Mr. LAIRD. So you are talking about $200 million worth of lower priority items.

Mr. CARDWELL. No, I am talking about $2.5 billion worth of items. Mr. LAIRD. You are talking between the high and the low; but you are not talking between the low and the final budget submission. The low budget is $13.5 billion, and the budget that you have before this committee now is $13.3 billion. So, you are talking about $200 million there. Let us get into the differences now between the $13.5 billion and the $15.8 billion. Let us discuss that now.

Mr. CARDWELL. We can furnish that by agency and within the National Institutes of Health by activity. We cannot take it below activity because it was not requested nor was it submitted below activity. Mr. LAIRD. You asked for priorities, I would assume, between the high and low budgets, though.

Mr. CARDWELL. No, we did not.

Mr. LAIRD. You have no priorities, no information given to you on priorities? I would think that would be the first thing you would

ask for.

Mr. CARDWELL. The line drawn on priorities was: Give us those items that you believe to be of such high priority that they should be fitted within the so-called low budget. They were proposed to us as the highest priority items. The items that made up the difference between the $13.5 billion and the $15.8 billion were identified as being of lower priority, but as a block. In other words, there were two blocks of priorities. The highest priority items went in the so-called low budget. The lower priority items went in the so-called high budget.

PRIORITIES IN OFFICE OF EDUCATION BUDGET

Mr. LAIRD. I understand you have no priority information at all submitted to you by any agency, such as the Office of Education, on priorities between the $13.5 and the $15.8 billion? Did not the Office of Education indicate to you some of the highest priority items that were left out of the budget and, if you were to increase the budget by, say, $200 million, what the highest priority items would be?

Mr. CARDWELL. In this way: In effect, the answer to that is yes. Mr. LAIRD. That's fine. Let us take the Office of Education and then we will get back to the NIH. I want to know, for the Office of Education, what the difference was between their low and high budget. Mr. CARDWELL. By item?

Mr. LAIRD. By item. Then I want to know their priorities. I want to find out where you made a change and where you followed the Office of Education's priorities.

Mr. CARDWELL. The Office of Education's priorities would have been established in an evolutionary way. If the Bureau of the Budget proposed to deny an item that was in the low budget, the Commissioner of Education was asked to evaluate the effect of that proposal on his total program. He would indicate to us those items that he wanted appealed. The Secretary reviewed them from the same point of view. In this way he established priorities. We appealed the highest priority items. We stepped back and accepted the Bureau of the Budget allowance on lower priority items.

Mr. LAIRD. I am using the Office of Education budget as an example just for information, because you have overall responsibility.

Mr. CARDWELL. Correct.

Mr. LAIRD. How many of the items not in the low budget as originally submitted were deleted for items given a lower priority by the Office of Education.

Mr. CARDWELL. Yes.

Mr. LAIRD. How many were there?

Mr. CARDWELL. I do not know that there were any.

Mr. LAIRD. You did not override the Office of Education in the establishment of any priority item in the budget? You, the Bureau of the Budget, or the White House?

Mr. CARDWELL. I would like to check the record to be certain of the answer.

Mr. LAIRD. I would like to have a listing of all items on which a bureau or agency in the Department was overridden as far as the priority of an item was concerned.

Mr. FLOOD. By the Bureau of the Budget?

Mr. LAIRD. Or by the Secretary for inclusion. I am talking about inclusion now. Do you follow me?

Mr. CARDWELL. Yes, I do. Let me put your question as I understand it: If an item had been identified in the so-called high budget and later showed up in the final budget, you want a listing of such items, because that would indicate that we made that a higher priority, "we" being the Secretary or the Bureau of the Budget or the administration, than the operating agency making the proposal. Is that correct?

Mr. LAIRD. That is correct. You indicated there were not any. Mr. CARDWELL. I am not certain that there are any. I would not think that there were any. There may be some isolated situations.

ARTIFICIAL HEART AS AN EXAMPLE OF PROCEDURE FOR ESTABLISHING PRIORITIES

For example, I can recall that the artificial heart budget came under special examination because the Congress took action which affected the 1968 level of that program after these two budget levels had been established. That action occurred after the original submission by the National Institutes of Health and by the Surgeon General. So, we did perhaps make some shifts, recognizing the fact that the Congress added money in that program.

Mr. LAIRD. Taking that as an example, I would like that fully explained. I do not quite follow you. You mean in our budget markup in October we made some shifts that required you to make changes? Mr. CARDWELL. Yes.

Mr. LAIRD. Tell me what those were.

Mr. CARDWELL. I do not have the figures at hand. I just remember the item.

Mr. FLOOD. Since we have the NIH here, why don't we make a guinea pig out of this program? This is a good idea. We can find out what happened.

Mr. LAIRD. Take the artificial heart as an example.

Dr. SHANNON. I cannot give you the historical development of this item except in very general terms. I think we can reconstruct it from

our notes.

Mr. LAIRD. Mr. Cardwell brought this up as an example and, as long as this is the one that he pointed to, let us take this as a guinea pig, as the chairman suggests.

Dr. SHANNON. My recollection of that item is that we had in the 1967 budget, as a result of the Congress action, a sum slightly in excess of $15 million.

Mr. CARDWELL. That is right. At the time the original budgets were put together, the first submission, there was about $5.7 million put in the high priority budget for this purpose. The Congress added $15 million. So, we had to go back and reevaluate the impact of that on the 1968 budget, and the original submissions that were made did not take that into consideration. They could not take it into consideration. Mr. LAIRD. Who did the reevaluation, the Heart Institute or some accountant over in the Bureau of the Budget? Who did this reevaluation?

Mr. CARDWELL. The National Institutes of Health, of course, was the program involved, and the Office of the Secretary's staff, including our staff, would arrange for this to take place.

Mr. LAIRD. This is something that was in the high budget. You moved it down into the low budget?

Mr. CARDWELL. I do not recall specifically how it fell into the two budgets, if at all.

Mr. LAIRD. Do you have the low and the high budget with you?

Dr. SHANNON. We do not have that. We would have to furnish it for the record. Although the 1967 figure was substantially higher, as it came out of the Congress, than was anticipated in the original President's budget, it was our judgment that, with the change of Institute Directors and the change in leadership of the program, it probably ought to be continued roughly at the same level in 1968 as in 1967.

I think our discussions with the Bureau of the Budget involved their willingness to accept a substantially higher figure in 1968 than we had proposed. I can reconstruct this.

Mr. LAIRD. For the record, could we have this? This is an example which Mr. Cardwell uses as one of the items which has been moved around.

Mr. CARDWELL. The congressional action occured after the original submission. That is the reason I identified it.

Mr. LAIRD. Let us make this clear. We took final action on the artificial heart program about the first of October.

What will the expenditure rate be in the artificial heart program in fiscal year 1967 ?

Dr. SHANNON. The expenditure will be substantially below the authorization.

Mr. LAIRD. I am talking about the expenditure, because this governs what we do in 1968.

Dr. SHANNON. This will be below $15 million. I do not know precisely, but I think Dr. Frederickson may have a better figure when he comes before you. It may well be that we can reconstruct that history before you meet with Dr. Frederickson for the Heart Institute.

I would emphasize taht a good deal of the decisionmaking on specific items, such as this, were the result of verbal discussions, and it may well be that it will be difficult for us to find in our records spe

cific decisions that were made, other than our own internal memorandums.

Mr. FLOOD. We haven't got much of a guinea pig.

Dr. SHANNON. You must realize that we are rather distant from the Bureau of the Budget. They operate with the Department. The figure comes to us and the usual response is, if we find the figure unsatisfactory in terms of what we feel the program should be

Mr. LAIRD. You are really not the best witness in this area.

Dr. SHANNON. No, sir. I think the Department is the best witness. Mr. LAIRD. We have to go to the Department, because this evidently is a departmental decision and not an NIH decision in this case. Mr. CARDWELL. The artificial heart decision?

Mr. LAIRD. Yes.

Mr. CARDWELL. No, I do not think so.

Your question to me was, could any changes have occurred between these two levels, and I said I did not think such changes occurred but they may have. I thought of one instance in which it might have occurred. I am not sure whether it did or not.

Mr. LAIRD. You brought up the subject. I did not bring it up. You used this as an example, right?

Mr. CARDWELL. Right.

Mr. LAIRD. I am just trying to figure out what happened in this example.

Mr. CARDWELL. I would like to check the record. I cannot tell you from memory what happened, but I think the record will show. Mr. LAIRD. Do you know what happened, Mr. Kelly?

FORMULATION OF BUDGET ESTIMATE

Mr. KELLY. I would like to comment on the problem. I think the discussion which you and Mr. Cardwell have had has been illuminating and indicates a set of circumstances that would lead you to believe that each stage of this process is an arm's-length stage that is definitive in and of itself.

We gave you some tables saying what the operating agency asked for, what the Department asked for, and what the Budget Bureau allowed.

Mr. LAIRD. I have those tables before me. From this discussion I guess they are not very complete because there must have been two or three other budgets that you have left out.

Mr. KELLY. That is right. During this entire process-this process flows together there are continuing communications between the operating agencies, the Secretary, and the Budget Bureau, with changes occurring.

The point Mr. Cardwell was trying to make on the artificial heart is that when we initially ask for budgetary data

Mr. LAIRD. He was trying to use the artificial heart as an example because he thought he could use our committee as a basis for doing this. I do not think this committee has anything to do with the 1968 budget until we act on it.

Mr. KELLY. No. It is a wonderful example of the basic problem of constructing a budget and reconstructing what occurred.

The National Institutes of Health and the Public Health Service commenced the development of the 1968 budget well before the Congress acted on 1967.

Mr. FLOOD. About what month?

Mr. KELLY. Maybe 3 months before. Maybe they started in February and started presenting us data in April and in May. So, in order to do that, we asked them to start with the assumption that the Congress approved the 1967 budget unchanged. Therefore, this becomes their base.

Using that as a base, they said that they would be in a position to spend $5 million in 1968 within the constraints that were established for the development of the artificial heart; but before we had reached the point of formalizing and finalizing this budget, the Congress has decided that the 1967 program should be a larger program than had originally been predicted for 1967. This necessarily made us change 1968 to recognize this change in base.

So, during this period in which these data flowed back and forth, the 1968 budget had to be updated and changed to fit changing circumstances. Part of those changing circumstances are the actions of the Congress. Part of them are our own actions, that we moved either more quickly or more slowly than we anticipated we would.

In essence, the total amount of the budget for the National Institutes of Health is a decision that is made by the President on the advice of the Bureau of the Budget and on the advice of the Secretary. The distribution of that total budget among the various items and kinds of programs that are conducted is primarily determined by the Surgeon General and the Director of the National Institutes of Health in collaboration with their staffs because they, within those constraints and within those limits, are more capable of developing the kind of a program would best fulfill the roles and responsibilities of their agencies.

You can reconstruct any one of these items.

Mr. LAIRD. That is why it will be interesting to see the priorities established between all items in the low and the high budget. It is nice to have this chart, but the priorities are the important thing. You understand that.

Mr. FLOOD. And who determined them.

Mr. LAIRD. I think I had better drop that, because I am not getting very far and no one has much material available today. I hope you can supply it for the record.

(The information requested appears on pp. 29-40.)

REGIONAL MEDICAL PROGRAMS

Mr. LAIRD. We are going to get into a discussion of the regional medical programs a little later on, Dr. Shannon, when the item comes up. But since the National Institutes of Health has overall responsibility in this area, and while you are here I would like to ask you whether you think this program has gotten off the ground.

Dr. SHANNON. Within the legislative guidelines given us to operate the program, 1 think, indeed, it has. I think the guidelines themselves impose restrictions which tend to slow program development but, be that as it may, these are the legislative authorities we have, and with