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Mr. Chairman, the subject of special revenue sharing is complex and broad in scope. Accordingly, our testimony this morning is, as you say, quite lengthy and detailed. In the interests of time, I ask we be permitted to pass over our discussion of the philosophy of the special revenue-sharing concept.

Before addressing the specific bill, S. 1669, which is, of course, the subject of today's hearing, I should like to say that we support the ease of administration of consolidation in our prepared text, and we spend a great deal of detail on this subject.

I would like to turn now to the specifics of S. 1669, the subject of today's hearing. I have an opening comment, and then I would like to list the issues of greatest concern which we have with S. 1669.

First, our comment is an expression of disappointment that the scope of the bill is limited to the State plan programs. While we are advised that some 40 programs representing most of the Federal education money are included within S. 1669, the severe cases of administrative overburden and program fragmentation will not be tended to if the direct Federal/local type of grant programs are not included as well.

Since the bill substantively affects major elementary and secondary programs, we would literally need days of hearings to fully examine in precise terms what the bill does and what its implications are for the present and future Federal role in education. But since it is not feasible to so cover the bill, we will outline our major concerns with those provisions dealing with the distribution formula, impact aid and public housing, State advisory councils, local appeals procedure, administration under the Secretary, the Secretary's discretionary fund, and the authorization of appropriations.

DISTRIBUTION FORMULA

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Section 4 provides for the "Allotment and Use of Shared Revenues.” In this regard, we have two items of concern which hopefully will be given further study by the administration and the Congress.

Our first concern relates to the character of apportionment among the States. As you know, under special revenue sharing, such factors as the number of vocational or handicapped pupils would no longer be considered in making payments to the States.

Rather, pursuant to a tripartite weighted formula, each State would share in one massive appropriation for elementary and secondary education according to its portion of school-aged children from the general population,

low-income families, and federally connected families.

While we are not opposed to a change in the basis for making payment, we need further information before we can support the precise formula which is chosen. Indeed, data should be furnished showing how much each State would receive at various levels of appropriations.

Furthermore, 5- to 10-year projections should be made as to the number of students who will comprise each element of the formula.

And, then only after combining the two and comparing the results with current distribution trends, will we be able to understand the implications of this formula in terms of State-by-State total dollar amounts.

The mystery of the formula is found in the interrelationship of its three elements. Children from low-income families are weighed nearly twice as heavily as impact aid children and 10 times as heavily as the general student population.

Since HEW reports that there are 7.4 million children who are counted for title I purposes as compared to 52 million plus in the general population and some 2 million in the impacted program, it is immediately apparent that the precise manner in which low-income children are counted becomes extremely important, not only as to how much each State is eligible to receive in toto from the Federal Government, but also as to what portion thereof must be spent for title I purposes.

However, the bill does not define lower income children. In fact, the only definitional reference is found in section 20(9) which merely delegates the authority of defining low-income family to the Secretary of HEW. Accordingly, the Secretary may, for example, by administrative fiat eliminate the principle source of title I assistance to the big cities by cutting off the 2.2 million AFDC children from the definition now in effect. Results of similar magnitude can be achieved by raising or lowering the low-income factor. Mr. Chairman, we do not believe that a definition which can deter

а. mine by millions of dollars how much, more or less, any State can receive and the purposes for which that money can be used (that is, disadvantaged versus other programs) should be within the arbitrary control of the administration.

Finally, given the far-reaching effects of this legislation in terms of dollars and time, the administration should be held accountable even beyond revealing State-to-State appropriations trends and how it is weighting of the formula to produce such trends.

Specifically, it should be brought to task to explain its rationalethat is, the merits—for placing the relative weight which it chooses for each of the three elements. This is particularly important since the priority assigned to general aid, assistance for the disadvantaged, and the grouping of vocational, handicapped, and support service programs are directly linked, indeed controlled by the relative weight given to the number of children from the low-income, federally connected, and general population respectively.

Furthermore, unlike the current system wherein the priorities among programs can be shifted from year to year by proportionately increasing or decreasing the appropriations for each program, that cannot be done under S. 1669. As noted earlier, the bill has one appropriation under which the share for each program is fixed by formula. That is, a change in priorities among programs could only be brought about by an amendment of the legislation.

This takes me to our second concern with regard to the distribution formula, which relates to shifts in priorities among the grouping of vocational, handicapped, and support service programs.

For the purposes of discussion, Mr. Chairman, I beg your indulgence to briefly construct a model. Assume that for its first year of operation, Congress appropriates the same amount of money for elementary and secondary programs as it did this year. At this point, I refer to the Congressional Record of August 6 wherein at page S 13444 it was reported that the combined appropriations for ESEA, vocational education, education of the handicapped, and impact aid totaled $3.3 billion.

Assume further that the special revenue sharing formula would compute out to provide the same money for title I of ESEA and impact aid as was appropriated for those purposes in fiscal year 1972. Then if these amounts, $1.5 billion and $612 million, respectively, are subtracted from the $3.3 billion total, the remaining $1.2 billion would be available for the three program grouping here at issue.

Turning again to the special revenue sharing formula, we note that section 4 distributes this $1.2 billion as follows: one-third to vocational education, one-sixth to education of the handicapped, and onehalf to support service programs. Therefore, pursuant to the level of the fiscal year 1972 appropriation, the special revenue sharing formula works out to $400 million for vocational education. Hence, the funding of that program would be cut by 31 percent or $176 million from its current level of $576 million.

Under our model about $85 million would go to handicapped programs and some $91 million would go to support services. While in practice, the formula may not work out precisely this way, it will undoubtedly result in a shift of priorities among these three programs of approximately the same proportion.

While we are not at present arguing the merits of this shift in priorities, we do wish to point out that they exist. And, as noted earlier, once enacted the priorities among programs cannot be reshifted through the appropriations process since they are fixed by formula.

As you know, Mr. Chairman, under the current impact aid formula the U.S. Government will make a per pupil payment to any

school district for each federally connected child residing therein. The theory of the program is that the Federal Government should compensate the school district for bringing such children to its schools, when in employing and/or housing their parents, the Federal Government uses land which then become tax exempt.

Or, restated, the Federal Government recognizes that since an average of one-half of all school revenues comes from local property taxes, the effect of doing business on tax exempt land within the district would cause an unfair burden to the community if some form of Federal compensation was not otherwise forthcoming. Since the theory of the program is one of compensation--not to achieve a special educational purpose—the payments are treated as general aid.

S. 1669 continues the theory of payments for 3a children, that is, those who reside on Federal property. Indeed, this aspect of the bill gives more realistic recognition of the financial burden created by the Federal presence in that it would raise payments from 50 to 60 percent of the national per pupil expenditure.

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Unfortunately though, it does not continue to give recognition to those districts which make an extra effort to educate their children through the collection of local property tax revenues in amounts which produce a per pupil expenditure in excess of the national average.

That is, it would no longer give the district the option of using onehalf the State average per pupil expenditure or its local contribution rate, instead of one-half the national average.

But, perhaps more importantly, while section 4 preserves the method for making payments to the States for federally connected children who reside on other than Federal property, that is, 3b children, that section together with section 5 works to change the theory of the payment at the local level. This is done in two ways: First, the State

may transfer

up

to a total of 30 percent of all impact aid funds to nonimpacted school districts. Since only 4.700 districts out of a total of approximately 18,000 districts are receiving impact funds, we would expect that the States would shift close to their 30 percent limit to the nonimpacted districts.

And secondly, the bill apparently permits the State to make a limitless shifting of general aid funds among impacted districts regardless of the number of federally connected children residing therein.

While we have no doubt that the States would, in their wisdom, distribut impact moneys according to their determination of school district need, that would nonetheless change the theory of the payments, which is one of compensation.

In effect, the bill is saying that the Federal Government can take tax-producing land from a district and leave it to the States to decide whether just compensation therefor should be made to that district or be redistributed to another of its districts which may be more needy. We believe that the States should not be put into this position.

We further believe that the Federal Government should both pay its own way in areas where it conducts tax-exempt businesses and, in addition, provide general assistance to those areas which need it. In this connection, the bill creates additional conceptual confusion in permitting impact funds to be distributed on the basis of need since the State allotment is pegged to the number of federally connected children therein, not the relative need of the districts within that State as compared to other States.

It should also be considered that the impact aid program does not belong in this bill in the first place. The purpose of the bill is to ease the administration of categorical programs. Impact aid is not a categorical program but one of general aid. Under the current law, districts need only count the number of their federally connected children and then a predictable payment is made under a precise formula. Nothing could be easier.

This bill, on the other hand, complicates the program with uncertainty of payment and would result in an application procedure at the State level which would probably require districts to make detailed pleas of need.

Finally, we feel that the inclusion of impact aid, as written, within this bill interferes with the prerogatives of this committee. Last year,

Mr. Chairman, you personally spent much time studying the merits of the impact program and various amendments thereto. It was then decided that this subject must be given more consideration before any final action could be taken. This bill appears to be sidestepping that decision, as well as delegating to the States, the Federal prerogative to establish an equitable formula for Federal compensation.

We were also disappointed to note that S. 1669 does not include payments to districts impacted by children residing on low-rent public housing. Ironically, it would seem that if the administration wanted to make impact aid payments on a basis which considered need, that it would have retained the public housing provision.

Not only would the Federal Government then be assisting our financially beleaguered urban areas, but the moneys could be directly used to help pay the especially high cost of educating the disadvantaged children who reside therein.

We note that local school boards do not have any right to appeal to the State and/or HEW to either challenge the merits of the State plan or the equities of any financial distribution thereunder. While we agree that effective education policy and administration requires a strong State role in program development and oversight, we also feel that the denial of an appeal procedure to local boards goes too far. Or, restated, we are asking that the council be made accountable to the local working level.

Under S. 1669, the responsibility for administering the special revenue sharing program rests with the Secretary of HEW, rather than the Commissioner of Education. Mr. Chairman, we are strongly opposed to this designation for several reasons.

First, in part, our rationale for embracing the special revenue sharing concept is that it reduces administrative overburden. Experience shows that programs operated at the Secretary's level produces the antithetical result.

For example, the Headstart program is within the Office of the Secretary. Rather than managing it under title I, the Secretary's office treats it as a special unit within HEW. Consequently, school boards now have one more office to find and establish liaison with, another set of regulations and guidelines to become familiar with, another set of application and reporting procedures to comply with, and so forth.

This provision is not merely self-defeating in terms of the goals of special revenue sharing, but promises to deepen the existing administrative nightmare to the extent that all Office of Education programs would then be subject to this organizational fragmentation.

This takes us to my second point. For several years now, NSBA has been urging the Congress and the President to assign a higher Federal priority to education through the establishment of a Department of Education. Until recently when members of this committee and the Committee on Government Operations actively took the

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