present law (which would be true under the proposed reorganization plan) no method of controlling the amount allocated for individual subsidies except to the extent that the totals must not exceed appropriations. Under the present law, the cost of airmail transportation service and the amount of subsidies are consolidated and the rate of compensation is fixed by the Civil Aeronautics Board which the Postmaster General is obligated to pay from the appropriations for airmail transportation services. Under the proposed reorganization plan it would appear necessary to limit payments from the appropriation for airmail transportation services payable by the Postmaster General to the amount fixed by the Civil Aeronautics Board as the rate of compensation for these services. The payment of subsidies under the proposed reorganization plan would be made by the Civil Aeronautics Board from appropriations made therefor. It is not possible under the Constitution for any public officer or department to obligate the United States to pay any moneys whatsoever except pursuant to statutory authorization.

It is for Congress, proceeding under the Constitution, to say what amount may be drawn from the Treasury in pursuance of an appropriation, and if an officer, upon his own responsibility, and without the authority of Congress, assumes to bind the Government by express or implied, contract, to pay a sum in excess of that limited by Congress for the purposes of such a contract, the contract is nullity, so far as the Government is concerned, and no legal obligation arises upon its part to meet its provision (Hooe v. United States (1910) 218 U. S. 322).

From a practical point of view no airmail carrier or other air carrier would have a claim, other than moral, against the United States for any promised subsidies which had not been specifically authorized by statute and which had not been specifically allocated from funds previously appropriated. Congress has power to recognize moral obligations (Marion & Rye Valley Railroad Co. v. United States (1926) 270 U. S. 280).

THE LIBRARY OF CONGRESS,

LEGISLATIVE REFERENCE SERVICE, AMERICAN LAW DIVISION
Washington 25, D. C., May 19, 1953.

To: Hon. John F. Kennedy

(Attention of Mr. Marvin).

Subject: Power of the Civil Aeronautics Board to obligate the United States for subsidy payments under the proposed reorganization plan and under S. 1360 of the 83d Congress.

Assuming, arguendo, that the proposed reorganization plan is valid, then the power of the Board to obligate the United States for subsidy payments would emanate from section 406 (b) of the Civil Aeronautics Act of 1938 (52 Stat. 998; U. S. C. 49:486). The pertinent part of this section, with respect to subsidies as distinguished from compensation for airmail transportation service after the effectuation of the division of the function under the proposed reorganization plan, would be: "and, [the need] together with all other revenue of the air carrier, to enable such air carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the postal service, and the national defense." The authority thus granted by section 406 (b) to consider the foregoing factor in the fixing of airmail transportation compensation is a rather nebulous basis upon which to predicate a reorganization plan under which an obligatory contract for the payment of subsidies may be made.

But even if it were sufficient authority to support obligatory contracts of the payment of subsidies, such contracts would be subject to the limitations of Revised Statutes 3678 (U. S. C. 31:665), the first subsection of which reads: "No officer or employee of the United States shall make or authorize an expenditure from or create or authorize an obligation under any appropriation or fund in excess of the amount available therein; nor shall any such officer or employee involve the Government in any contract or other obligation, for the payment of money for any purpose, in advance of appropriations made for such purpose, unless such contract or obligation is authorized by law." If sections 483, 486 and 493 of title 39 of the United States Code, which generally authorize the Postmaster General to contract for carrying the mails, yield to this provision, as originally enacted, limiting

expenditures so that appropriation is necessary for the employment of extra carriers, etc. (39 Op. Atty. Gen. 157), may it be logically contended that the general and indefinite terms of section 486 (b), pertaining to the consideration of the need for subsidies, would be outside the purview of such section? It is the settled and recognized policy of Congress to keep all of the departments of the Government, in the matter of incurring obligations for expenditures, within the appropriations annually made for conducting its affairs (Sutton v. U. S. (1921), 256 Ú. S. 575).

The contracts likewise would be subject to the provisions of the act of June 30, 1906 (34 Stat. 764; U. S. C. 31:627), which provides: "No act of Congress hereafter passed shall be construed to make an appropriation out of the Treasury of the United States, or to authorize the execution of a contract involving the payment of money in excess of appropriations made by law, unless such act shall in specific terms declare an appropriation to be made or that a contract may be executed" [italics supplied]. As those dealing with the Government must be held to have notice of these limitations upon authority (see Sutton v. U. S., supra), any con tention that the grants or subsidies are not within the ambit of the limitations of this section is very tenuous.

If the power of the Postmaster General "to establish post offices" does not authorize him to bind the United States by a lease for a post office building, there being no appropriation therefor (Chase v. U. S. (1894) 155 U. S. 489), a fortiori the Civil Aeronautics Board may not bind the United States by a contract for the grant of subsidies in excess of appropriations. If, as stated in 6 Opinions of the Attorney General 28, one appropriation does not necessarily involve the undertaking of the Congress to make further appropriations, and does not of itself empower the President to engage the Government beyond the specified sum, it is impossible to support the allegation that the Civil Aeronautics Board may bind the Government to pay grants of subsidies made by it in excess of appropriations. The general public system for the appropriation and disbursement of public moneys is permanent and unless charges are within the objects for which an appropriation is made they cannot be applied to that appropriation (28 Op. Atty. Gen. 634).

The foregoing observations, with reference to limitations on the authority of the Civil Aeronautics Board to obligate the United States for subsidy payments beyond the amount appropriated and available, would likewise be applicable to the Board if S. 1360 were passed. There would be, however, the additional specific restriction of the bill found on page 5, lines 2 to 6, which reads: "Payments under this subsection [subsidies for essential aircraft operation] shall be made by the Board out of sums appropriated to the Board for such purpose, and there are hereby authorized to be appropriated such sums as may be necessary to carry out the provisions of this subsection." This wording of S. 1360 also has the additional advantage over the proposed reorganization plan in that it grants a clear authorization for appropriations for subsidies as such, which is not found in the Civil Aeronautics Act of 1938, supra, the foundation for the payment of subsidies under the proposed reorganization plan.

[H. Rept. 1242, 83d Cong., 2d sess., State, Justice, and Commerce Appropriations, 1955, p. 13]

CIVIL AERONAUTICS BOARD

Salaries and expenses. The committee recommends $3,777,000, the budget estimate for this Board. The appropriation for the present fiscal year was $3,750,000. However, to that must be added $27,000 which was transferred to Civil Aeronautics Board under Reorganization Plan No. 10 from the Post Office Department for the handling of subsidy payments. The committee recognizes that Federal expenditures are substantially affected by actions of this Board. It has made no reduction in the request for the coming year and expects that the Board will give prompt and serious consideration to ways and means of reducing the cost to the Government represented by mail payments to carriers in total as well as for subsidy. In view of the recent Supreme Court decisions requiring that excess earnings from domestic operations of an international carrier be offset against the international subsidy rate, the Board will be required to promptly review all cases which contain this element.

Payments to air carriers.-Formal separation of the service and subsidy components of airmail pay was effected by Reorganization Plan No. 10 which became law August 1, 1953. Under that plan, effective October 1, 1953, the

Postmaster General is responsible for payment of service mail pay at rates established by the Civil Aeronautics Board and the Board is responsible for payment, out of appropriations made for these purposes, of the subsidy element. The subsidy payment is therefore now a part of this bill.

It is estimated by the Board that $80,252,000 will accrue to the subsidy carriers during the fiscal year 1955. The comparable figure for the present fiscal year is $80,655,000. These funds were previously carried in the Post Office Department Appropriation Act. The following table gives a breakdown of the 1954 and 1955 subsidy figures:

Subsidy:

International, overseas and territorial.

1955

$3,566, 000

23,841, 000

2,563, 000

50, 282, 000

80, 252, 000

The budget request for 1955, however, is $73 million since the proposed appropriation language places this account on an actual expenditure basis and the Board estimated actual payments to carriers during the fiscal year 1955 at that amount. However, actual payments by the Board from October 1, 1953, through December 31, 1953, totaled $12,643,055 according to information given the committee by the Board.

[H. Rept. 1242, 83d Cong., 2d sess., State, Justice, and Commerce Appropriations, 1955, p. 14]

Since the completion of the hearings by this committee the Supreme Court in unanimous decisions reversed certain methods used by the Civil Aeronautics Board in the computation of subsidies.

The Supreme Court decision in cases Nos. 222 and 223, October term, 1953, stated:

"The standard is 'the need of each such air carrier.' The 'need' of the carrier is measured by the entirety of its operations, not by the losses of one division or department. The measure of 'the need' is an amount of compensation necessary to carry the mail and 'together with all other revenues of the air carrier' adequate for maintenance and development. And the act defines 'air carrier' as 'any citizen of the United States who undertakes***to engage in air transportation * * *' section 1 (2). Thus the wording of the act precludes measuring 'the need' of the carrier by any other unit than the carrier as an entity.

"As we read the act, Congress has established a special formula for the fixing of a subsidy rate. While the rate may be for a class of service, the return in form of a subsidy must be computed with reference to the entire operations of the carrier. (The requirement is that the Board offset all of a carrier's revenues in determining the subsidy; there is no discretion in the Board to disregard any portion of the revenue because of economic or other policy considerations.) In other words, an air carrier's subsidy need is an amount which, 'together with all other revenue' of the carrier, will enable it to meet and maintain the objectives of the act. The carrier's 'need' is therefore a limiting factor in the sense that the subsidy may not exceed it. Since the Board did not construe and apply the act in that manner, the court of appeals was correct in reversing the rate order."

In view of the far-reaching nature of the Supreme Court decision the committee has recommended only $23 million for this item at this time. The committee hopes that the necessary review of all subsidy claims affected by this decision will be made as expeditiously as possible and that it will result in a substantial savings to the American taxpayer.

Graph: Total "mail pay" including subsidy to United States air carriers,
10 years 1946-55

Fiscal year:

1946

1947

1948.

1949.

1950.

1951

1952.

1953

1954. 1955

$39, 096, 000 55, 331, 000 88,446, 000 111, 135, 000 118, 701, 000 119, 697, 000

122, 078, 000

Total__.

129, 680, 000

136, 725, 000

1140, 475, 000

1, 061, 364, 000

1 1955: Proposed in Budget of the U. S. Government for fiscal year 1955: Mail pay in post office budget, p. 860, col. 1, ($60,223,000) plus subsidy in Commerce (CAB) budget, p. 443, col. 2 ($80,252,000).

Sources: 1946-50: General Accounting Office in hearings before the Senate Committee on Interstate and Foreign Commerce on Separation of Airmail Pay from Subsidy, 82d Cong., 1st sess., p. 657. 1951-54: CAB administrative separation repcrts in hearings before the Subcommittee of the House Com. mittee on Appropriations on the Department of Commerce, 83d Cong., 2d sess., pp. 591-599.

TOTAL "MAIL PAY" (INCLUDING SUBSIDY) TO U.S. AIRLINES
DOMESTIC & INTERNATIONAL, FISCAL YEARS 1946-1955

MILLIONS

140

1952 1953 1954 1955

SOURCES: 1946-50: GENERAL ACCOUNTING OFFICE. SENATE INTERSTATE HEARINGS, 82 CONG. IST SESS. p. 657
1951-54: CAB. HOUSE APPROPRIATIONS HEARINGS 83 CONG. 2ND SESS. p. 591-599
*1955: PROPOSED FOR POST OFFICE AND CAB APPROPRIATIONS

ASSOCIATION OF AIRLIFT AND AIRFREIGHT CARRIERS

STATEMENT OF L. R. HACKNEY, EXECUTIVE VICE PRESIDENT

GENERAL STATEMENT

Senator SMITH. Is Mr. Hackney here?

Mr. HACKNEY. Yes.

Senator SMITH. Will you tell us whom you represent?

Mr. HACKNEY. The Transport Air Group.

Senator SMITH. Have you a statement which you wish to give, or do you want to include it in the record and highlight it?

Mr. HACKNEY. I would prefer to highlight it, if I may.

Senator SMITH. Without objection, your statement will be included in the record at this place, and we will hear from you at this time. Mr. HACKNEY. Madam Chairman and members of the subcommittee, this is a statement on behalf of H. R. 8067, CAB appropriations for airline subsidies.

I sincerely appreciate the opportunity of presenting a statement before you in behalf of Transport Air Group, Inc. (TAG) the Association of Airlift and Airfreight Carriers. My name is L. R. Hackney, and I am executive vice president of TAG. Our membership consists of California Eastern Airways, Inc., The Flying Tiger Line, Inc., Transocean Air Lines, Seaboard and Western Airlines, Inc., and Slick Airways, Inc.

I would like first to emphasize that I have not come before this committee to criticize the appropriation of subsidy aid to air carriers where this form of aid is essential to the maintenance of adequate postal service, or for the needs of commerce. However, as you are concerned with appropriations, and in the case of the Civil Aeronautics Board the matter of subsidy, there are four salient points which I would like to clarify.

CONTRIBUTION TO NATIONAL DEFENSE

First, that contrary to popular belief it has been the nonsubsidized airlift and airfreight carriers that have made the major contribution to national defense since the end of World War II, rather than the subsidized passenger carriers or those passenger carriers eligible for subsidy. Unfortunately there have been several statements made from the floor of the House, while the CAB appropriations were under vigorous debate, which have been made a part of the Congressional Record (House of Representatives, Hon. Frank T. Bow of Ohio, March 3, 1954, Congressional Record, March 4, 1954, pp. A1716A1717). These remarks likewise give the impression that it is the segment of the air transport industry which is subsidized or is eligible for subsidy, which has been practically the sole supplier of airlift. This entirely ignores the activities of the forgotten other segment, the airlift and airfreight carriers, which has been responsible for the greater part of the civil airlift support of the Defense Department since the termination of the Second World War.

It was TAG members who performed over 55 percent of the commercial support for the military on the Pacific airlift, our aerial supply pipeline during the recent Korean hostilities. Nor has this been the