States an amount equal to the costs of handling penalty mail matter utilized by the agencies concerned. Section 5 of the law, however, exempted the War Department from the provisions of the law. Public Law 239, Eightieth Congress, approved July 24, 1947, repealed section 5 of Public Law 364, and the War Department therefore immediately became subject to the remaining provisions of Public Law 364.

Mr. CASE. What you are saying is that for the first time the War Department had to come under the same provisions with respect to penalty mail.

Major HARNAR. Yes. From 1944 until July of 1947 the War Department was exempt from the act.

Mr. CASE. I think the members of the committee are familiar with the penalty mail provision; we have had to deal with that in other appropriation bills.

BASIS FOR ESTIMATE FOR 1949

Major HARNAR. Yes. Since there were no figures available as to the exact amounts of official mail matter of the War Department which in previous years entered the United States postal service, an estimate could not be based on past usage. Consequently, inquiries were sent to the major oversea commands, commanders of armies in the United States, and departmental services, requesting an estimate of the various types of official penalty mail matter (envelopes, cards, labels, tags, and wrappers) which would be required by each of the civil functions within their area during the fiscal year 1949 (tab A). A consolidation of the estimated figures furnished by the various commands shows the estimated usage of official penalty mail matter by the civil functions activities to be as follows:

Cemeterial..--.

Alaska communication system..

Rivers and harbors and flood control__
Government and relief in occupied areas.

Total...

$3, 735, 000 90, 000 6, 468, 750 956, 250

11, 250, 000

On the basis of cost-of-handling figures furnished by the Bureau of Accounts, Post Office Department, for the fiscal year 1949 ($20 per thousand pieces) funds necessary for the volume of official penalty mail matter to be used by civil function activities administered by the Department of the Army is as follows:

NEED FOR SUPPLEMENTAL ESTIMATE FOR 1948

Mr. CASE. I notice in your estimates, at page 1132, you show a supplemental estimate for 1948 of $200,000. Have they received that money?

Major HARNAR. As far as I know they have not. I do not think they have, because we have not yet been billed by the Post Office Department for any of the usage.

Mr. CASE. What this is for is the amount of the obligations incurred since the effective date of Public Law 239.

Major HARNAR. That is what the estimate would be.

Mr. CASE. That would be since the 25th of July 1947.
Major HARNAR. Until July 1, 1948.

Mr. CASE. Have you any actual figures of the obligations you have incurred since that date?

Major HARNAR. We have submitted to the Post Office Department the report covering the period from the 25th of July to the 1st of October, the figures therein being the basis for billing by that Department. Since the report was presented within the last few days the Department of the Army has not yet received the bill.

Mr. CASE. I was wondering whether you had any actual experience since the law went into effect on which we could check the amount you are requesting for the next fiscal year.

Major HARNAR. No, we have not. Our first complete reporting period ended the 31st of December and we are just now beginning to get a few scattered reports in from the commands; they will probably be coming in until the end of this month and it will be that time before we will have complete figures covering a full reporting period.

Mr. CASE. You think it will be the end of the month before you could supply the committee with such figures?

Major HARNAR. Yes.

Mr. CASE. Will you do that by that time so we may have them before we mark up the bill, for the benefit of getting such actual experience as you may have.

Major HARNAR. Yes.

Mr. CASE. If there are no further questions we thank you, Major. Major HARNAR. Thank you.

WEDNESDAY, JANUARY 14, 1948.

ALASKA COMMUNICATION SYSTEM

STATEMENTS OF MAJ. GEN. S. B. AKIN, CHIEF SIGNAL OFFICER; COL. K. B. LAWTON, CHIEF, FISCAL DIVISION; M. C. WEST, ASSOCIATE CHIEF, FISCAL DIVISION; AND MRS. G. B. WISEMAN, CHIEF, BUDGET BRANCH, FISCAL DIVISION

STANDARD CLASSIFICATION SCHEDULE

Mr. ENGEL We will now take up the items for the Alaska communication system. We have with us Maj. Gen. S. B. Akin, chief signal officer; Col. K. B. Lawton, chief fiscal officer; Mr. M. C. West, Associate Chief, Fiscal Division, and Mrs. G. B. Wiseman, Chief, Budget Branch, Fiscal Division.

GENERAL STATEMENT

General Akin, do you have a statement you would like to make? General AKIN. Yes, I would like to make a statement, sir.

EXTENT OF THE ALASKA SYSTEM

Let me commence the defense of this budget by reminding you of the extent of the Alaska system. We have a chart here which shows the system. The black dots [indicating on plat] indicate the 41 stations that are in Alaska, with the forty-second in Seattle. The red lines are the radio circuits,the blue lines are the submarine cable, and the black lines are the wire lines.

In order that you may have some conception of the extent of the system we have superimposed the system on a map of the United States which we have here, with Seattle in the Bahamas and Attu, which is the western extremity of our system, between Los Angeles and San Francisco [indicating]), so that gives you some idea of the area that is covered by the system.

Mr. ENGEL. How many miles all told?

General AKIN. In the system itself, I did not compute that, but I would say probably from one extremity to the other, probably in the neighborhood of 2,500 or 3,000 miles airline, including the Aleutian Chain, but I am not sure of that. It is an arterial system which serves an area of about 586,400 square miles. Alaska has a population of 90,000, 60,000 of which are white.

Now, it connects with some 360 private stations located throughout Alaska, and that general distribution is shown on this chart [indicating], in Central Alaska end Southern Alaska, and particularly southeastern Alaska with a few scattered in other places in Alaska. You will recall from the statement last year, gentlemen, that there is no commercial company that has been willing to enter the commercial service there in Alaska, and take over the operation of all of the stations. So, that renders it necessary to have it as a Government operation to serve the development of the Territory, and to meet the requirements of the civilian activities there primarily.

Mr. SCRIVNER. Do I understand, then, that your system does serve both the civilian and commercial needs up through that area? General AKIN. Yes, sir.

REVENUES OF THE SYSTEM

Mr. SCRIVNER. And is the Government compensated for that service which it renders?

General AKIN. Yes, sir; I have a statement of the revenues which are turned into the Treasury every year. I can give it to you now if you desire it.

Mr. SCRIVNER. You might just as well.

General AKIN. In 1947.

Mr. ENGEL. Was that the fiscal year 1947?

General AKIN. Yes. It was $1,075,418.

Mr. ENGEL. That is revenues?

General AKIN. Yes, sir. That was for 1947. We have not completed the computation for 1948 yet because all the accounts are not yet in, but we estimate $1,285,000 for 1948, and in 1949 with the increase in traffic which is occurring, it should go to $1,375,000 as funds covered into the Treasury which are collected from the system.

NEED FOR WATCHING CIVILIAN AND MILITARY DEVELOPMENT IN ALASKA

One of the things that we have to watch in the Alaska development is that our interest in meeting the military needs does not cause us to fail in our primary function of meeting the civilian needs or the civil development of Alaska. That development, of course, is both civil and military.

In order that we may be constantly informed of the developments in Alaska, with their potential demands on communications, we have members on the President's Inter-Agency Coordinating Committee for Alaska. That committee has membership on it from the Army, the Navy, the Air Forces, the Departments of Interior and Agriculture, and the Civil Aeronautics Authority.

The purpose is to provide a plan for the development of Alaska, and my representative there watches all of the developments taking place, and tries to keep informed and predict what the communication requirements will be.

We then take those commercial requirements and coordinate them with the military requirements, and that is what we are trying to present to you.

Some of the developments now under way in Alaska are those of the Aluminum Company of America which has extensive limestone plants in Ketchikan area. There is a cable junction at Ketchikan where it comes in from the south.

Mr. ENGEL. There is a limestone plant there, is there not?
General AKIN. Yes, sir.

Mr. SCRIVNER. What is the purpose of that development?

General AKIN. To get out limestone, I imagine, and make lime and possibly cement products.

Mr. SCRIVNER. For consumption in Alaska?

Colonel LAWTON. No, on the west coast of the United States mostly.

General AKIN. Then we have the pulp industry with which you are probably familiar, and that will develop in southeastern Alaska, in that same general area, and then there are attractions that they are putting in for the tourists. They propose to erect a $2,000,000 hotel at Fairbanks, and to add to the hotel at Anchorage.

Mr. ENGEL. Who is going to build the hotel, the Army?
General AKIN. No, sir, I believe that is a civilian project.
Colonel LAWTON. Yes, sir, it is strictly civilian.

Mr. ENGEL. For resort purposes?

Colonel LAWTON. Yes, sir, for tourists.

General AKIN. Then, there will be log cabin centers built all along the Alcan Highway to attract tourists there and to provide accommodations for them.

Then there is also an expansion of mineral research and exploration which is taking place that will be carried on by the Bureau of Mines and other activities of the Government.

Mr. ENGEL. In what part of Alaska.

General AKIN. I think generally in southeastern Alaska.

Finally, they contemplate an expansion program there for the rehabilitation of the Alaskan Railroad.

They plan to get Diesel and electric locomotives there and new cars, and the over-all expenditure for that purpose is going to run, I think, about $34,000,000. I understand that it is a several-year program.

Mr. ENGEL. Is that going to be done through the Department of the Interior?

General AKIN. Yes, sir; I think so, Mr. Chairman. That railroad is operated by the Department of the Interior.

So, that gives you some of the items that are going to cause some increase in our requirements for circuits there and also cause an increase in the traffic load.

DISCUSSION OF FORM AND CONTENT OF BUDGET FOR 1949

Now, turning to the present budget, Mr. Chairman, this budget is not in exactly the form that we told you last year it would be, nor is it as all-inclusive as we thought it would be.

The reason for that is that the Bureau of the Budget decided that the Army and the Air Forces would, in the fiscal year 1950 submit separate budgets. For that reason they wanted us to continue the 1949 budget in the same form, and subject to the same ground rules as the 1948 budget.

Mr. ENGEL. Do you mean that the Army Air Corps is going to have a signal corps system of their own?

General AKIN. No, maybe I did not give you the picture.

They wanted the budget for the Alaska system to be effective in the same way as 1948, not including in it items such as the building and construction that is peculiar to the system, and some $400,000 worth of items that the Army normally provides.

Last year we told you that we would try to get those items out of the military budgets and put them in the Alaska system so that you would have a definite picture before you and know what the cost of the Alaska Communication System is, but when we presented that to the Bureau of the Budget they said they would rather that we did not do that now, since the budgets for next year will be an Army budget and an Air Forces budget, and depending on the decision at that time as to what items would be included in the Alaska Communication System, we had better leave the situation as it is this year, and not include in it the building construction which we had planned to include, nor this $400,000 of items provided by the Army for the support of the system.

Mr. ENGEL. Then the buildings and the construction of the buildings, or items for the construction of buildings which are to house Signal Corps equipment or facilities in the Alaska communication system are taken out of the budget and put into the engineers. service estimate or budget, is that right?