Page images

[The statement referred to follows:]

Mr. Mueller made mention on June 23 of the fact that Douglas School District is an applicant for assistance under section 3(d)(2)(B) and that funds are generally available after the school term has ended. I would like to explain that this section is one intended to aid a heavily impacted school district to balance its budget. The Division makes payments to applications under this on the basis of the verification of actual financial data, evidence that the school district is making a reasonable tax effort, and the recommendation of the Regional Program Officer relative to these facts. We do not believe it prudent to make determination of eligibility and make payments based upon estimated data provided in an initial application. Sometimes due to various reasons beyond our control the Program Officers are not able to make an on-site review or secure the necessary facts within the period of the school term, thus late payments do occur.

I would like to comment on a statement made by Dr. Duncan of Highland Falls, New York on June 23. He mentioned that a study of several years ago indicated that the West Point Section 6 school was spending about $1,800 a pupil at the same time that his district was receiving about $800 for an A student. He said that his citizenry felt that the difference would have to be made up by the state of New York and that this wouldn't be a fair thing for the community. He is quite right in having stated earlier that it is our policy to attempt to get local school districts to take over Section 6 schools wherever possible. We believe firmly that education is a State and local responsibility and that a State should provide the same assistance to every child within its boundaries regardless of that child's residence on Federal or non-Federal property. In 1977, the approximate per pupil cost at the West Point Section 6 school is $1,977. The amount for an A pupil at Highland Falls is $1,108 of which 90% or $997 will be funded by the appropriation. The estimated per pupil cost at Highland Falls for 1977 is $2,249 of which $1,211 is expected from the State, leaving an average local share of $1,038.

I would like to comment, also, on Dr. Fish's remarks of June 28 relative to low rent housing funds to be expended inaccordance with Title I mechanisms by local school districts. We agree that the Act did not specifically state that these monies must be spent in accordance with Title I procedures. The Act did state that such funds must be used for special programs and projects designed to meet the special educational needs of educationally deprived children from low-income families. The Conference Report and discussions in the Congress during the passage of the Education Amendments of 1974 made it very clear to the Office of Education that monies to be paid to local school districts for children associated with low rent housing must be spent to support Title I or Title I type programs. Further, the Congress expressed rather explicitly the priorities to be followed in approving such program proposals and the fact that State Educational Agencies should monitor the expenditure of funds for public housing children. Consequently, the Division of School Assistance in Federally Affected Areas worked quite closely with the Division of Education for the Disadvantaged to establish appropriate procedures to assure that these monies served the purposes expressed in the Act by the Congress. Those procedures, of necessity, follow closely Title I requirements.

June 29, 1977

Dr. Fish's comments on page 406 (Lines 519-525):

"The final statement regards the process mentioned here. School districts were not adequately consulted in the process mentioned here. There was one meeting at the Office of Education-I know because I invited myself. The word was passed to the State Departments to bring somebody to the meeting. The meeting did not occur until we brought this to the attention of the Office of Education and only a few people from eight States were invited. There were fewer than 20 districts in the room when this took place."

The following comment should be made:

Representatives of local school districts have had ample opportunity to review the interim regulations. Prior to publiction of proposed rules, four regional meetings were held where the legislation was discussed. A presentation was made to a national organization of districts receiving payments under Public Law 81-874 and at other conferences including a special conference of eight States in February, 1975. Proposed rules were published May 1, 1975 and the public was invited to comment. Interim regulations were published June 25, 1976, and again comments were invited. Final Regulations and a proposed rule were published March 22, 1977. The State education agencies were supplied copies of each publication in the Federal Register and were requested to circulate these to applicant school districts. Other comments

have been made through letters and telephone communication. It is believed that adequate opportunity has been provided for interested parties to review and comment on these regulations.

Mr. STORMER. A task group was established within the Office of Education shortly after the enactment of Public Law 93-380 in 1974 to deal with the equalization amendments to Public Law 874 and during that period of time, subsequent by, we have met with state and local representatives.

Dr. Thomas Johns is a specialist in school finance and was a member of the School Finance Task Force, which operated within the Office of Education in the early 1970s.

He is a member of the school finance unit that deals with the Public Law 93-380 operating program to assist state educational agencies to design programs to equalize expenditures. Because of his continuing activity of this task group, we have requested that he present the testimony today.

Chairman PERKINS. Without objection, all your prepared statements will be inserted in the record. We will hear you all as a panel and then open up for questioning.

[The prepared statement of Dr. Johns follows:]


Statement by

Dr. Thomas L. Johns
Specialist, School Finance

Bureau of Elementary and Secondary Education
U.S. Office of Education

Department of Health, Education, and Welfare
Before the

Subcommittee on Elementary, Secondary, and Vocational Education
Committee on Education and Labor

House of Representatives

Wednesday, June 29, 1977
9:30 a.m.

Dr. Johns is accompanied by:

William Stormer, Director, Division of School Assistance in Federally
Affected Areas, Bureau of Elementary and Secondary Education, U.S.
Office of Education, HEW

Linda Chavez, Special Assistant to the Deputy Assistant Secretary
for Legislation (Education), HEW

Harry L. Phillips, Deputy Assistant Commissioner for Legislation,
U.S. Office of Education, HEW

Implementation of the Equalization
Provision of Section 5(d) (2) of P.L. 81-874

Mr. Chairman and Members of the Subcommittee, I am pleased to appear before you to discuss the plans and activities for the implementation of the equalization provision of P.L. 81-874. In order to place the equalization provision in the correct perspective it is useful that a brief background statement be provided. During the 1960's a number of States added provisions to their school finance laws which counted impact aid receipts as a local resource for purposes of calculating State school aid entitlements to local educational agencies. These provisons acted to reduce State aid payments. The States enacting them defended this practice on the ground that impact aid funds were provided as a payment from the Federal government "in lieu of local taxes." Therefore these payments could be counted as local wealth. Court actions were initiated to test the legality of such State withholding action. In the case of Shepeard v. Godwin a Federal District Court held that the State withholding action in the State of Virginia violated the Supremacy Clause of the Constitution. Then in 1968 P.L. 81-874 was amended to prohibit the payment of any regular impact aid funds to any school district located within a State which took these Federal payments into consideration and adjusted State aid payments accordingly. In 1974 the Impact Aid law was again amended to create a limited exception to the prohibition provision for those States which had enacted school finance laws designed to "equalize expenditures".

While the reasons given for the enactment of the exception amendment varied, the essential rationale was that Impact Aid payments to local

educational agencies in States with highly equalizing finance programs
constituted an unfair windfall to agencies in which the State has already
made possible an adequate and equitable financial base. The Section 5(d)(2)
exception provision allows States with highly equalizing programs to
incorporate P.L. 81-874 funds into their school finance equalization

However, neither the prohibition provision (Sec. 5(d)(1) of P.L. 81-874) nor the exception provision (Sec. 5(d)(2) of P.L. 81-874) has been applied to date for several reasons.

The Congress in 1973 adopted an amendment waiving the prohibition provision for FY 1974. This waiver was enacted after the U.S. Office of Education had taken steps to terminate P.L. 81-874 payments to Kansas and North Dakota because they had enacted school finance laws which violated the prohibition provision of the 1968 amendments. The 1973 amendment subsequently was applied also to New Mexico and Maine. The controversial nature of the exception provision regulations led to unusual delays in achieving their publication and is another reason for not having implemented it. After consultation with State and local educational agencies proposed rules and regulations were published June 25, 1976, and these were republished as final regulations March 22, 1977. A major amending provision to the final regulations, which has been twice published in proposed form, still has not been published as a final rule. Because of the delay in promulgating final regulations for the exception provision, Congress adopted an amendment in 1976 which in effect again suspended the operation of the prohibition provision until July 1, 1977 for States with apparently non-conforming

laws; or if final regulations had not been promulgated by this date, until such regulations were promulgated.

Since final regulations have been promulgated, we are required by law to initiate the application of both the prohibition and exception provisions on July 1, 1977. To date, we have notified five States that we intend to commence determination proceedings after July 1, 1977. Of the five States, Alaska requested the Commissioner to initiate determination proceedings. In the case of New Mexico, Kansas, North Dakota, and Maine, the Commissioner decided to initiate determination proceedings after recurring information indicated that these States intend to take account of P.L. 81-874 payments in their State school aid formulas in the 1977-78 school year. In addition Utah has requested an evaluation as to whether the State would be eligible to take into consideration 874 payments if such a provision were included in their Minimum School Finance Act.

Now I would like to turn to the provisions of the final regulations published on March 22, 1977. These regulations provide that two qualifying standards be met by a State before it is eligible to apply the provisions of Section 5(d)(2) of the Act to its State equalization program. These standards consist of a general qualifying standard and disparity standard. Additionally, a wealth neutrality standard was published in proposed form (for the second time) on March 22, 1977. When this standard becomes effective, it will serve as an alternative to the disparity standard. The final regulation for this wealth neutrality standard is now in the USOE clearance process.

[ocr errors]
« PreviousContinue »