Mr. DWIGHT. I believe it was $560 million and then, there was in very late July or August, after the year had closed, an additional $30 million appropriate in the last supplemental. Mr. QUIE. It was $560 million the year before and for 1973, the request was for $610 million and subsequently, there was a revision of the budget and it was $590 million which was $30 million over the year before. Mr. DWIGHT. I believe the program was operating at the $560 million level when I became administrator. Mr. QUIE. It was operating at the $560 million level because of the nature of the first continuing resolution, if I remember correctly. That is why you could not go up to $590 million and the rationale, as I understand it, is that it was late in the year, in the fiscal year and, therefore, the full $610 million could not be utilized. Mr. DWIGHT. I think the appropriation called for funds to be available for one of the rehabilitation acts. This was vetoed and as a consequence, the language was inoperative. Those funds were finally secured through the supplemental and then, as I recall, there was some further mixup in the language of the appropriation act and that had to be sent back and be modified and that is why it became available so late in the year. So actually, I would assume some of the benefits of this funding would be accruing in the current year rather than last year so the 12percent increase I spoke about is probably somewhat understated. Mr. QUIE. At what spending level have you been operating under now until you get your bill finally passed? Mr. DWIGHT. $590 million would be the continuing authorization level which we are presently operating under. However, with the supplemental, which was the subject of hearings in both the House and the Senate, now moving, that would be modified upward to $615 million or whatever is ultimately in the law, or in the appropriations. Mr. QUIE. If this finally becomes law later on this month, there remains not much over 6 months of the fiscal year. If you are spending at $590 million now then you would get $615 million. That is a $25 million difference. Since it is available for half the year, that would be an increase on an analyzed basis of $50 million additional. Mr. DWIGHT. That is correct. Mr. QUIE. Or $540 million. Mr. DWIGHT. Mr. Reedy might want to comment on that a little further. However, many of the States anticipate the passage of at least the amount requested by the administration. As a consequence, some of the States may be spending at a level above an annual rate of the $590 million, anticipating that the funds would be made available through the appropriation process at least at a level consistent with the administration request. Mr. QUIE. So some of them are spending on an annualized basis of $615 million because that is what they expect. Would any of them be spending at a higher annualized basis than $615 million. Mr. REEDY. Mr. Quie, the only official information given to the States was based on the present budget of $610 million and each State was given an estimate of what this might provide to them so that they may use it to plan operations in 1974 until the actual appropriation was passed. The addition of $6 million, in order to adjust the minimal State allotments upward, is so small that that would have made no difference in the States' plans. We tend to be somewhat coservative using the actual administration's request as our basis of projecting expenditures. Mr. QUIE. If the Congress should pass a supplemental appropriation bill at $650 million, as the gentleman from Indiana indicated it was very close in the House, and if they do pass it, then, the Senate, with a pretty substantial majority, this may be the figure of the supplemental appropriation bill. That, then, would be $60 million over the rate at which you are. spending now available for half of the fiscal year. Therefore, it would be an annualized spending rate of $120 million additional. Mr. REEDY. Mr. Quie. I understand it would be only $40 million above. Our present rate of spending is $610 million, and if $650 million were appropriated, that would be $40 million, rather than $60 million, above the current estimates. Mr. QUIE. Then, you and Mr. Dwight are giving two answers here because Mr. Dwight said you are spending now at $590 million and you are saying you are spending at $610 million. Mr. REEDY. Let me correct that because you could get that impression. We are authorized to reimburse the States on a $590 million basis. But in anticipation of a minimum figure of $610 million, which is in the present budget, we have supplied the States with 10 different estimates on that figure. We assume, without having any hard facts, that they have been projecting their rate of spending for the entire year on the $610 million method, but that is just my assumption. Mr. QUIE. How about last fiscal year when you had a budget request of $610 million and you finally scaled it to $590 million? Were you at that time giving the impression to the States that you would be getting the $610 million so they could spend accordingly and, therefore, were they caught off-guard when you moved it down? Mr. REEDY. Yes, that, in effect, happened. We did provide information that the expected level of appropriations would be $610 million. You will recall that figure was appropriated by the Congress and was signed by the President. I believe the President signed the bill, and later it was ruled not to be effective because of a reference to an act that had been vetoed. So, there was a realistic basis on which States could project their estimates on the $610 million level. Since we later reverted to the $560 million level, there were reported dislocations and hardship among the States because of that uncertainty. Mr. QUIE. Why did you revise the budget to $590 million, then, instead of staying at $610 million? It would not be as much of a hardship if you had reverted to $560 million as you are required to do. The States were spending at the level of $610 million. Why was it necessary to move down to $590 million? Mr. REEDY. My recollection is this action came in the closing weeks of the fiscal year and, in fact, was not finally acted upon until 2 weeks after the close of the fiscal year. So a revised estimate, from the $50 million down to $30 million, was made as being adequate to take care of the States' matching requirements at that point because they had earlier scaled down their operations below what they had originally started with. Mr. QUIE. With that explanation, my suggestion that we go to $650 million appropriations means $60 million-the difference from $590 million-would not be accurate; rather we should talk about you going to $650 million, that would be $40 million above what has been anticipated by the States, therefore, being available for only half of the fiscal year would be at an annualized basis of $80 million additional. Would that be accurate? Mr. REEDY. I rather doubt if it would work out exactly that way. In the first place, there is a cost-of-living increase in the operation of a State agency, and to fit their operations this year back to last year's level means that they have restrained expenditures for case service and so forth in order to maintain staff. The second half of the year has always been the heavier part of the expenditure of most State agencies, and spreading that over the whole year does not mean that they would have to pick it all up just in new operations in the last half of the year, in my opinion. Mr. QUIE. So, in other words, there is justification for having an appropriation figure higher than the $610 or even $615 million? Mr. REEDY. As reported earlier in the last 2 years, many States have spent substantially more than the amount for which they received Federal matching. If we pick up this margin alone, then, there would be a good portion of the extra $40 million consumed." Mr. QUIE. How much of the $40 million additional would be consumed to fund the programs that they now have in operation adequately because of the squeeze, as you indicated, staying at last year's anticipated level? How much of the $40 million would be used for that and how much of the $40 million additional if Congress appropriated it would then have to go for new programs? Mr. REEDY. I would be unable to give an exact figure, but on the basis of the expenditure reports of last year in which States could have claimed higher Federal matching, we could reach an estimate on that and supply it. Mr. QUIE. If you could do that. Then, the other question I have is what kind of capability is there in the States now to fully utilize that amount of money which would be the difference between the estimate that they could easily use over the $610 million because of the inflation you talked about and the full $40 million. There is a chunk of money in there that is more than was just picked up because of inflation. How quickly can you start a new project and how adequately could they utilize that money? Mr. DWIGHT. One of the things that occurs to me, Congressman Quie, is that if we generalize, we would probably reach an erroneous conclusion. In other words, you would have to look at each State on the basis of information we do not presently have, I don't believe. In other words, what the States are doing, what their legislatures have appropriated, what kind of flexibility they have, these factors would have to be examined on an individual State basis. We do not presently have that information. That is not to say we could not get it, but it would probably take a while to get it if our past experience in garnering information from the States is any indication. Mr. QUIE. How long a time are you talking about? Mr. DWIGHT. A couple of weeks. Mr. BRADEMAS. Mr. Reedy, don't you have the information on what the States estimate they can put up? The committee has it and I therefore ask unanimous consent to place it in the record at this point. [Material referred to follows:] ESTIMATED GRANTS SECTION 110, REHABILITATION ACT OF 1973 BASED ON MATCHING STATE FUNDS AVAILABLE WITHIN ALLOTMENT 4, 218, 237 9, 366, 134 6,658, 163 6, 239, 332 6, 239, 332 13,068, 000 14, 194, 273 14, 194, 273 14, 194, 273 15, 326, 300 16, 261, 755 16, 261, 755 16, 261, 755 2,719, 494 4, 218, 237 4, 218, 237 8,912, 809 9,927, 846 13,742, 698 22,902, 421 9, 927, 846 13,742, 698 22, 902, 421 12, 011, 927 11, 930, 650 11,927, 091 12, 011, 927 9, 927, 846 13,742,698 22, 902, 421 12, 011, 927 11,930, 650 15, 514,000 2,693, 551 4,753, 179 2, 000, 000 2,638, 283 15, 223, 335 4,570, 745 34,039, 210 21, 364, 858 2,596, 361 30,567, 658 10, 325, 153 7,037, 538 34, 988, 268 2,854, 341 12, 268, 618 2,797, 832 14, 409, 300 41, 203, 702 4,607, 945 2, 000, 000 16, 133, 701 9, 659, 625 1 Excludes $1,000,000 for the evaluation of the vocational rehabilitation program. 2 Distribution based on State funds reported in the program and financial plan, May 1972, as available for the basic support program, sec. 110, for fiscal year 1974, with a minimum grant of $2,000,000. 3 Adjustment required by sec. 110(d) to bring State's grant to fiscal year 1973 amount. • Authorized under sec. 111(a). Mr. REEDY. We have an estimate as of April on the amount of State funds available for matching fiscal 1974. Mr. BRADEMAS. Would that amount in your judgment, from your experience, be increased or decreased since April? Here we are in December. Mr. REEDY. I Would be unable to say, whether it has changed significantly. Most States, by April, had their firm appropriations. Mr. BRADEMAS. If most States by April had their firm appropriations, then a reasonable corollary of that response is there is little likelihood they would have changed several months later. Isn't that true? Mr. REEDY. Among all the State agencies, some of them every year change somewhat. Generally, the changes are toward increases rather than toward decreases in their estimates. So it would be slightly higher. Mr. BRADEMAS. It would be slightly higher? Mr. REEDY. Slightly. Mr. BRADEMAS. Therefore the members of the House-Senate Conference Committee on this matter ought to be able to have a reasonable judgment already as to the amount of moneys the States have available to match Federal funds. Is that not true? Mr. REEDY. Yes. Mr. BRADEMAS. That is true? Mr. REEDY. Yes, sir. Mr. QUIE. Let me also ask you, Mr. Dwight, in section 407 there is going to be a State allocation study. You are supposed to report back by June 30, 1974. I am looking forward to that study because I have a feeling that if the facts of the case on this formula were presented to the Members of the House of Representatives they would want to change it. It just happens that the majority of Senators fare better than a majority of House Members on this formula, the way a formula is written. There was a Senator from the Southern part of the Nation who had a little influence on the way this thing was written. I noted this last time. Our Northern colleagues are becoming more and more aware of that and I don't think we are going to extend this formula just the way it is next time. In fact, I am not going to be in accord with extending it just the way it is next time either. Now, we need the results of that study. How are you progressing on that study? What kind of action have you taken and when can we expect to get the report on it? Mr. DWIGHT. You can expect to get the report as the law requires. That was one of the efforts we have presently underway in the implementation of the new law. In other words, we got our marching orders on September 20 when the law was signed by the President, and we are proceeding toward a design of this effort along with several others which will provide us with information and options so that Congress can consider them. This is, as I understand it, a problem that has been with us for some period of time and has been the source of some agitation on the part |