funds for a very broad spectrum of activities under the general label of social services. Several times Congress stepped in and prevented the regulations from going into effect.

The result was a stalemate serving the interests of no one. To resolve the matter, some Members of the Congress began advocating a type of special revenue sharing for social services. Concurrently, the Department also began to consider alternatives which would give considerably more authority and flexibility to States. From a series of meetings between the Department, Members of the Congressincluding members of this subcommittee-and public and private interest groups, title XX emerged as a compromise of varying points of view. But while consensus was reached and the bill passed by the Congress and signed into law, some issues were not adequately dealt with, as subsequent controversy indicates.

A basic issue which arose early was the extent to which the Department should regulate certain provisions to prevent abuses and maintain good practice. Many perceived our first efforts as overregulation. Over the next year, the case was frequently made to the Department that the public-planning process and the $2.5 billion annual ceiling were enough constraints to prevent some of the abuses of the past. In the spirit of achieving a genuine partnership, the Department has been taking whatever action is can through regulation to eliminate burdensome restrictions. On April 2, we published regulations modifying the eligibility provisions to allow much greater simplicity and to reduce administrative costs. These changes have generally been received with much favor. Also, the Department has been readying a further set of regulation changes to give States even greater flexibility in all aspects of their administration of this program. These draft regulations have received wide scrutiny by the public and private interest groups and their comments are now being considered in developing the regulations which will be published shortly.

When these revisions are published, we believe we will have gone about as far as we can in devolving responsibility and flexibility to the States given existing provisions of title XX. But from our dealing with the States and the voluntary service sector, it is clear that they want the Federal Government to go much further to eliminate or ameliorate a number of statutory and derivative regulatory restrictions which do little but add to administrative complexities and costs and thereby detract from the quality and quantity of service programs. It is for this reason that our proposed Financial Assistance for Community Services Act would delete virtually all of the strings still attached to title XX funds under current law.

A second issue, which arose just prior to the implementation of title XX last October, concerns group eligibility practiced under the previous program. Some mistakenly thought the Department could reinstitute the practice by regulation. But only an interim solution was possible by regulation: Allowing group eligibility to continue for 6 months in programs which it had under the old program as a phasein measure. By now, the phasein period has expired and the affected programs should now be converted to an individual eligibility procedure, although a considerably less rigorous procedure if the States involved have exercised the option to use a simple declaration of eligibility process granted in our April 2 regulatory amendments.

To date there really has been no resolution of the problem. In testimony before this committee on March 4, the Department suggested that the appropriate way to resolve this issue is within the context of H.R. 12175. Because of the greater targeting and public planning processes provided in this bill, the administration is willing to accept group eligibility for any group of recipients. As an interim measure, the administration also sought legislatíve sanction for extending the phasein period until the block grant could be acted upon. This step was, as you know, endorsed by this subcommittee and the House in H.R. 12455. The Senate, as you probably know, has now substituted an approach to this issue which we strongly oppose, and I will return to that subject in a few minutes.

A third issue which title XX did not adequately deal with and which also arose when title XX was about to go into effect is the question of day care staffing standards. The compromise worked out for title XX was to recognize that the 1968 Federal interagency day care requirements (FIDCR) were controversial, perhaps even questionable public policy. Consequently, an appropriateness study was mandated by Congress, due in July 1977, which was intended to lead to changes. Until that time the statute provides that the standards, as modified by title XX, should be in effect. Unfortunately, the statute also made the sanctions for noncompliance much more severe than had been the case under the old program. States and many day care providers reacted strongly to the possibility that the standards would actually be enforced and began petitioning Congress and the Department to delay implementation, which was granted until January 31, 1976. Now these standards are in effect and providers not in compliance are subject to audit exceptions.

The administration's position on this issue is quite simple and is embodied in the title XX block grant proposal; namely, that States should be free to set and enforce their own day care staffing standards, a right and responsibility they now exercise with respect to teacher-pupil ratios in public schools. This was a central issue on which the President vetoed H.R. 9803, the day care staffing standards bill, last April 6. And it was after a strenuous debate on this issue that the Senate sustained that veto.

A second confrontation on this issue is now at hand in the form of Senate amendments to H.R. 12455. This bill has the appearance of a "compromise" on the standards, but it is not, for it fails to address adequately the central issues outlined in the President's veto message on H.R. 9803. The new bill, as you know, suspends the controversial Federal day care staffing standards until October 1, 1977, but in a way that signals that the Senate believes this issue will ultimately be decided in favor of Federal, rather than State, power in this area.

In effect, the Senate amendments would only suspend this issue, rather than deal with it. The President asked for a simple suspension of the standards until October 1 of this year to give the Congress ample time to resolve this issue once and for all within the context of the title XX bloc grant proposal.

Mr. CORMAN. Excuse me, Mr. Secretary. I hate to interrupt but I may never have another chance to ask this question, in view of your time limitation. I understand the President's objection is to the standards we are holding him to, not the money involved.

Secretary MATHEWS. Yes, sir, he does have the feeling that

Mr. CORMAN. I have the feeling if we took the money out of the bill, he might sign it; is that correct?

Secretary MATHEWS. I couldn't give you definite assurance at this point but you are correct in assuming that a great objection, the principal objection is to inflexibility of the standards. The standards call into question whether we really know that those ratios are appropriate and they call into question the role of the Federal Government in setting these ratios when it has long been recognized in our practice and in our Constitution that the States set all other kinds of ratios. So you are correct in assuming that is true.

Now in regard to that issue, and in regard to the action of the Senate recently, the Senate amendments also would provide, I believe, some $375 million over the next 17 months-the same amount provided or presupposed in the vetoed H.R. 9803.

We have some problem with that. The logic of that escapes us. If these standards are to be suspended for 17 months, we wonder why the new money is needed. And if that money is to be regarded as a startup cost to help States prepare for the imposition of some form of Federal standards following the study 17 months hence, what is it. that we're asking the States to startup for, since we have not concluded the study or made the recommendation. So the logic behind the $375 million escapes us, particularly in light of the suspension of the provisions that the $375 million was to pay for.

We strongly oppose these amendments and if this bill receives final congressional action in a form which does not adequately address these issues that I have addressed here, it is quite likely that I will recommend its veto. The States want-and they should have-the right and responsibility to determine for themselves the most appropriate staffchild ratios for day care services. The Federal Government does not have a monopoly on concern for children or on expertise in this area. A fourth issue which title XX does not adequately resolve concerns the Federal monitoring of expenditures in State and local social services programs. I am sure you are all familiar with the many and frequent disputes that have arisen over the validity of past and present claims for Federal reimbursement for these programs. How to avoid continuing conflict is, of course, a difficult question and the department does not have an easy answer. However, the block grant would move both the Federal Government and the States to a more solid footing by having the States assume the first line responsibility for monitoring of expenditures and doing so by an independent agency that could give an assessment. This would allow the States flexibility while strengthening accountability. This we believe is a more appropriate posture.

I will now review more specifically the provisions of H.R. 12175 and our reasons for proposing them.

First, the bill would authorize expenditures of social service moneys as a block grant, that is. Federal money not contingent on a State's ability to commit its own or local money for this purpose. The administration believes that States should not be forced to tie their moneys to Federal strictures and to Federal services. This does not mean, however, as some predict, that there will necessarily be widescale cutbacks of State money devoted to social services. Rather, as

most States have social needs which cannot be met by Federal moneys alone, there will be significant pressure to continue funding at present levels. We have heard from a number of Governors that since they now spend more for social services than is necessary to gain Federal funds, it is not likely that the aggregate expenditures will fall below the present matched level.

Second, H.R. 12175 would remove from title XX a number of restrictions on how social service moneys may be spent, principally in the areas of health, education, and residential care. These are grey areas where it is often difficult to distinguish in practice where a social service leaves off and where these other kinds of service begin. For example, in long-term care, States are often constrained by the title XX statute from funding creative alternatives to allow people to remain in community-based care. And in services to the mentally retarded, the boundary between a social service and developmental education is very hard to draw. H.R. 12175 would allow States the flexibility to meet their own service program needs as they see fit.

Third, H.R. 12175 proposes, as I have noted, that States set day care standards in accord with their own priorities rather than in response to national mandates. The bill strengthens both those provisions which make States accountable for their enforcement once standards are set. The issue of inappropriateness, which many States have used to explain why they have not enforced the national standards, would be removed. The result, we believe, would be a higher overall quality of programs since State standards would be monitored much more rigorously than thy are at the present time.

I have noted here that we fully intend to complete the day care standards appropriateness study mandated under title XX-but with an eye to publishing suggested guidelines for the States to consider in drafting their standards, not with an eye to pronouncing a set of Federal standards.

Fourth, H.R. 12175 would continue and strengthen-the public planning process which is the heart of title XX. The first year's experience indicates that the social service programs have been more open and more responsive to citizen involvement than before.

Fifth, H.R. 12175 would place the State itself in the role of monitoring its own fiscal and programmatic operation. An independent State audit agency would conduct an annual audit and assessment of program implementation, reports of which would be made public. The department would, of course, retain the right to enter a State to check to see that these procedures are not abused. We believe such a public audit process would result in programs which are more accountable than is the case when States are responsible mainly to the Federal auditors.

Sixth, under this bill, there would be a $101 million increase in 1977 funding for title XX services and State and local training over what is expected to be expended under current law that year. That increase, coupled with enhanced State flexibility and the removal of cumbersome Federal restrictions, will augment the resources of States to provide more and better, and better targeted, services to meet the most pressing needs of their citizenry.

By contrast, the Senate amendments would breach the title XX limitation by adding hundreds of millions of dollars for the highly dubious purpose of potentially enforcing extremely controversial day

care standards-and would pull along State and local matching funds in their wake in pursuit of this misdirected objective. The block grant proposal, instead, would contain no earmarked funding, would remove the requirements for State matching funds, and would encourage States to identify and resolve their priority needs as they see them.

Seventh H.R. 12175 would substantially modify the title XX eligibility provisions at once to insure that the bulk of Federal service dollars are targeted for services to those most in need and to give States maximum flexibility. This would be achieved under the bill by requiring that 75 percent of the Federal funds be devoted to those either eligible for or in receipt of welfare, medicaid or SSI benefits or whose income is below the poverty line. For the balance of the Federal funds, and any State funds that are devoted to services, States would be free to provide services, with or without fees, to any income level population.

It should be noted that while present law mandates that an amount equivalent to half of the Federal title XX funds be devoted to categorically eligible people, States are actually spending nearly 75 percent of their funds on this income group.

As you know, the Senate amendments to H.R. 12455 would take this program in quite the opposite direction in that they would eliminate entirely the concept of Federal eligibility limitations on services funded under title XX. If the Federal Government has any role at all in shaping the direction of social services programs, that role is to insure that Federal funds are targeted to those most in need of help. To expunge that concept from Federal law, as the Senate amendments would do, would be to alter radically the very nature of this program and bring into question the underlying rationale for its existence.

Rather than take this fateful step, we hope the Congress will reject these provisions of the Senate amendments and will adopt instead the language of the House version of H.R. 12455 which would, in effect, permit those few States now using group eligibility for certain services to continue to do so until October 1 of this year-time for the Congress to act definitively on the question of group eligibility within the context of the administration's proposal. Under H.R. 12175, as you know, group eligibility would once again be available to those States wishing to employ this concept for certain services.

We are confident that if this proposal is adopted, the strengthened public planning and accountability processes would effectively prevent the kinds of abuses which led the Congress to reject group eligi bility in the context of title XX.

And finally, before answering questions, I want to emphasize that our commitment to the concept of federally supported social services programs is very real, or we wouldn't he before you with a proposal that not only increases the actual amount of Federal support for these services but also removes burdensome statutory and regulatory strings which consume dollars which might otherwise be devoted to provision of services.

I would hope that the debate on this proposal will focus on its underlying premise that the Federal-State partnership should be just that, a partnership, and no more.