the issues for last year at present contract prices), $108,136.04. Allowing for an increase of 8 per cent. in the issues for the next over the present fiscal year would give $116,786.92 as the amount required for the manufacture of stamps for the ensuing year. I have placed the estimate, in even figures, at $116,700. This estimate is $21,053.47 less. than the expenditure for the fiscal year, and $57,300 less than the appropriation for the current fiscal year.

STAMPED ENVELOPES, NEWSPAPER WRAPPERS, AND LETTER SHEETS. While for several years past "letter sheets" (a letter sheet and envelope combined) have been included with the appropriation for stamped envelopes and newspaper wrappers, the Department has thus far failed to take advantage of the law authorizing the issue of such sheets, and the expenditure has accordingly been for the two former items only. The increase in the number of stamped envelopes and newspaper wrappers issued during the last over the previous fiscal year was less than 1 per cent., while the average annual increase for the past seven years was 8.7 per cent. The increase for the quarter ended September 30, 1885, was a little more than 3 per cent. over the corresponding quarter of 1884.

1

As previously stated, the present contract will expire on the 30th Se tember, 1886. Should the present condition of the paper market co tinue, a great reduction of prices may be expected. The present co tract was let more than three years ago, and since that time there his been a considerable falling off in the price of paper-stock. Moreover, I am satisfied, from a careful examination of the subject, that such a readjustment of the standards may be made as will tend still further to reduce the cost under the new contract. While I believe that the reduction will reach as much as 30 per cent., the more prudent and safer course for present objects is to allow for a lower rate. The estimate of appropriation will accordingly be based upon a reduction of only 20 per cent. in prices.

The expenditure for stamped envelopes and newspaper wrappers for the year ended June 30, 1885, was $626,165.56. Assuming an increase of 4 per cent. in the issues would give the cost for the present year at $651,212.18. Allowing for an increase of 12 per cent. for the next over the present fiscal year, would give the cost for the next year, at present contract prices, at $729,357.64. Reducing this amount by 20 per cent., to correspond with the estimated reduction in prices, would leave the estimated amount required at $583,486.11, which may be placed in even figures at $583,500. This estimate is $42,665.56 less than the expenditure for the last fiscal year, and $161,500 less than the appropriation for the current fiscal year. It will be noticed that the deduction of 20 per cent. in prices has been made on the estimated issues for the entire year, although the present contract runs for onequarter of the year; but it is to be observed that the requisitions for that quarter should be largely curtailed, with the view of exhausting the stock in post-offices anterior to the expected reduction of prices. to the public. The allowance of an increase of 12 per cent. in the issues for the next year, while somewhat above the average of the past several years, is not unreasonable, considering the enhanced sales that may be expected to follow a reduction of prices.

POSTAL CARDS.

Postal cards were first introduced under the act of June 8, 1872, the issue beginning on the 1st May, 1873, and amounting, for the months

of May and June of that year, to 31,094,000 cards. The number of cards issued during the year ended June 30, 1874, was 91,079,000, and for the succeeding year (1875), 107,616,000, an increase of 16,537,000, or 18.15 per cent. The increase for the year ended June 30, 1876, over the pre. ceding year was at the rate of 40 per cent.; for 1877 over 1876, 12.73 per cent.; for 1878 over 1877, 18 per cent.; for 1879 over 1878, 10.55 per cent.; for 1880 over 1879, 22.80 per cent.; for 1881 over 1880, 13.20 per cent.; for 1882 over 1881, 13.90 per cent.; and for 1883 over 1882, 7.97 per cent. The average annual rate of increase for the nine years to June 30, 1883, was 17.47 per cent., and the issues for the year ended on that date amounted to 379,516,750 cards. Since then, however, there has been a steady reduction; the issue for the year ended June 30, 1884, amounting to only 362,876,750, a decrease of 16,640,000, or 4.38 per cent., and for the year ended June 30, 1885, to 339,416,500 cards, a decrease of 23,460,250, or 6.46 per cent. This decrease was due in part to the depression in business, but very much more largely to the reduction on the 1st of October, 1883, in the letter rate of postage to 2 cents, leading to the substitution, to a considerable extent, of sealed letters and printed matter for written postal cards and unsealed circulars. It is probable, however, that sufficient time has elapsed for the public to become fully informed of the advantages of sealed matter over postal cards, and that the demand for the latter has reached a minimum. If so, the issue of cards must be expected to increase in the future; and, indeed, the present revival of business may lead to a large augmentation for the purposes of trade. It is deemed prudent, therefore, to estimate for an increase of 4 per cent. for the present over the last fiscal year, and for an increase of 12 per cent. for the next over the present year. At these rates the cards issued for the year ending June 30, 1886, would amount to 352,993,160, costing at the present contract price $168,413.04, and for the year ending June 30, 1887, to 395,352,339 cards, costing $188,622.60. The estimate is placed in an even amount at $188,600. This amount is $3,899.13 more than the expenditure for the last fiscal year, and $50,400 less than the appropriation for the current year.

REGISTERED-PACKAGE, TAG, OFFICAL, AND DEAD-LETTER ENVELOPES,

The cost of registered package, tag, official, and dead-letter envelopes for the last fiscal year was $90,097.26; but this expenditure affords no clew to the needs of the service, inasmuch as on the one hand there was an exceedingly unfavorable contract during the greater portion of the year, and, on the other hand, because of the excessive prices the issues were largely curtailed with the effect of reducing the stock in postoffices. The circumstances of the late contract will be referred to somewhat fully in my forthcoming annual report, to which a copy of this letter will be appended, and they are detailed still more at length in Ex. Doc. No. 264, House of Representatives, second session Forty-eighth Congress. It will be sufficient here to say that this office was not responsible for the contract.

The present contract was awarded on the basis of the number of envelopes issued for the year ended March 31, 1885, amounting, at the lowest bid offered and accepted, to $55,667.80, a reduction of $42,437.25, as compared to the cost of like numbers of envelopes at the prices in the late contract.

This amount, however, does not fully represent the real saving by

the new contract, the issues of the year upon which the award was made having, as already explained, been reduced in consequence of excessive prices. The cost of envelopes issued for the quarter ended September 30, 1885, under the new contract, was $15,858.71, while the cost of like numbers at the prices in the late contract would amount to $29,148.85. At this rate the expenditure for the present fiscal year would amount to $63,434.84, and the saving under the present contract to $53,160.56, or 45.5 per cent., as compared to the late contract. Unless there should be an unfavorable change in the paper market, there is no reason to anticipate an increase of prices, though no appreciable reduction is at all probable under a new contract for the forthcoming year. Allowing for an increase of 6 per cent. upon the estimated cost of envelopes for the present year, to represent a probable increase in the quantities needed, would give $67,240.93 as the amount of the appropriation required for the next fiscal year. The estimate is placed in even figures at $67,200. This amount is $22,897.26 less than the expenditure for the last fiscal year, and $72,800 less than the appropriation for the current fiscal year.

POSTAGE-STAMP, STAMPED-ENVELOPE, AND POSTAL-CARD AGENCIES.

The estimates for the several agencies for the inspection and distribution of postage-stamps, stamped envelopes, and postal cards are placed at the same amounts ($8,100, $16,000, and $7,300, respectively) as the appropriations for the current fiscal year. Indeed, there has been no increase in the appropriation for the postage stamp and stampedenvelope agencies since the 1st July, 1878, and none in the postal-card agency since the 1st July, 1879. The expenditure for the postage stamp agency during the last fiscal year was $5,745.86; for the stamped-envelope agency, $15,886.10; and for the postal card agency, $7,005.82. The large unexpended balance of $2,354.14 in the postage stamp agency was due to the fact that the position of agent in charge was allowed to go unfilled for the greater portion of the year, the duties having been performed in the interim by the principal clerk. The unexpended balance in the stamped envelope agency was $113.90, and in the postal-card agency $294.18.

SHIP, STEAMBOAT, AND WAY LETTERS.

By law (sections 3913, 3976, 3977, 3978, Revised Statutes), this appropriation is necessary for the payment to masters or owners of vessels, not regularly engaged in the transportation of the mails, for letters brought and delivered to post offices on arrival in port for transmission to destination. The parties receiving the letters are required to pay, in addition to the regular postage, the amount paid to said master or owner, which amounts are consequently refunded to the Department. The estimate for this purpose is placed at the same amount ($2,000) as the appropriation for the present fiscal year. The expenditure for the last fiscal year was $1,801.11.

ENGRAVING, PRINTING, AND BINDING DRAFTS AND WARRANTS.

This appropriation is for the purchase of drafts and warrants used for payments to creditors, transfers of funds to and from postmasters, and collections of balances due the Department. The drafts and

warrants are prepared and furnished by the Bureau of Engraving and Printing of the Treasury Department, and the expenditure on this account for the last fiscal year was $2,081.22. The appropriation for the present fiscal year is $2,000, and the estimate for the next year is placed at the same amount.

MISCELLANEOUS.

The estimate for miscellaneous expenditures is left at the same amount ($1,000) as the appropriation for the present fiscal year. The amount expended under this head during the last fiscal year was $901.48, the items appearing in detail in the report of the Auditor. A large share of the expenditure was in connection with the late contract for official envelopes, and this office was not responsible for incurring it. The amount paid F. B. Conger, postmaster at Washington, was for postagestamps to prepay official correspondence of the Department to foreign countries under article 8 of the convention of the Universal Postal Union, the stock of stamps on hand and purchased out of the appropriation for that purpose having been unwittingly destroyed by direction of the person in whose custody they had been placed. The miscellaneous expenditures for the year ended June 30, 1884, were $201.05; for the year ended June 30, 1883, $228; and for the year ended June 30, 1882, $292.22, the appropriation having been $1,000 in each case.

RECAPITULATION.

The decrease of the estimates for the next fiscal year from the expenditures for the last fiscal year is shown by the following table:

Comparative statement of expenditures for year ended June 30, 1885, and estimates of appropriations for year ending June 30, 1887.

The decrease of the estimates for the next fiscal year from the ap propriations for the present fiscal year will appear in the following: Comparative statement of appropriations for year ended June 30, 1886, and estimates of appropriations for year ending June 30, 1887.

It will be observed that the estimates for the year ending June 30, 1887, are $79,738.75, or 7.4 per cent., less than the actual expenditures for the year ended June 30, 1885, notwithstanding that there is a con templated increase of 13.8 per cent. in the number of the various articles of postal supplies. The estimates are also $342,000, or 25.6 per cent., less than the appropriations for the current year, founded upon estimates made a year since. The appropriations are now shown to be much in excess of actual requirements, for two reasons: First, because of the unexpectedly large reductions in the new contract prices of supplies; and, second, because the issues have failed to show the increase that was anticipated. Under the present estimates the expenditures for the year are approximated at $1,027,596.10, which would leave an unexpended balance of $306,803.90, or 22.9 per cent., of the appropriations. The estimated expenditures for the next fiscal year are $992,400, or 3.4 per cent., less than the present estimate of expenditures for the current fiscal year.

SAVING BY NEW CONTRACTS.

Attention has been called to the reductions effected by the contracts recently entered into for the manufacture of postage-stamps, postal cards, registered package, tag, official, and dead-letter envelopes. The saving for the present fiscal year by the new contracts will appear in the following:

Comparative statement of cost at late and present contract prices of the estimated issues of postage stamps, postal cards, and registered-package, registered-tag, official, and dead-letter envelopes, for year ended June 30, 1886.