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[[underlined]] FINANCIAL REPORT [[/underlined]]

[[underlined]] FEDERAL FUNDS [[/underlined]]

Federal funds for operations and construction are summarized on Exhibit A. Highlights for both the current year, FY 1975, and for FY 1976 follow:

[[underlined]]OPERATIONS:[[/underlined]] Our original FY 75 appropriation at the beginning of this year did not provide for the federal wage and salary increase in October, nor for unanticipated increases in rent and utility costs (steam alone rose in November from #3.25 to $4.61/M.LB., retroactive to July 1974 -- an increase of $363,000). While not allowing for the estimated full amount of these cost increases, Office of Management and Budget is recommending approval of a supplemental appropriation of $2,967,000 for these purposes for this year; with Congressional approval this will raise our FY 75 Salaries & Expenses (operating purpose) appropriation to $70,706,000. The substantial increase over the previous year, in addition to protecting us against this and previous years' inflationary increases, is allowing the Institution to make steady progress in our Bicentennial programs, including preparation of exhibits for the new Air and Space Museum, and to continue correction of deficiencies in supporting services.

For FY 1976, OMB is allowing an operating (S&E) budget request of $79,408,000, an increase of $8,702,000 over FY 1975. This additional funding is for three important needs:

-- $2,454,000 for further increases in largely uncontrollable expenses: normal pay raises, higher utility costs, increased rental charges for GSA-provided space,