the cold charity of the world the old employees who have faithfully and honestly served the Government that many of them have helped to save would be repugnant to every patriotic man and woman in the country.

As other governments, States, municipalities, and even corporations (who are popularly supposed not to have souls to save or bodies to kick) are doing this, an act of common justice, why should Congress hesitate? I beg leave to add these statistics and at the same time acknowledge my indebtedness to the various gentlemen associated with the special committee before referred to.

I have a mass of statistics which I trust will not bore the committee. Take the city of New York. First, the police pension fund, city of New York, charter of Greater New York, sections 351-367. The receipts in 1907 were $1,516,945.56. The balance left over on December 31, 1906, was $63,719.98, so that we had a total amount available on the 1st of January, 1907, of $1,580,665.54. The disbursements for 1907 were, pensions paid to policemen retired, $1,510,230.23. Mr. FOSTER. Do you take out something from the pay? Mr. GOULDEN. Yes, sir; I think it is I per cent.

Refunded to policemen for sick benefits, etc., $19,816.13. The number of male pensioners is 1,768; widows, 1,039

The CHAIRMAN. How long has it been in operation?

Mr. GOULDEN. It runs back at least twenty years.

Children, 155, or a total number receiving benefits from the police pension fund of 2,962.

Fire department, New York City, 1907, Greater New York charter, subdivision 8, section 789: Receipts for 1907, bureau of combustibles, $92,340.50; contributions from various people who are kindly disposed toward the fire department in one way and another, $24,648; excise licenses, $369,073.52; foreign fire insurance tax, $127,162.72; penalties, etc., fines of policemen of ten, twenty, or thirty days' pay, $51,002.71, making a total of $664,227.45. We had a balance on December 31, 1906, of $853,112.63. There was retired men during the year paying out $429,131.95; pensions for widows and orphans, relieved men, etc., $225,173.25, making a total amount paid out of $654,305.20.

Public school-teachers' retirement fund, provided for under section 1092, charter of city of New York, amended, chapter 167, laws of 1907. The retirement fund shall consist of—

1. All money, pay, or income forfeited, deducted, etc., from the teachers.

2. All moneys received from donations, etc.

3. Five per cent annually of all excise moneys or license fees.

4. One per cent of the salaries of teachers and principals.

5. All such other methods of increment as may be duly and legally devised for the increase of said fund.

The receipts for 1907 were $784,354.89.

The CHAIRMAN. The great bulk of that amount, if it had not gone there, would have gone into the city treasury?

Mr. GOULDEN. Yes; and the fines and deductions would not perhaps have been so large. Those who were fined for absence or for any other cause were willing to pay the amount because they knew that it went into a fund which would benefit themselves.

The balance on January 1, 1907, was $1,102,028.19, giving us a total of $1,886,383.08. The disbursements in 1907 were $689,390.64, leaving a balance on hand on January 1, 1908, of $1,196,992.44. The CHAIRMAN. That is invested separately?

Mr. GOULDEN. Yes; invested separately in the bonds and stocks of the city of New York.

Mr. KIMBALL. Is any of this fund invested in any other bonds? Mr. GOULDEN. I think not. The total number of teachers in the system is 15,000.

Mr. FOSTER. Is it compulsory?

Mr. GOULDEN. Yes. The total number of annuitants February, 1908, were 966.