It is important to bear in mind that the statistics upon which we must depend as reflecting the facts of railway operation are prepared by the railroads and that in consequence we can not be certain that there has been an accurate and a correct report to the commission as to the separation or distinction between the revenues and expenses resulting from the operation of physical properties which properly should be included and the revenues and expenses of miscellaneous physical properties which have nothing whatever to do with railway operation. It will be pointed out later that these miscellaneous or so-called "outside" properties which are owned by the railroads represent quite considerable amounts of revenues and expenses the proper accounting of which is of great importance. I here present for the record chart No. 8.

Mr. WARNE. The accompanying chart (chart 8) shows graphically the tendency in the amount of total maintenance expenditures each year from 1890 to 1919 and by five-year averages. Especially striking are the huge increases each year since 1917, while the railroads were under Federal control. The amount for 1920, which is not given on the chart, is $2,625,460,542. The figures since 1917 are for Class I roads only. It will be noted that the bars and statistics show such large increases since 1917 as to nearly double the amount spent in 1919 compared with 1916; for 1920 the expenditures are $529,000,000 more than twice those of 1916. Considering the annual expenditures for total maintenance for 1915, 1916, and 1917, it is found that these three years preceding Federal control show an average of $1,022,400,000. For each of the three years following, during all but four months of which the railroads operated under the Government guaranty, this average expenditure exceeded $2,124,600,000.

The CHAIRMAN. What do you mean by that? I did not quite catch that.

Mr. WARNE. Do you mean during all but the four months of which the railroads operated under the Government guaranty?

The CHAIRMAN. You use the word "guaranty" as the equivalent of compensation-when they were paid so much for the use of the property?

Mr. WARNE. Yes; exactly.

The CHAIRMAN. I just wanted to make that clear.

Mr. WARNE. Yes. Here is an average annual increase of $1,102,200,000—107 per cent-a sum more than double the average of the three years preceding Federal control.

The average increase in total maintenance from 1915 to 1917, the two years immediately preceding Federal control, was $118,000,000. From 1917 to 1919, two years of Federal operation, this increase was $435,300,000. In the single year 1920, during six months of which the roads were under private operation but with the Government guarantee, the increase over the very large increase for 1919 exceeded $627,000,000.

The CHAIRMAN. Well, that would be very largely accounted for by the increase in the cost of material, and in the increase in wages of labor.

Mr. WARNE. Yes. But I am just laying down, now, Senator, the general tendency. Later on I shall explain this in detail.

The CHAIRMAN. Yes.

Mr. WARNE. In the single year 1920, during six months of which the roads were under private operation but with the Government guarantee, the increase over the very large increase for 1919 exceeded $627,000,000.

The principal items in total maintenance from 1915 to 1920 and their relative importance as determined by the total sums spent under each in 1920 are presented in the accompanying table. These 12 items comprise more than five-sixths-84 per cent-of total maintenance expenditures in that year; they make up 38 per cent of total operating expenses. Three items alone having to do with the repair of equipment-repairs to locomotive, to freight-train cars, and to passenger-train cars-total nearly $1,300,000,000 in 1920, or not quite one-half of total maintenance expenses. Figures are not given for years prior to 1915 for the reason that the Interstate Commerce Commission reclassified the items of the way and structures maintenance account in that year, thus preventing accurate comparisons.

(The table of principal items in total maintenance expenses is as follows:)

Principal items in total maintenance expenses.

[Class I carriers, excluding switching and terminal companies.]

nance....

Per cent of above items to total maintenance...

860,743, 739 1,017, 342, 148 1,127,538, 775 1,745,316,399 1,995, 528, 883 2,625, 460, 542

80

78

83

85

84

Mr. WARNE. I would like to comment on this table sufficiently, Mr. Chairman, to indicate the significance of the more important items in the total maintenance. For instance, repairs to locomotives is the first most important item, which in 1920 gives $605,500,000. In 1915 that same item was $159,000,000.

The next most important item is repairs to freight-train cars.
The CHAIRMAN. Now, you are speaking of what period?

Mr. WARNE. I am speaking now of from 1915 to 1920. I can not go back of 1915, because of the change in classification. The CHAIRMAN. The five years.

Mr. WARNE. Yes. We have there practically six years of figures. Repairs to freight-train cars in 1920 totaled $594,000,000, while in 1915 they were only $163,000,000.

Track laying and surfacing is the third most important item in total maintenance. In 1920 this cost $307,000,000, and in 1915, $93,000,000.

Roadway maintenance is the fourth most important item. In 1920 the expenditures amounted to $129,500,000, whereas in 1915 the expenditures for that item were only $36,000,000.

The fifth most important item is ties. In 1920 they cost $124,500,000, and in 1915, $65,000,000.

The CHAIRMAN. You are speaking of calendar years now?

Mr. WARNE. Well, 1915 is the fiscal year; the rest are calendar years.

The CHAIRMAN. The balance are calendar years?

Mr. WARNE. Yes. Superintendence is the sixth most important item of total maintenance. In 1920 it cost $101,500,000, and in 1915, $36,800,000.

Senator LA FOLLETTE. Does your table show the expenditures for each year?

Mr. WARNE. Yes; it gives each year. I am only giving you the first and last years. The table will be printed, Senator, and I am only just giving the spread.

Senator LA FOLLETTE. Yes; I see.

The CHAIRMAN. You have not attempted to divide the year 1920 between the period of Federal control and afterwards?

Mr. WARNE. Yes; I am dividing it by months, showing these total items.

The seventh most important item in total maintenance is repairs to passenger-train cars. In 1920 this amounted to $100,500,000, and in 1915 it was $32,500,000.

The next most important item is depreciation of freight-train cars. This charge increased from $47,000,000 in 1915 to $80,000,000 in 1920. Then comes bridges, trestles, and culverts. They cost $28,000,000 in 1915, and $53,000,000 in 1920.

Then, the remaining three of the more important items are track material other than rails, which increased from $16,000,000 to $42,000,000 from 1915 to 1920; station and office buildings, which increased from $14,000,000 to $39,500,000, and depreciation of locomotives, which increased from $21,700,000 to $38,600,000.

Now, these items in 1915 constituted 80 per cent of total maintenance. In 1920 they constituted 84 per cent. They increased from $713,000,000 in 1915 to $2,216,000,000 in 1920; that is nearly three times as much.

Total maintenance expenses are subdivided by the accounting method of the Interstate Commerce Commission into two primary accounts: (1) Equipment, and (2) maintenance of way and structures. In 1920 the proportion of each to total maintenance was 61 per cent for equipment and 39 per cent for way and structures,

showing expen liture for maintenane of my ip ment to be the more important as masted by the amounts set. The 1992) mainte Lance of eg lignent expense amuttei to 852 and those for maintenance of way and structures to $1.92.48 I will now put in the record chart 2:

Mr. WARNE. The arcompanying chart chart & presents the statists for maintenance of exuipment expenses each year from 150 to 2016, and by fre-year aretares. The bars representing the very large increases for 1915 and 1918 are partimlarly conspicions, the expenditures for 1918 being more than don'le those for 1916. For 1920 these expenses were Sh * more than twi e the sam spent in 1916.

Here

Averaging the expenditures for maintenane of equipment for the three years preceding Federal control it is found these ancunt to The average for the three years following 1917, during all of which time, with the exception of four months, the roads were under the Government garantée, reachei $134) is an increase in the average of $713.000m, or of 120 per vent. The increase in the average equipment expenses from 1915 to 1917. the two years preceding Federal ontrol, was $44,000,000). From 1917 to 1918, the first two years of Federal operation, this average increase was 8209.000000. For the single year 1920, for six months of which the roads were operated by their private owners under the Government guarantee. the increase over 1919 reached nearly

The CHAIRMAN. I see that your two charts, 8 and 9, bring down the showing to the year and including the year 1919.

Mr. WARNE Yes, sir.

The CHAIRMAN. The figures you have been giving us include also the year 19209

Mr. WARNE. But I have stated in the text, Senator, the figure for 192% I give you the figure in the text. These charts were made before, the De figures were available. But you have in the text die ussing this chart the figure for 1920,

The CHAIRMAN. Yes. Does your table show the division up to Mar h 1. 1929

Mr. WARNE. Later on I show that.

Senator LA FOLLETTE. You have a table by months which you present later. Mr. Warne!

will

Mr. WARNE. Later on: yes. This is just the general aspect of the case. Later on I go into the details with respect to months during those three periods.

In the accompanying table is presented the principal items which go to make up total maintenance of equipment expenses, arranged according to their importance as determined by the amounts spent in 1920.

The table of Principal items in railway maintenance of equipment is as follows:)