The expenditures during the year were $801,209.77 less than in the preceding year.  This reduction is to be attributed mainly to the operation of the law passed June 17, 1878, changing the compensation of postmasters from a commission on the value of stamps sold to a commission on stamps canceled.

The amount drawn from the Treasury on appropriations, in addition to the revenues of the Department, was $3,031,454.96, being $2,276,197.86 less than in the preceding year.

The expenditures for the fiscal year ending June 30, 1881, are estimated at $39,920,900 and the receipts from all sources at $32,210,000, leaving a deficiency to be appropriated for out of the Treasury of $7,710,900.

The relations of the Department with railroad companies have been harmonized, notwithstanding the general reduction by Congress of their compensation by the appropriation for special facilities, and the railway post-office lines have been greatly extended, especially in the Southern States.  The interests of the Railway Mail Service and of the public would be greatly promoted and the expenditures could be more readily controlled by the classification of the employees of the Railway Mail Service as recommended by the Postmaster-General, the appropriation for salaries, with respect to which the maximum limit is already fixed by law, to be made in gross.

The Postmaster-General recommends an amendment of the law regulating the increase of compensation for increased service and increased speed on star routes, so as to enable him to advertise for proposals for such increased service and speed.  He also suggests the advantages to accrue to the commerce of the country from the enactment of a general law authorizing contracts with American-built steamers, carrying the American flag, for transporting the mail between ports of the United States and ports of the West Indies and South America, at a fixed maximum price per mile, the amount to be expended being regulated by annual appropriations, in like manner with the amount paid for the domestic star service.

The arrangement made by the Postmaster-General and the Secretary of the Treasury for the collection of duty upon books received in the mail from foreign countries has proved so satisfactory in its practical operation that the recommendation is now made that Congress shall extend the provisions of the act of March 3, 1879, under which this arrangement was made, so as to apply to all other dutiable articles received in the mails from foreign countries.

The reports of the Secretary of the Interior and of the Commissioner of Indian Affairs, setting forth the present state of our relations with the Indian tribes on our territory, the measures taken to advance their civilization and prosperity, and the progress already achieved by them, will be found of more than ordinary interest.  The general conduct of our Indian population has been so satisfactory that the occurrence of two disturbances, which resulted in bloodshed and destruction of property, is all the more to be lamented.