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If you have other suggestions along that line we will be delighted to receive them from you.

It seems from your testimony that the cost of the new amendments to this second level of funding will be $750 million without any funds for the hold-harmless provisions.

Is that correct?

Mr. BELL. Approximately $608 million, Mr. Chairman.

Chairman PERKINS. If so, as you admit, did you use the latest available data to arrive at that cost?

Mr. BELL. Yes, we did. We used the best that we have. We would still be operating on estimates. But of course the program has a long history. So we think the estimates are fairly good.

Chairman PERKINS. Will the costs be higher when you receive later data or less?

Mr. BELL. Would you comment on that, Mr. Stormer?

Mr. STORMER. I would think the costs would be approximately the same, slightly higher.

Chairman PERKINS. Could you tell us, give us your best estimate of the cost of the hold-harmless provisions?

Mr. STORMER. I am not prepared to give that figure at the present time.

Chairman PERKINS. Will you get that for the record? Supply it for the record?

I notice in your budget estimate I have your sheet before me herefor fiscal 1975 the allowance was the same as the $636,016,000 and for 1974 it was $593,416,000.

Am I correct in those figures?

Mr. BELL. The latter figure I believe we have $574,416,000, if I am following you. That is after a 5-percent reduction, Mr. Chairman. Chairman PERKINS. I know there is some injustice in this program which we first authorized in 1949 and again in 1958, but I have witnessed over a period of years the tremendous good it has done throughout the country.

We have all these problems now of inadequacy of funding of all school programs at the local levels, and the Government, in my judg ment, is just not in a position to drag the rug out from under these local education districts.

Some are wealthier than others and may be able to withstand the absorption. But to do so would not, in my judgment, hold up in the Congress.

I think that we need the most constructive suggestions that we can get from your Department because I do not anticipate the Congress, or this committee. being in a mood to cut back this program in view of the conditions of the local schools throughout the whole country. You have proposed to spend only about $200 million, if I read you correctly, for the next year in the area of impact aid. Am I correct? Mr. BELL. Approximately $256 million, Mr. Chairman.

Chairman PERKINS. I am sure you would agree with me that that proposal is a dead duck.

Mr. BELL. As far as its possibilities are concerned. I might point out, Mr. Chairman, for the record that there are 1.246 districts that get less than 1 percent of their total current expenditures out of impact aid.

There are another 1,142 that get less than 110 percent.

So a huge number of that total get a small amount of their total budgets in that regard, Mr. Chairman.

Mr. FORD. Will the chairman let me comment on that point?
Chairman PERKINS. I will turn it over to you.

Let me state that I have been most interested in the testimony and thank you for coming, all of you.

I want the other witnesses to know that I have another hearing to attend this morning.

There are some people from my area testifying today on black lung legislation which is being considered by Congressman Dent's subcommittee.

I will come back to this hearing as soon as possible, but in the meantime Congressman Ford will carry on here.

This is a program that all of us are tremendously interested in.

I don't think this is going to be a year in which we are going to permit a cutback in our education programs, a year in which they should be expanded.


Mr. Quie, do you have a question?

Mr. QUIE. Thank you, Mr. Chairman.

I would like to go a little bit further, Commissioner Bell, to the bottom of page 2 of your statement where you say "If such disparity was no greater than 20 percent" then the State qualifies.

Is that going to be absolute? If a State has a disparity greater than 20 percent they are not going to be considered?

Mr. BELL. Yes, Mr. Quie. We have worked with experts on this, some highly respected statisticians.

I want to emphasize that our thinking is tentative. We want to strive to determine what the intent was of Congress. The comments I am making I want to couch in those terms.

So we are open and we will be responsive to what we get from this hearing and from other hearings on this.

But the first thing we would do is eliminate the far-out districts. Statisticians have told us that the top 5 percent and the bottom 5 percent in a list of districts listing them from the highest expenditure per pupil to the lowest include a number of school systems that for several reasons may be very extreme, expenditures particularly in a number of nonoperating districts in almost all of the States and then small rural districts that have enormously high costs in many instances and a few students.

The data that we have convinces us in our regulations that if we would eliminate this extreme top 5 and extreme bottom 5 percent then we could apply the 20 percent quite strictly.

The one provision that we are still wrestling with in the law has to do with a provision that we think is a good one in school equalization which recognizes effort and if a school district by a vote of the people wants to levy more than the required levy and have a richer program and if equalization continues on this basis in that instance they may not fall strictly within the mathematical calculation.

That is why we have provision in here that we would weigh such exceptions on their merit.

But our intent was to provide equalization. The trigger would be if the equalization didn't exceed 20 percent of expenditures.

I mention that point because it takes cognizance of what experts. in school finance call power equalization. That is continual equalization that recognizes an effort of the school system to have a richer program and by levying additional levies.

In a poor district then such a prgram would get enough equalization so they can match a wealthy district if the local people want to make the same effort.

I don't know if I am coming across on that point. But that is the one exception to the 20 percent which by applying that principle would be in the realm of 20 percent if effort and equalization for effort were recognized.

Mr. QUIE. Let me see if I understand it then.

The initial 20 percent you look at the lack of disparity or disparity between the 5th percential and the 95th percentile?

Mr. BELL. That is right, sir.

Mr. QUIE. You recognize that there can be some peculiar situations at each end of the 5 percent.

Mr. BELL. Yes.

Mr. QUIE. And between the 95th and 5th percentile if a school district should by a vote of its own citizens go beyond that equalization program that was set by the State, then that would not be counted in the 20 percent?

Mr. BELL. It would not if—and this is a big if-if the State would continue to equalize so that a poor district that wanted to make the same effort as a wealthy district could continue to stay within 20 percent of the wealthy district through the equalization formula, that is the additional levy.

So actually we would stay within the bounds of the strict 20 percent rule.

Mr. QUIE. That would bother me because you can't equalize forever. You equalize to an adequate education.

Take for instance in Minnesota where we have the State equalization where 70 percent of the money comes from the State. It got a little higher. Then there was a levy limit placed on each school district. They are only allowed to go up to that amount in order that the equalization would work.

However when they hold election for the school board they also hold a bond issue. If they want to increase the tax level set by the State they are permitted to do it.

If I understand the law correctly that additional amount does not have to be equalized with another district who happens to vote for an increase as well.

Mr. BELL. Our view is that that would perpetuate inequities. There is very little incentive for a poor district to vote a tax levy if they would get a very insignificant amount of money for it.

That has been our position up to this point. I want to emphasize again that we are still open on this.

But it has been our position up to this point that we would like to see what the school finance experts call power equalization still apply.

The other alternative of course-we are still weighing this-is to hold to a strict 20 percent, period, which of course would be administratively more simple for us.

Mr. QUIE. It is still enough to get a successful vote to go above the limit anyway where you have an election for increasing your taxes and at the same time there is a school board election, that is tough enough.

Mr. BELL. Right.

Mr. QUIE. But if you then aren't able to secure the money that you voted but it has to be shared with other school districts then it seems to me you foreclose any school from increasing above the limit.

It seems to me if the State sets an equalization up to a certain amount they want all the school districts to achieve, I don't see anything wrong for a school district that happens to have a little bit more money, because the people have more wealth in that school district, to go beyond that if they want to.

Why stop at the State? Why not make every State equalize with the rest of the Nation?

Why stop at the Nation? Why not equalize everybody in the whole world and see if there are any people in outer space that ought to be equalized with?

Mr. BELL. In our view there is very little incentive to a poor district that may only raise $5 or $10 a child. There are such districts. There is little incentive for them to hold a tax levy election if there isn't State aid.

Now, it wouldn't be our intention to see the wealthy district on that level share their property tax moneys with the poor district.

We see that as a continued aid program applying the power equalization effect. Everything we can learn from the studies and the best recent literature on school finance would indicate that if there is an incentive for a district to make a greater effort the incentive ought to be worth it so by making that effort the poor can come within some distance of the wealthy.

I have had experience as a local school superintendent in three States. I have observed those with an election provision. There are just very few who care to make the additional effort.

Mr. QUIE. It seems to me in Minnesota we permit the poor to come up within some distance. They come up equal with the total program and very few have availed themselves of that one opportunity.

But if you go beyond that and require the poor to share everything with everyone else then I don't think we will ever achieve anything but mediocrity.

I welcome what has been written on education. But I just think we are going to end up with mediocrity and there won't be any lighthouse district, nobody venturing out into a more expensive program, because they have to equalize it with everyone else. Education is going to suffer because of that.

I know this is just with impact aid. But it is part of the whole pattern. We are trying to get equality of results instead of equality of opportunity.

Mr. BELL. I think I would say the fact that it is just impact aid, it expresses a philosophy and a point of view. It is a very significant move, notwithstanding the fact that it just relates to impact aid.

I agree that we need to have lighthouse districts. I don't think we serve education when we level them all down to the same level.

It is because of that that we talk about the 20-percent provision. It would be my argument that a wealthy district or another district. that had a high commitment to education and wanted to make a greater effort, that if they can go 20 percent above the others then that gives them an enormous leverage in a thousand-dollar-student level of support. That would give them an extra $200 per child, which I think gives them a lot of money to be lighthouse systems.

Mr. QUIE. May I interrupt you? I may be misunderstanding. The differential that you have, the 20 percent, if it is like we talk on redistricting that means if you are 10 percent above the median and 10 percent below that means they can take 20 percent above the poorest and they are only allowed 10 percent above the median. Or are you talking about 20 percent above and 20 percent below, making it 40 percent?

Mr. BELL. No; that would just be a 20-percent range

Mr. QUIE. Does that mean he is only allowed to go 10 percent over the median ?

Mr. BELL. There would still be the opportunity for districts that wanted to make the additional effort, to have 20 percent more money by additional effort, more effort than the others.

Mr. QUIE. 20 percent from the other extreme.

Mr. BELL. Yes.

Mr. QUIE. From the average?

Mr. BELL. No. Over the total range of the 5th to the 95th percentile. Mr. FORD. Will the gentleman yield?

Mr. QUIE. I yield.

Mr. FORD. Commissioner, I am confused by the answer you have just given to Mr. Quie.

Looking at page 2 of your statement, I think it has caught everybody's attention because it seems to fly in the face of what our intention was in putting this into law.

You say "If such disparity was no greater than 20 percent then the program would be deemed to qualify for the exception and SAFA payments could be taken into account for the affected districts but only in the proportion allowed by the statute" and also "Under our current thinking a State aid program would be evaluated under section 5(d) (3) in terms of a basic standard which would measure the degree of disparity in revenue or expenditure per pupil among local educational agencies in the State."

That seems to be saying that if a state is not expending 20 percent more then they automatically qualify.

Mr. BELL. Yes; Mr. Ford. The thing that my testimony failed to say is that we would first of all take out the two extreme 5 percents, the top 5 percent and the bottom 5 percent.

The formula that we are now talking about, let me emphasize again, this is to avoid the great statistical swings that we found by looking at the data, we are still open on this.

In calculating who would qualify for the impact aid to fall into the state coffers we would take out the top 5-percent expenditure districts and the bottom 5 percent in expenditures.

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