hospitals and military agencies milk and its products acquired under the price support program, except that section 3 removes the time limit by substituting the word "annually" for the words "until December 31, 1958."

The Department favors the removal of the time limit so that the present program under which consumption of milk and its products by veterans' hospital patients and military personnel has been increased may be continued as long as it is helpful in carrying out the milk and butterfat price support program. This could be accomplished either by amending section 202 of the Agricultural Act of 1949, as amended, to delete the time limit or by enacting section 3 of the bill. If accomplished by enacting section 3 of the bill, a question arises as to whether the word "annually" should not be omitted since the word might be construed as meaning that CCC must set aside or reserve sufficient supplies for use by veterans' hospitals and military agencies for a whole year ahead in preference to sales, school lunch, and other uses during the year.

The Bureau of the Budget advises that there is no objection to the submission of this report.

Sincerely yours,

E. T. BENSON, Secretary.

[H. R. 9618, 85th Cong., 2d sess.]

A BILL To amend the Agricultural Act of 1949 to provide for furnishing surplus dairy products to the Coast Guard, the Coast Guard Academy, and the United States Merchant Marine Academy

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (b) of section 202 of the Agricultural Act of 1949 is amended by striking out "of the Army, Navy, or Air Force, and as a part of the ration" and inserting in lieu thereof "(1) of the Army, Navy, Air Force, or Coast Guard, (2)" and by inserting before the period at the end of the first sentence of such subsection the following: ", and (3) of cadets and midshipmen at, and other personnel assigned to, the United States Merchant Marine Academy".

[H. R. 10324, 85th Cong., 2d sess.]

A BILL To extend and expand the special milk for children program for an additional two-year period, to extend the program of expanded milk in Veterans' Administration facilities and Armed Forces for an additional two-year period, and to extend the brucellosis eradication program for an additional two-year period, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the last sentence of section 201 (c) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446), is amended by striking out "two" and inserting in lieu thereof "four", by striking out "1958" and inserting in lieu thereof "1960", and by striking out "$75,000,000" and inserting in lieu thereof "$125,000,000".

SEC. 2. The first sentence of section 202 (a) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446a), is amended by striking out "1958" and inserting in lieu thereof "1960".

SEC. 3. The first sentence of section 202 (b) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446a), is amended by striking out "1958" and inserting in lieu thereof "1960" and adding after "Air Force" the following: "the Coast Guard, and the cadets and personnel of the United States Merchant Marine Academy".

SEC. 4. The first sentence of section 204 (e) of the Agricultural Act of 1954, as amended (7 U. S. C. 397), is amended by striking out the word "and" following "1956", and by inserting after "1958," the following: "and $20,000,000 for each of the fiscal years 1959 and 1960,".

[H. R. 10390, 85th Cong., 2d sess.]

A BILL To extend and expand the special milk for children program for an additional two-year period, to extend the program of expanded milk in Veterans' Administration facilities and Armed Forces for an additional two-year period, and to extend the brucellosis eradication program for an additional two-year period, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the last sentence of section 201 (c) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446), is amended by striking out "two" and inserting in lieu thereof the word "four", by striking out "1958" and inserting in lieu thereof "1960", by striking out "$75,000,000, and inserting in lieu thereof "$250,000,000", and by striking out "increase" and inserting in lieu thereof the word "finance".

SEC. 2. The first sentence of section 202 (a) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446a and 70 Stat. 86), is amended by striking out "1958" and inserting in lieu thereof "1960".

SEC. 3. The first sentence of section 202 (b) of the Agricultural Act of 1949, as amended (7 U. S. C. 1446a and 70 Stat. 87), is amended by striking out "1958" and inserting in lieu thereof “1960” and adding after “Air Force" the following: "Coast Guard and the cadets and personnel of the United States Merchant Marine Academy."

SEC. 4. The first sentence of section 204 (e) of the Agricultural Act of 1954, as amended (70 Stat. 86), is amended by striking the word "and" following "1956" and inserting after "1958" the following: "and $20,000,000 for each of the fiscal years 1959 and 1960,".

Mr. ABERNETHY. I believe the first witness to be heard is Mr. Davis, who is testifying for the Department.

You may come forward.

May I add that there are numerous bills on the various subjects before the committee, by Mr. Johnson, Mr. Laird, Mr. Andresen, Mr. Anfuso, Mrs. Knutson, and possibly others that I do not have before me just now, and it is not necessarily the desire of the committee that testimony be directed to any particular bill, but to the subject, and with the understanding, of course, that the committee may consider some of the particular bills subsequently.

All right, Mr. Davis. We are glad to have you.

STATEMENT OF HOWARD P. DAVIS, DEPUTY DIRECTOR, FOOD DISTRIBUTION DIVISION, AMS, ACCOMPANIED BY MARTIN D. GARBER, DIRECTOR, FOOD DISTRIBUTION DIVISION, AMS; NATHAN KOENIG, SPECIAL ASSISTANT TO THE ADMINISTRATOR, AMS; AND ISABELLE M. KELLEY, FOOD DISTRIBUTION DIVISION, AMS, UNITED STATES DEPARTMENT OF AGRICULTURE Mr. DAVIS. We have a prepared statement that I would like to read and then following, or during it, if you wish, we would be glad to answer any questions that the committee might care to raise.

We are pleased to be here today to report on the operations of the special milk program and to discuss the extension of this program beyond June 30, 1958.

In his special message to the Congress on January 16, 1958, the President recommended the extension of the special milk program as one part of a comprehensive farm food and fiber program for agriculture. At least nine bills to extend the special milk program beyond. 1958 have been introduced by Members of the House.

The special milk program was originally authorized for a 2-year period as part of the revised and broadened dairy price-support program in the Agricultural Act of 1954. It was subsequently extended for another 2-year period-through fiscal year 1958-and the au

thorized use of CCC funds was increased from the original level of $50 million annually to $60 million for 1956 and to $75 million for 1957 and 1958.

The program was also broadened to include summer camps and child-care institutions-first on a limited basis and, subsequently, to all nonprofit camps and child-care institutions. Last summer was the first full season of operations in camps.

We are here today to support another 2-year extension of the special milk program because we believe it has made a very outstanding contribution to its basic purposes.

First, it has made it possible for many more children to drink more adequate quantities of milk. Second, it has very substantially contributed to the effective operation of the dairy price-support program. CCC expenditures under this program are resulting in a market for milk in fluid form which, otherwise, CCC would be acquiring under the price-support program in the form of manufactured dairy prod

ucts.

The special milk program is now operating in all of the 48 States, the District of Columbia, and in Alaska and Hawaii. CCC expenditures under the program totaled $61 million in 1957, an increase of $15 million over the 1956 expenditure of $46 million.

Mr. ABERNETHY. Is that fiscal or annual?

Mr. DAVIS. That is fiscal.

Last year, over 71,000 schools, camps, and institutions participated. Schools, of course, represent the bulk of the participation. Last summer, 2,200 camps were in the program and we had some 600 institutions, such as orphanages, child-care centers, and neighborhood houses. A total of 1.8 billion half pints of milk were consumed by children under the program last year, an increase of 400 million half pints, or more than 25 percent above consumption in the previous year. We estimate that in 1957, a total of 18 million children were drinking milk under the national school lunch and special milk programs.

Mr. JOHNSON. How much of this inccrease could be attributed to the legislation that I sponsored and that was signed by the President in 1957?

Mr. DAVIS. To camps and institutions?

Mr. JOHNSON. Yes.

Mr. DAVIS. From a survey that we conducted this past year on about 208 of these camps and institutions, we found that the average quantity of milk being consumed was somewhat less than 2 half pints a day, and that the increase above that in those surveyed camps was about 43 percent. Out of the total, I am trying as I talk to you, to do a little mental arithmetic-out of the total 400 million, I would assume then that the increase-that would be quite hard to figure, think we better try to get you that figure.

Mr. JOHNSON. I was wondering how much of that 400 million half pints increase last year could be attributed to that?

Mr. DAVIS. I would say this, it would probably be very small proportion, for this reason: there are 2.200 summer camps as against some almost 70,000 schools. The schools operate 9 months. The summer camps may be 9 weeks at the best. So that it would represent a rather small proportion of the total.

(The figures to be furnished are as follows:)

The special milk program was extended to summer camps and other childcare institutions in June 1956. Because of the time required to develop procedures, forms, and instructions for these new eligible groups, it was not possible to initiate the program in summer camps on any broad-scale basis for the fiscal year 1957. However, a total of 638 child-care institutions other than summer camps did enter the program during the fall and winter months of that fiscal year and it is estimated that approximately 15.5 million half pints of milk were consumed by these institutions under the program. For the current fiscal year, a total of 2,200 summer camps participated as well as 850 other child-care institutions, It is estimated that for the two groups together milk consumption will be approximately 40 million half pints for the 1958 fiscal year.

Mr. DAVIS. We expect a larger special milk program both in schools and institutions this year. School enrollments are increasing and, each year, more schools are coming into the program. However, it has been difficult to establish any firm trends this year, because school participation has been affected by the Asian flu epidemic and, more recently, by the unusually severe winter in many areas of the country. Our preliminary reports show an expenditure of almost $28 million through December of this fiscal year. On this basis, our latest estimate of expenditures for the full year is around $68 million.

I believe in our school lunch budget material that was submitted at an earlier date we carry a figure of $70 million. We would feel that at this time that that perhaps should be revised slightly downward to around $68 million.

Members of this subcommittee will recall that following the first year of operations when results were less than had been expected— the program for schools was modified. Originally, each school was assigned a consumption base, representing the amount of milk served to children during a typical month of the preceding school year. Each month, participating schools were reimbursed for milk served over and above the consumption base.

Schools in the national school-lunch program received 4 cents per half pint for the additional milk; other schools received 3 cents. While they received reimbursement only for additional milk, it was intended that the reimbursement received should be used to reduce the price of all the milk they served. Obviously, we could not expect a school to charge previous customers 6 or 7 cents for milk while offering it for 2 or 3 cents to other children in the school, providing of course in the first instance we could identify the children that had been drinking milk previously.

Operating experience clearly indicated, however, that the method of reimbursement used under the first year's program was not achieving the desired results. In many schools previously selling milk-but with a real potential for increased consumption-the payments received for the additional milk did not cover the losses they incurred in selling milk below cost to all of the children, and they had no other source of funds to cover such costs.

On the other hand, some schools found their reimbursement payment to be more than enough to cover the price reductions they had inaugurated.

Further, in addition to the usual problems encountered in determining an historical consumption base for each school, the opening of new schools, the consolidation of others, and changes in pupil en

rollments, all offered additional complications as the program moved into its second year.

This situation was especially disturbing to the Department because a series of experimental studies, undertaken by 17 States that first year, showed that price reductions were an essential first step in a school's effort to increase milk consumption. This, plus making milk more readily available to children, appeared to be the key factor.

After consultation with school officials and the dairy industry, modifications were made for the 1956 school year. Since that time, reimbursement has been made on all separate servings of milk, that is, on all milk except the half pint served as part of a type A or B lunch under the national school lunch program. No reimbursement, of course, is made for the milk consumed by adults.

We retained the same maximum rates-4 cents for schools in the national school lunch program; 3 cents for others.

Mr. ABERNETHY. What do you mean, "the others"?

Mr. DAVIS. Those schools that were not participating in the national school lunch program.

The rate any individual school receives, however, it determined by the amount by which it reduced its selling price below its cost and the expenses it incurs in operating or expanding its milk service. (In most schools, these expenses are 1 cent or less per half pint.) This method of reimbursement provides the school with advance assurance that the reimbursement payments will cover the financial losses incurred because of price reductions.

In providing for partial reimbursement for all milk served to children outside the regular type A or B lunch, the Department recognized that payments would be made to reduce the price of some milk that might otherwise be consumed. We felt this was clearly in line with the intent of Congress in providing funds for use in increasing the then-current level of school milk consumption.

In 1955, for example, about 325 million type C lunches-that lunch consists of milk-the milk-only lunch-were served under the national school lunch program, with an average Federal reimbursement payment of 1 cent per half pint. This type C service was shifted to the special milk program where a larger price reduction could be financed as a means of further increasing milk consumption in schools with the type C program.

This action actually was a continuation of the trend toward a complete meal service under the school lunch program. Most States had already restricted or eliminated type C reimbursement in order to concentrate available funds on the type A or B meal, which, of course, also includes milk. In fact, despite the shifting of type C lunches, milk consumption under the national school lunch program is now larger than it was in the year just prior to the start of the special milk program. Last year, a total of 1.8 billion half pints of milk was consumed under the school lunch program compared with 1.6 billion half pints

in 1954.

In 1954 that included the type C program. These modifications have previously been reported to you at hearings on special milk legislation as well as in a letter from the Acting Secretary dated August 28, 1956. Nevertheless, I have gone into some detail today because questions have been raised concerning this latter aspect of the modifications.