I had my first budget experience before the Independent Offices Appropriations Subcommittee.

I came to the Department of Health, Education, and Welfare in 1955, where I worked on the vocational rehabilitation program for slightly under 2 years. Between the period 1957 and 1959 I worked for the Office of the Secretary as the budget analyst.

I then went to the Food and Drug Administration as Assistant Commissioner for Administration where I worked for 8 years. I returned to the Office of the Secretary as departmental budget officer in 1967, to work for John Gardner when he was Secretary. I held that job until last August when Jim Kelly retired and became vice president for administration of Georgetown,

I have worked for Secretary Richardson since he took office last August. As the chairman has said, I have appeared before this group many, many times. I have learned a lot and I hope to learn a great deal

more.

COMPTROLLER'S OVERVIEW OF THE BUDGET

We would like to spend the next half hour giving you a quick overview of the budget.

We thought it would be helpful, and we have done this previously as you remember, to give you a breakdown against which you might later ask questions and deal with the witnesses as they come before

you.

Mr. FLOOD. You are going to talk about the entire HEW budget? Mr. CALDWELL. Yes, sir; this presentation deals with the entire budget.

We recognize that certain aspects of that budget do not come before this subcommittee. For example, most recently the Food and Drug Administration portion was shifted to the Subcommittee on Agriculture and Environmental and Consumer Protection.

FEDERAL AND TRUST FUND TOTALS

First we thought we would look at the total budget. In terms of Federal funds it adds up to $25.9 billion for HEW, an increase of $3.5 billion.

In terms of outlays, $24 billion, an increase of $2.6 billion.

Trust funds, of course, are the Social Security Administration Trust Funds. They account for the largest single share of the HEW budget, $55.4 billion in budget authority or receipts. This is an increase of $8.1 billion. Also, 1972 outlays are estimated at $47.3 billion, an increase of $4.1 billion.

The interfund adjustment line represents three items: (1) general fund payments into the trust fund for certain members of the military service who are eligible to receive benefits but did not pay into the fund.

(2) General fund payments for persons over 72 who did not pay in but are eligible for benefits because of the Prouty amendment.

(3) General fund payments for medicare benefits. People over age 65 who are not eligible for retirement benefits are eligible for medicare. Also the monthly premium payments for supplementary medical insurance are matched by payments from the general fund.

I might just mention that this $78.8 billion in budget authority on the consolidated budget basis puts HEW ahead of Defense for the first time.

Of course, it is only fair to point out that it would not be true if it were not for this large block of trust fund receipts.

Overall, HEW's share of the total Federal budget goes up a little bit. We were about 29 percent in 1971. We go up to about 30 percent

in 1972.

OPERATING AGENCY BUDGETS

This chart is a rundown of the budget by operating agencies in terms of both budget authority and outlays.

As I mentioned previously, the Food and Drug Administration budget which adds up to about $95 million will no longer be considered

as a part of the bill to be developed by this subcommittee but it is, of course, a part of our overall health budget.

Inasmuch as the emphasis there is on consumer protection it comes under the jurisdiction of a new subcommittee.

HEW BUDGET BY OPERATING AGENCY

As you can see, in health, there is an increase in budget authority from $3.4 billion to $3.6; and there is a very significant increase in education, going from $4.9 billion to $6.1 billion in 1972.

Hereafter as we go through the charts we will emphasize budget authority because that seems to us to be of primary interest to this subcommittee. It is the additional authority we are requesting you to give us in the Appropriation Act.

The Social and Rehabilitation Service shows an increase, of course, from $10.6 billion in 1971 to $12.2 billion in 1972. The budget also contains $581 million for initial activities under the family assistance plan.

Social Security outlays, which are the significant item here, also go up from $43.4 to $47.6 billion. The special institutions, of course, are Howard University, Gallaudet College, the American Printing House for the Blind, the National Technical Institute for the Deaf, and the Model Secondary School for the Deaf.

In the Office of Child Development we operate the Headstart program, shifted to HEW from OEO last year.

Departmental management is the office of the Secretary. It includes civil rights and managerial activities dealing with the Department as a whole.

HIGHLIGHTS OF 1971-72 BUDGET CHANGES

From this point we will try to take the budget apart and will try to give you some of the highlights in terms of change in appropriation requests and budget authority.

Biomedical research, which consists entirely of health research activities of NIH, but excludes manpower activities, would show a net increase of $105 million. That net increase has several growth changes in it, the most significant of which is the $100 million special cancer initiative identified by the President in his state of the Union message and the budget message.

There are also increases for mental health, family planning, and several other activities. There is one significant decrease for NIH, and that is in general research support grants.

HEALTH MANPOWER

Health manpower shows a significant increase in 1972, a net increase of $90 million to a program level of $545 million. This will also be a part of the President's special health initiatives which will be identified in his health message which I understand is going to be released tomorrow morning.

There is an increase of $34 million to reach a program level of about $443 million in mental health activities in 1972 centered largely at the National Institute of Mental Health.

The 1972 budget places emphasis on combatting drug addiction and alcoholism and most of the increase is accounted for in those two areas.

MATERNAL AND CHILD HEALTH

In maternal and child health there is an increase of $70 million, $57 million of which is for family planning. You will see as you examine that particular budget that family planning activities, both research and services, are receiving a great deal of emphasis throughout the department in 1972.

HEALTH SERVICES RESEARCH AND DEVELOPMENT

The Health Services Research and Development program shows an increase of $4 million. Included in that increase is an item that is very special and will show up in the President's health initiative and has to do with additional money to analyze and study the potential for developing the so-called health maintenance organizations. When the Secretary appears later this afternoon you will find he is going to place a great deal of emphasis on this particular approach to the delivery of health services. This approach concentrates on both prepayment for health care and preventive health care, and the Secretary is very enthusiastic about this.

REGIONAL MEDICAL PROGRAMS

The regional medical program does show a net decrease and this I know will be of interest to the chairman. With the appropriations requested for that program in 1972 the program would drop from an appropiation level of $101 million down to $52 million.

However, in terms of grants awarded during the year 1972 compared to 1971, there would be a slight increase of $5 million, and this is because we have, as we have experienced each year in that program, carryover balances.

I will say to you, though, that this program level of $87 million in 1972 will eat up all of the balances that will be carried forward in that program.

The net result in 1973 would be that appropriations would have to be substantially increased to maintain the 1972 program level.

MEDICAL FACILITY CONSTRUCTION

Medical facility construction, the Hill-Burton program, shows a net decrease of $86 million but there is more to this than meets the eye. The $139 million consists of $85 million in grants for ambulatory