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Then for the rest of them our test for disparity would be that in the rest of them there would be no greater range than 20 percent in the current expenditures between the highest and the lowest after removing those.

Mr. FORD. I don't think your top 5 or bottom 5 helps any. It exacerbates the situation in those States that have a single large city. In California, Los Angeles, you count that as one district. If you

take 5 percent you would find all the big cities in that State. You would have more than half the kids in your 5 percent. You aren't counting 5 percent of the children who are receiving education on a funding level. You are counting 5 percent of the districts in which those children attend school.

Without looking at it, my hunch is that that would be just a terrible disparity in a State such as mine where a third of the children in school are in one corner of the State, and all 5 percent of the districts would be in the area.

Mr. BELL. We have found that the big urban districts are not the ones that are the high expenditures. I think if you looked at the data and if you took a 20-percent range without taking these far extremes out you could see what a problem it is.

There are some small districts that justifiably have to spend more because of their size. We have talked to the most authoritative sources we can on this. We have consuted with the best studies we can reach.

We seriously believe that by making this calculation if we don't eliminate those enormous extremes that we will run into difficulties.

Even by doing that our estimate now is that maybe three or four States may qualify.

So we are applying what we think was the intent of the Congress, that there be a high standard. Maybe another member here of my staff could discuss this 5 percent. Maybe I am not doing a good job in describing this to you. Maybe he could explain the necessity for it.

Mr. Ford. The basic problem that arises with your statement is that you would adopt a standard and say, “This is what equalization is."

I am sorry that Mr. Meeds is not here because this is his amendment. He and I worked on this at great length, both here in the committee and in conference committee.

We finally ended up putting language in the report which we hoped would head off this kind of formula, saying that you would examine on a case-by-case basis and develop criteria as you went along that would enable you as a Commissioner to determine that in fact that State was equalizing its effort.

We didn't care whether it was 5 or 10 percent or what it was. But it had to be a genuine equalization.

We contemplated at the time that this legislation was written that it wouldn't be more than two or three States as they are now distributing the money that have been qualified.

The rationale for putting this provision in there was that it was a laudable public purpose to encourage other States to accelerate their efforts to amply Serrano versus Priest by equalizing.

Again, that is not a burden that the impact aid should hear by itself. But this is the first place that we did it.

What you are suggesting here is trying to look at the whole country and come up with an advance rule of equalization.

I just would like to see the rationale or a person explain how they believe, with the disparity we have in schoo distribution formulas in the 50 States, that could be done.

We could not, working months with this, get anybody from your Department, from any of the educational agencies, any of the members themselves, to come up with an idea of how you would do it.

So we really threw to you a very subjective type of job. It looks to me like you tried to make it objective, not subjective, at the expense of carrying out the intent.

Mr. BELL. We read the statute as requiring a standard and that it not be done on a judgmental case-by-case basis without standards and without a definite definition of what we mean by "equalization."

We have spent a lot of time on this. We have talked to a large number of staff members on the hill and a lot of time out in the field.

I would suggest, Mr. Ford, that to do this on a subjective basis without any standard means of application of it would be extremely difficult.

We think we have to start with a definition of what "equalization" is.

Mr. Ford. I think you are correct that there would be a legal question, I believe, if we didn't start out with a basic standard or parameters within which you were going to make your decision.

But if you go back to the report of the conferees, you will find that having set out these parameters within which you will operate and make your decision, we said at page 163 of that report :

It is the intention of the conferees that the provision concerning the proportion of funds to be equalized must be implemented on a case-by-case basis, school district by school district, and not on the basis of a general rule to be applied through a State.

That again was because of the deep concern we had about the concentrations of large numbers of people in our city school districts versus rural areas in the State.

We did not want you to say that a man standing with a foot in a bucket of water and a foot on a hot stove was freezing and burning at the same time or the

average he was comfortable. That is what happens when you go State by State and have a big city like Detroit or Los Angeles inside of that State.

Mr. BELL. Mr. Ford, I am informed by my colleagues here that the part you just quoted is the part that is to apply after this is done and not the means of determining who qualifies or who doesn't.

I want to point out again, based on our tentative data, that there would only be three or at the very most four States who qualified. We thought that was the intent.

Our efforts to try to learn the intent of the Congress led us to feel that we had a good expression of the intent.

I should say, sir, that what I am hearing vou say

Mr. Forn. Let me defer to you in this way, Mr. Commissioner. I want to work with you, as members of my committee do.

You mentioned that you have some data that you used to develop the criteria that would indicate the wisdom of stopping at the point where you stop. We don't have that available. Perhaps if you could make that available to us to look at before we finish considering this matter we would be thinking with the same facts before us.

that on

Mr. BELL. The thing I have to be careful about is, I don't want to convey the impression here that we have made up our mind and we are totally committed to a procedure. It is far from that.

We are approaching this with a teachable attitude in that regard. I would like to call on Charlie Cooke to make a point.

Mr. CookE. Mr. Ford, if I might make one point, as far as I know there are no urban aeras, large urban areas, in any State that come under either the 5-percent limitation, top or bottom. They are all in that 90 percent that would be considered within the disparity framework.

I don't think what you are concerned about, if I understand your concern, will be affected by this 20-percent disparity issue.

The problem is as I understand the law I don't think we cannot have a national standard. We have to have something to work from.

I think also, as the Commissioner has said earlier, we do have a waiver provision in there which when they come close to a 20 percent they will be seriously considered as qualifying.

But again we have to watch out because the intent of Congress also seems to be clear that they want a very narrow strict definition for what equalization is.

Mr. Ford. You may be able to solve our problem and we can examine the data.

At this time I will call on Mrs. Chisholm.
Mrs. CusHOLM. Thank you, Mr. Chairman.

Mr. Commissioner, since you propose revising the impact aid legislation in such a way that it would eliminate approximately 3,600 of the districts that are now eligible for impact aid funds, and you then go further and reduce the funding level to approximately two-thirds of the current level, what do you propose to do with all the rest of the funds?

Mr. BELL. You mean the funds remaining ?
Mrs. CHISHOLM. Yes.

Mr. BELL. We would propose that the Congress wouldn't appropriate that amount of money in view of the size of the deficit that is anticipated and the need for us to be economizing and cutting down on Federal expenditures.

This would be an expenditure that we could avoid making if the administration's recommendations were accepted.

Mrs. CMSHOLM. Pursuing that a little bit further, for example, the city of New York is eligible for only approximately $1 million in impact aid.

Under your proposal the city of New York would get nothing. Is that correct?

Mr. BELL. Yes.

Mrs. CHISHOLM. We do have approximately 71,000 public housing students living on tax-exempt property at a loss of more than $60 million a year to the city.

Is your plan equitable in view of the number of public housing children we have in New York?

Mr. BELL. The position that the administration has taken has not been, as I am sure vou know, to fund the public housing programs. The calculation that the administration has made is that the reason for this is that it is not justified on the basis of equity.

I might ask Mr. Stormer to discuss further the public housing, the position on this, if you would.

Mr. STORMER. Let me answer your first question with respect to whether New York would qualify under the proposal. The answer would be, "No." It would not.

As I understand your second question the children residing on lowrent housing would under the current authorization for 1976 would be taken care of in the first tier of funding, 25 percent, of whatever their entitlement happened to be. They would not be included in the second tier funding at all; only if moneys were available to fund beyond the second tier would the low-rent housing child come back into play for receiving some assistance.

Mr. BELL. Under the administration's proposal if this didn't result in losing 5 percent of their revenue they still would not qualify.

Mrs. CHISHOLM. I realize that impact aid is a very complicated and complex subject. But would one of you explain to me the equitability of this formula when you take into consideration the fact that Prince Georges County and Montgomery County and other very wealthy counties can acquire so much money for B category students and when, on the other hand, you have districts in this country where persons are living on tax-exempt property? This pertains particularly to the large cities which do not get any kind of tax benefits.

I just can't see the justification for the formula the way you are proposing it.

Mr. BELL. We have long felt that the formula was inequitable. I think

my

testimony pointed that out. Certainly the Battelle Institute study pointed that out.

Mrs. CHISHOLM. Thank you.
Do you wish to elaborate?

Mr. ALFORD. Mrs. Chisholm, I was going to comment that the normal arguments in the case of public housing have been that public housing is a local operation. The Federal Government does provide approximately two-thirds, I think, of the initial cost of building public housing. It is basically operated on the rental income from those units.

But it was always viewed as a local activity and therefore not a Federal responsibility in the sense of the Federal impact aid program.

There are various situations around the country in the case of taxexempt property which are not Federal.

For instance the State of Nerada has, or at least had a few years ago, its own impact aid law which provides essentially for the Carson City area. That is a State impact and a State exemption of property and State activities. So we view this as local.

Mrs. CHISHOLM. Thank you.
Mr. FORD. Are you finished ?
Mrs. CHISHOLM. Yes, I am.

Mr. Ford. Commissioner, your prepared testimony and response indicates you are very much impressed by the Battelle Report. It is one of the famous reports that everybody quotes like the Bible to sunport their own view.

I have heard views for and against this program year in and year out.

I would observe that the Battelle Report also savs that the Federal Government should provide assistance to school districts in federally impacted areas and should continue to.

The administration proposal flies in the face of the Battelle Report. Any proposal that excludes 3,600 out of 4,500 school districts is clearly not continuing a program of school assistance to federally impacted areas.

We also found that Battelle said that no formula which would be perfectly equitable could be devised.

I want to say “amen” to that because we have been trying to utilize it.

However, as imperfect as the formula was, it is obviously and on its face a fairer formula than yours because there just is no way that you can suggest that those numbers you propose are simply an adjustment of the formula on an equitable basis, because as Mrs. Chisholm has observed, she wants to know what you are going to do with all the money that is left over.

Battelle also came to the conclusion that the basic feature, when you get away from the arguments about very finite specifics of the current program, describing it as they were examining it at that time, there is no way in which you can take the sum of the conclusions of the Battelle Report and fairly interpret that to indicate that the Federal impact aid program has outlived its usefulness or should be truncated or terminated.

With all due respect, I can't help but observe that the proposal of the administration is making now.

I might observe that over the years, starting in with the Johnson administration, we have had absorption approaches on how to cut down the money,

We have had very little from this administration in the way of actual specific recommendations to change the formula and meet the complaints of inequity, windfall, and so on.

We have had a number of very dramatic suggestions in absorption that would not have the magnitude of the current proposal but the same kind of effect.

Back in the 90th Congress the first proposal that had my name on it as a member of this committee started out dealing with disaster aid for nonpublic institutions. It ended up being a vehicle for amendment.

The city of Detroit requested to change the 6-percent qualifying factor to 3 percent. Why didn't we do that? Because we discovered that we had large cities in this country that had thousands of Federal impact children for which they were receiving no compensation solely because when you take 20,000 impact kids and put them in a school district the size of Detroit or New York, on a percentage basis they don't look like much. But they still cost money, to educate those 20.000.

We find it very inconsistent to suggest that educating 20,000 or 30,000 or 40,000 Government children in New York was not as much a responsibility as educating 5,000 children in a school district with, sav, 120,000 children in it.

For that reason we made all the school districts qualify if they had 3 percent or at least 400 pupils. So that we again took care of the situation.

In a very small district it is possible that those go too far. But that was rejected with the idea of not even using that figure and coming up with absorption. We rejected it because, in attempting to

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