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The general feeling of the large city systems we have talked to is that the impact funds from public housing should have maximum flexibility in their use. This does not mean that funds should be put into a principal's "slush" fund, but that they should be used for a variety of purposes based upon the needs of the building site to which they have been allocated. What is not needed is highly restricted and specific regulations such as those governing Title I Funds. We must consider allowing each school district to submit to its State Department a spending plan to meet the specified needs of the school and the children to be served, and to reach concrete objectives. In Los Angeles or Detroit these funds might be used to provide a safe and decent learning environment for their children; in Minneapolis dollars might be used to serve children in a special reading program. The Congress in the Education Amendments of 1972 passed an Indian Education Act which, like the public housing impact, was an entitlement program with specified purposes. We would hope to have similar latitude in the operation of programs in public housing areas.

Mr. Chairman, the cities are pleased with this Committee's work last year in conference on the public housing provisions of impact aid. We feel that the compromises reached were fair. We have been pleased and grateful also with the Chairman's continued support of public housing funding in the past as documented in his testimony before the Labor-HEW Appropriations Subcommittee of the House in 1973 and 1974.

If there is any further information you or the Committee may need, or comments you would like to receive, please feel free to call on me or Dr. Lehne or upon Dr. Herschel Fort of the Detroit Public Schools for help. We will be working together on these particular provisions for the coming year. Once again, our thanks to you and the Committee.



SAMUEL B. HUSK, Executive Vice-President.



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Mr. Chairman, I appreciate the opportunity to present to this Committee some reactions and some concerns I have as to proposed regulations governing application of Section 5(d) (3) of P.L. 874.

As was emphasized over and over again last year, when P.L. 874 was amended to allow states to consider impact aid payments as local resources under certain conditions, Congress wants to encourage states to equalize education among their school districts. And, we want to assure states that have gone ahead and equalized educational finance that their systems will not be thrown off balance by a restrictive and inflexible impact aid law.

It is appropriate that impact aid monies be counted as local resources-which, essentially, they are-where a state has equalized educational expenditure to compensate for disparate local resources.

However, I am concerned that under the concepts presented thus far by HEW, states will be allowed to reduce their aid to local districts receiving impact aid monies despite wide disparity in tax bases and per pupil expenditures for education. HEW appears to have interpreted the language of 5(d) (3) broadly, with an intent to encourage states to move toward equalization. There are a number of ways in which states can come under the equalization umbrella, according to the proposals set forth in the HEW concept paper on this matter. It is my view that, in interpreting the 5(d) (3) language so broadly, HEW is not following the intent of Congress. What is needed is a tight interpretation which will allow states with complete equalization to take impact monies into consideration when computing state aid to education, but will not penalize impacted districts which rely on P.L. 874 funds to compensate for low tax bases and inability to raise enough money through mill levies.

In its concept paper, HEW has proposed a standard whereby a state may qualify under 5(d) (3) if there is no more than a 20 percentile difference in amount of revenue per pupil between districts, under the state's equalization formula. This standard is far too broad. It will allow states to capture, at state level, the funds that go to districts to compensate for the federal presence in those districts.

What I believe the Congress was trying to insure when this amendment to P.L. 874 passed last year was that these P.L. 874 funds not go through the states unless such states have formulas that attempt to equalize the total education program-not just maintenance and operation, and not just a minimum per pupil expenditure that allows wealthy districts to continue to enjoy a vastly superior educational program. Because of the many different equalization formulas employed by states, it was impossible to pass an amendment that defined “equalization" for purposes of the 5(d) (3) exemption. That task has been left to HEW. But the intent of Congress is clear. Only states with equlization formulas that take into account the total resources of a school district should be able to capture P.L. 874 funds at the state level.

A discussion of the Utah school equalization formula may be instructive in highlighting some of the particular problems of the approach set forth in the HEW concept paper. Utah is equalized with 28 mills for maintenance and operation, which guarantees a certain minimum expenditure per pupil and a minimum local tax rate. There is an additional 10 mill voted local leeway that is partially equalized. The remaining funds that go into the basic education program, the capital outlay program, and the voted leeway program are not equalized. Thus, there are serious disparities in expenditures per pupil from district to district, with the wealthier districts providing the highest per pupil expenditure. Districts with lower assessed valuations have to make a greater tax effort to generate enough money to educate their students, whereas in districts with greater assessed valuation, a more modest tax effort will generate sufficient funds. A 1 mill increase in the voted leeway raises anywhere from $3.32 per pupil in Davis County and $3.84 in Weber County (heavily impacted districts to $9.95 in Jordan and $11.55 in Salt Lake City. Impact Aid payments are not "gravy." They are necessary compensations for the lack of a property tax base and they comprise a critically important part of these school districts' budgets.

School superintendents from impacted districts have told me that to compensate for the loss of impact funds, impacted districts would have to levy anywhere

from two to nine mills. To impose such a burden on these districts was not, in my view, the intent of Congress in amending section 5(d) (2).

I would urge the Commissioner to promulgate regulations which will protect impacted school districts from loss of P.L. 874 monies where the state equalization program is not one which equalizes for the total educational program and does not reflect all of the resources available to a local district.


Rockville, Maryland, February 20, 1975.

Chairman, House Committee on Education and Labor,
U.S. House of Representatives, Washington, D.C.

DEAR REPRESENTATIVE PERKINS: On behalf of this school system I want to bring to your awareness the substantial adverse financial impact that the education amendments of 1974 will cause to taxpayers in this county. We are pleased that you have scheduled a special committee hearing on February 27 about the anticipated effect of this legislation on Impact Aid to school systems throughout the country. I request that this letter be made a matter of record at that hearing and also that, if additional hearings are scheduled to receive testimony beyond the limited number of speakers you can hear on February 27, we be permitted to present more detailed testimony.

Our understanding is that the special hearing is primarily to seek clarification from the Commissioner of Education and others in USOE about the guidelines which will be followed in the implementation of the education amendments of 1974. Because of some apparent confusion about this legislation and its effect on the Impact Aid Program, we believe this hearing will serve a very useful purpose.

In order to try to assess the financial impact in Maryland from the changes in the level of financial support under the Impact Aid Program, members of the superintendent's staff obtained pertinent data from several Maryland school systems. The data are predicated on a per-pupil amount of $832 which reflects the current level of payment plus a 10 per cent increase factor in the FY 1975 program. Attachment A summarizes the projected impact between the existing provisions in the program and those under Tier I and Tier II. It is readily apparent that these systems, which are typical of many school systems throughout the United States, would experience a devastating reduction in federal aid unless some changes are brought about. To illustrate the impact on this county, under Tier I we would lose about $6.5 million and under Tier II approximately $5.0 million. For the reasons described below, we view this reduction as most inequitable. The already heavily burdened taxpayers in the county very likely would need to make up the revenue loss through higher local taxes in the absence of any promise of a higher level of either state or federal aid.

A word about Impact Aid in this particular county may be helpful to you and other committee persons. Because of its comparative wealth, Montgomery County has been cited by federal officials as an unworthy recipient of Impact Aid. This is regrettable as one considers the plight of the taxpayers in this county in relation to: (1) the rather steady decline in the percentage of federal aid received, and (2) the removal from the tax rolls of federal property which, in turn, constitutes about 8 per cent of the value of all assessed property.

Attachment B summarizes by source the funding of operating budgets over the decade from FY 1966 through FY 1975. While the amount from federal sources (the bulk of which -$5.9 million-is from Impact Aid) has increased about $2.0 million over the period, the per cent has decreased from 6.7 to 3.0. The table also shows a significant decline (from 19.0 to 17.4 per cent) in state funding. The obvious result is that the county fiscal authorities have been required to fund the bulk of the added cost for education from local sources. It is significant that the local share has increased from about 68 per cent to nearly 74 per cent.

Impact Aid funds continue to be very helpful as budgets are funded. However, you and other federal legislators need to understand that as of July 1, 1974, the assessed value of all federal property in this county on a 50 per cent of market value level was $301,534,820. If the current $2.53 per $100 tax levy could be applied on this property, it would produce revenue of $7,636,369. Since the current

level of Impact Aid is only $5,873,080, it is obvious that local taxpayers must make up the loss factor. Stated another way, if this federal land was owned by commercial interests, the proceeds from real estate taxes would increase a net effect amount of about $1.8 million.

This information indicates beyond question that the Impact Aid proceeds to Montgomery are justified. The justice of the Impact Aid Program lies in the fact that most school costs are borne by the property tax paid on residential and commercial property. In Montgomery County a very large owner of commercial property is the federal government. Other employers pay property tax on their property and that money supports the schools. The federal government should accept this same fair responsibility where it owns large real property holdings. thus, it is only fair for the federal government to pay local property tax or in some other manner to do the equivalent-Public Law 874 is the vehicle for doing this.

The U.S. Office of Education has conducted two extensive studies of P.L. 874 and both have concluded the program should continue. The 1965 Stanford Study said in part: "Thus, we conclude that P.L. 874 is a defensible, though somewhat unusual, piece of federal legislation; that it is properly conceived in terms of relieving burdens imposed upon school districts that educated federal pupils . . ." The 1969 Battelle Study said in part: "The federal government should continue to provide a program of school assistance in federally affected areas. The basic features of the current program are sound. The basic mechanism of the current program... is sound. It is capable of providing a reasonable approximation of the federal impact upon a district . . ."

We will appreciate the inclusion of this letter in the record of the February 27 hearing. If subsequent hearings are scheduled on this legislation, which will have a devastating impact on many school systems unless amended, we will appreciate the opportunity to testify. Meantime, should your staff have any questions about the information in this letter, please let us know. We are hopeful that you will release the results of this hearing to affected school systems as early as possible.

Sincerely yours,




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1 Including Federal through State.

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2 Consists primarily of prior years surplus, sale of lunches and tuition and fees.

All supported programs were not included in the operating budget during these years.

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