to two cents, fixed to take effect on the 1st of October last. Following this report will be found an interesting table, marked I, showing the sources from which the revenues of the Department for the last fiscal year were derived, also the gross revenue by States and Territories and the percentage of such revenue by States and Territories. The expenditures are itemized in Table No. 3 accompanying the report of the Third Assistant Postmaster-General. The increase in the item of compensation to postmasters was $1,350,717.74, or a little more than 15 per cent., over the expenditure for the previous year. This was an unusually large increase; but it is estimated that nearly $700,000 of it was due to the fact that the act of March 3, 1883, to equalize the salaries of postmasters, was made to apply to the fourthclass offices from the date of its passage, instead of from October 1, when the reduction of postage took effect. The expenditure was $1,515,394.46 in excess of the appropriation. The deficiency was unavoidable, since the law fixes the compensation of postmasters, and authorizes them to retain it in accounting for the proceeds of their offices. The increase in the expenditure for clerks in post-offices was $458,682.81, or about 11 per cent., over that of the previous year; and for letter-carriers it was $550,043.77, or 20 per cent. The expenditures and liabilities for railroad transportation for the service of the year may be stated as follows: Amount already paid (being $179.74 in excess of the appropriation).. $11, 155, 179 74 Amount reported for payment and suspended on account of the insuf ficiency of the appropriation ... Estimated amount for service not yet reported for payment... Estimated total expenditures and liabilities for railroad transportation for 1883..... Add amount credited to Pacific railroad companies... Estimated total cost of railroad transportation for 1883.... 423, 992 92 225,000 00 11,804, 172 66 915, 710 22 12,719,882 88 I have included in the foregoing the amount earned by the Pacific railroad companies and credited to them on the books of the Treasury Department for the service of the last year. The act of March 3, 1879, under which the Pacific railroad companies are credited for carrying the mails, was formerly held to apply to their branch and leased lines, but recent decisions of the courts require payment for service on these lines to be made out of the appropriation for the transportation of the mails. The amount already ascertained for service on these lines for the last year is $452,567.23, and it is estimated that this will be increased to $500,000, which amount is included in the exhibits already made of expenditures and liabilities for the year. As compared with the previous year, there was a decrease in the expenditure for star service of $1,042,939.58, or 18 per cent. The aggregate appropriations for the service of the year were $44,876,600.18, or $1,284,899.62 more than the total expenditures and estimated liabilities for the same, exclusive of the amounts credited to the Pacific railroad companies. The appropriations by items will be found in Table No. 3 attached to the report of the Third Assistant Postmaster-General. APPROPRIATIONS TO SUPPLY DEFICIENCIES IN THE POSTAL REVENUE. Congress appropriated $1,902,177.90 to supply estimated deficiencies in the postal revenue for the year ended June 30, 1883, and $2,152,258 was appropriated for a like purpose for the year ended June 30, 1882. These appropriations remain undrawn in the Treasury, the postal revenues having been found more than sufficient to meet the expenditures of both years. Further information touching the financial operations of the Department will be found in the report of the Third Assistant Postmaster-General and the Auditor, in the appendix hereto. ESTIMATES FOR 1885. The receipts and expenditures for the fiscal year ending June 30, 1885, are estimated as follows: Ordinary postal revenue Net money-order receipts.... Expenditures exclusive of amounts to be credited to Pacific railroad companies... Deficiency to be supplied out of the general Treasury ESTIMATED REVENUE. $46, 674, 078 31 430,000 00 47, 104, 078 31 50,062,189 60 2,958, 111 29 Unusual difficulty is experienced at this time in forecasting the postal revenues by reason of the recent reduction of postage. The Department has no statistics showing the amount of postage collected on each of the several classes of mail matter, and no means, therefore, of determining the precise extent to which the revenues are affected by that reduction. Another element of uncertainty is the extent to which the mails will be increased under the stimulus of a lower rate of postage. Some compensation for the loss in the rate may reasonably be expected from three sources, viz: First, an increased amount of correspondence; second, the increased revenue to be derived from the substitution of sealed circulars at two cents for open ones at one cent; and third, the increased revenue from the substitution of letters for postal cards. The increase of revenue from these sources is, however, purely conjectural. In the absence of more certain data, the revenue for the next year has been estimated at $47,104,078.31, upon the following calculations: The increase in the postal receipts for 1880 over 1879, following the re vival of the business industries of the country, was at the rate of 10.8 per cent.; for 1881 over 1880 it was 10.4 per cent.; and for 1882 over 1881 it was 13.8 per cent. The increase for 1883 over 1882 was only 8.6 per cent.; but, as has already been explained, the receipts of the last year were materially affected by the then approaching reduction of letter postage. Except for this reduction of postage the increase of receipts would probably have been not less than 10 per cent., the quarter ending September 30, 1882, before the reduction was agitated, showing an increase of 11 per cent. over the corresponding quarter of the preceding fiscal year. Computed at an annual increase of 10 per cent., the ordinary postal receipts (excluding money-order receipts) on the basis of a 3-cent letter rate of postage would have been $54,567,458.61 for the fiscal year ending June 30, 1885, as shown in the following: Ordinary postal revenue for the year ended June 30, 1883.... Add increase of 10 per cent Gives estimated revenue on basis of 3-cent letter rate for the year ending Add increase of 10 per cent Gives estimated revenue on basis of 3-cent letter rate for the year ending $45,097, 073 24 4,509, 707 32 49,606, 780 56 4,960, 678 05 54, 567, 458 61 Taking the issues of 3-cent stamps and stamped envelopes as the measure of the values affected by the reduction of postage, and making no allowance for compensations to follow the lessening of the rate, the loss of revenue by the difference in the rates may be estimated at $10,393,380.30, as appears in the following: Value of 3-cent stamps and stamped envelopes issued during the year ended June 30, 1883..... Add 10 per cent. increase.. Gives estimated value for the year ending June 30, 1884. Gives estimated value for the year ending June 30, 1885..... Leaves estimated revenue from letters (not including drop or foreign letters)... $25,768, 711 50 2,576, 871 15 28, 345, 582 65 2,834, 558 26 31, 180, 140 91 10,393, 380 30 20,786,760 61 It will be observed that this estimate of issues assumes an annual increase of 10 per cent., the ratio at which the gross receipts are increased in the previous estimate. It will also be seen that in placing the revenue from letters (excluding drop and foreign letters) at $20,786,760.61, no allowance is made for an unusual increase in the volume of business to follow from a reduction of the rate of postage. That some allowance should be made will be readily conceded. Just what amount should be allowed cannot, of course, be determined with any degree of precision at this time. It has, however, been roughly placed at $2,500,000. The allowance of this sum for extra business would leave the estimated net loss on letters for the next year at $7,893,380.30, or a little less than one-fourth of the estimated revenue from letters upon the 3-cent basis. The foregoing estimates may be restated as follows: Estimated ordinary postal revenue for the year ending June 30, 1885, on basis of 3-cent letter rate... Deduct estimated loss occasioned by reduction of letter rate to 2 cents. $54, 567, 458 61 7,893, 380 30 46,674, 078 31 Add net profits from money-order business for the year ending June 30, 1885, as estimated by superintendent of the money-order system.. Gives total estimated revenue for the year ending June 30, 1885, on basis of 2-cent letter rate.. 430,000 00 47, 104, 078 31 ESTIMATED EXPENDITURES. As shown above, the expenditures for the year ending June 30, 1885, are estimated at $50,062,189.60, not including amounts credited to the Pacific railroad companies. They are explained so fully in detail in the papers attached to the table of estimates in the appendix and in the various Bureau reports that they need not be further referred to here. POST-OFFICES ESTABLISHED AND DISCONTINUED. The report of the First Assistant Postmaster-General presents the following comparative statement of the number of post-offices established and discontinued and of postmasters appointed for the fiscal years ended June 30, 1882, and June 30, 1883: EMPLOYÉS IN THE POSTAL SERVICE. The following table shows the number of employés in the Post-Office Department; also the number of postmasters, contractors, clerks in post-offices, railway post-office clerks, and other officers in the service, June 30, 1882, and June 30, 1883: This system was in operation during the year at 154 offices (including 42 newly established ones), and employed in the aggregate 3,680 carriers. The total appropriation for this service was $3,200,000, including a special appropriation of $200,000 to carry out the provisions of the act of August 2, 1882, an increase of $575,000 over that of the preceding year. The total cost of the service was $3,173,336.51, leaving an unexpended balance of $26,663.49. The increase of cost over the preceding year was $550,073.77. This was owing to the extension of the service to 42 additional cities in different sections of the country, employing in the aggregate 222 carriers to the appointment of 343 additional carriers in the older free-delivery cities, to the increased pay of auxiliary carriers from $400 to $600, and to the promotion of carriers from the lower to the next higher grade at the expiration of one year's service, as required by the act of August 2, 1882. POSTAGE ON LOCAL MATTER. The postage on local matter at the various offices amounted to $4,195,230.52, an increase over the preceding year of $378,654.43, and |