Senator Cotton has put his finger on it, which is, these are the only funds that can go to the blood and bones and the muscle of our school districts. Your title I funds do not do it. They are additional funds.

FUNDS TO ALLOW FULL ENTITLEMENT URGED

Now, I would like to correct what I am told by one of the staff that there might have been a misimpression about my other statement. I understand that there is a present deficiency for the present year of some $44 million. The statement that I want to make with respect to my position is that I intend to support the reinstatement of all funds necessary to bring the present program up to sufficiency and I intend to support with all I can the full implementation of the law at the level that it has been supported in the past for the 1967 budget, just so there will be no mistake on the record about my own position.

If you had seen and if you had talked with these people who had searched every way they could possibly figure to finance their school districts and I have talked with several member of several districtsyou would realize, I think, that you face a real problem. But, like Senator Pastore, I think you realize pretty well that Congress may well put all of these funds back.

Senator HILL. Mr. Secretary.

EFFECT OF PROPOSED CHANGE ON ALASKA

Senator BARTLETT. I am quite interested in this program. At the outset I wanted to say that I am not playing any of the torments, many of the torments which have racked the Senator from New Hampshire. I have been for this program from the beginning out of sheer necessity, because, frankly, I do not know how Alaska would have gotten along without it. I think since 1951 that for both acts we received something like $60 million.

May I ask how this proposed change would affect Alaska?

Mr. CARDWELL. Alaska would be entitled in impacted area aid under the present formula to about $11 or $12 million. Under the proposed budget, with modifications in the legislation, this would drop to about $8.1 million.

Senator BARTLETT. Personally, I regret having had to vote for any Federal aid to education. I wish it were not necessary. I wish the local school districts could take care of it, all elements of this, and the local colleges and universities.

Obviously, they cannot do so and obviously the people of the Nation as a whole have to make a contribution to this.

But what happens where you place a great military installation adjacent to a small community? The children must be educated from the military base and this is happening in many areas, of course.

The State of Alaska has done its best in the field of education, I am sure. The percentage of the tax revenues in Alaska that are dedicated to education is close to 50 percent, was over 50 percent for a time, and I don't see any probability that a phaseout is possible in this program unless there is some kind of a substitution for a long while to come. I agree with the Senators from New Hampshire and Colorado in relation to that.

The $60 million that Alaska received under this program have been downright essential because during the time the program came into

effect, changes came from territorial status to statehood, with all of its extra money demand upon the people of that area and as the discussion has gone on here, I had thought, Mr. Secretary, if worst came to worst, I might have to ask you to come up one day and testify in favor of a bill, which I might or might not introduce, providing that the status of statehood be terminated and we be changed into not a territory as we were but a colony so that we would have an exclusively Federal contribution to our governmental upkeep.

Senator PASTORE. That would be foreign aid.

CYNICAL ATTITUDE OF EDUCATORS

Senator BARTLETT. I would like to ask you, Mr. Secretary-because your remark interested me very, very much-Why is it that educators have a very cynical attitude regarding the program?

Mr. GARDNER. I think the reasons have been quite well expressed in Mr. Kelly's earlier statement.

First, as the Stanford research study shows, there is in many areas exaggeration of the extent of Federal impact.

Secondly, there is an inequity in the way school districts are treated-those whose Federal children represent less than 3 percent of enrollment have to pay the full cost of education.

Third, the way in which the school districts use per pupil costs, using a State or National average, often permit a school district to again exaggerate the amount of aid that it should receive.

Senator BARTLETT. Is it your suggestion that in the proposal now being made these mechanical imperfections would be corrected and the amounts of money will go to the several States to which they are perhaps justly entitled?

Mr. GARDNER. Yes, sir.

Senator BARTLETT. I must disagree with that, because I think you are going to whack Alaska some $3 million.

Senator ALLOTT. You are lucky.

Senator BARTLETT. I say this very deliberately not because of the $3 million item particularly, although the burden of furnishing that $3 million will be transferred to the State and local school district and it would be a tremendous one, but it seems to me there and I am sure everyone else who has spoken here is in the same situation at home, in his home State-I don't know in Alaska, for example, of any situation where there could be a lesser amount usefully employed.

STUDIES BY PRIVATE CONCERNS

The other day, Mr. Secretary, I asked Secretary Udall a question and I would like to put it to you despite the fact that Mr. Kelly told us that the study had been made at the direction of Congress. But I am becoming more and more intrigued in that Government goes to private concerns to make studies although the expertise with respect to a certain subject may reside within Government itself.

I have in mind a few years ago an agency, a bureau, where one department hired one of these private outfits, and it cost $40,000 to make a small study to inquire into this particular study, when another bureau in the same department had the most skilled people in the world who could have been dedeicated to the job of making the study, and

I am quite confident that the particular company in this particular case hired to do the job had never heard of the subject. They had to start from the ground up.

I wonder why are we turning increasingly to outside concerns outside the Government, outside institutes. Is it with the idea that Congress is going to be more visibly impressed by what is supposed to be an objective study?

Mr. GARDNER. Sir, I can't answer that authoritatively, because many agencies are engaged in this. I can give you my guess and my philosophy on it.

I am sure that instances arise in which a study is contracted out which could have been done by a first-class Government research unit. I am equally sure that it would be a grave mistake for the Government not to avail itself of the enormous resources of this Nation in research personnel and in research institutions that are outside of Government.

One of our great strengths is that our system permits us to play back and forth between Government and the private world so that we can use the universities to the fullest, use the private research laboratories, and use the management consultant agencies; in many cases, there are far superior resources outside.

COST AND SCOPE OF STANFORD RESEARCH INSTITUTE STUDY

Senator BARTLETT. I wonder how much it takes the taxpayers to learn from the Stanford Research Institute that we ought to cut back on the impacted areas. Do you know how much the study cost?

Mr. KELLY. I do not have that information but I would like to give you the information for the record. We gave the most serious consideration to the scope of this study. It was discussed between the Department and the Bureau of the Budget for some time before the Congress directed it.

It started out with the concept of being a much broader study, a study not related just to Public Law 874 or just schools but what is the economic impact of a Federal installation in a community.

This was such a far reaching economic evaluation to get at and so expensive that in the arrangements with the Congress that led to the study, it was decided to restrict the study to the impact on schools, that is, what is the educational and economic impact and how does Public Law 874 relate to that.

We actually got the University of Maryland to assist us in designing the study so that we could send out specifications and ask for proposals as to what various organizations would do, and it is an area in which the staff of the Department of Health, Education and Welfare do not really have background for it.

It is hard for us to find within our Department a group of economists whose basic relationship is to economic impact on a community and municipal financing and State financing.

It seemed to us we would be getting a much more professional quality of study if we went outside.

(The Department subsequently provided the following information:)

The cost of the Stanford Research Institute study was $175,000. Senator BARTLETT. I am not disagreeing with you; I just wanted to get your opinions on this since I was interested in it.

When the Senator from Colorado said he was going to dedicate himself to maintaining needed monies for this impacted areas, I told myself then silenty and I will say it publicly that I will be with him. Senator HILL. Senator Cotton.

SITUATION IN FISCAL YEAR 1966

Senator COTTON. I notice that in the fiscal 1966 appropriation you got the full amount requested, $347 million being appropriated. Both the House and the Senate did so.

The statement appeared from the Senate Report that this estimate will provide 100 percent of entitlements. It fell short of 100 percent entitlement.

Mr. KELLY. Just over $41 million short.

Senator ALLOTT. That relates to the $44 million I had projected. The right figure is $41 million?

Mr. KELLY. I think it is just over $41.

Senator COTTON. I understand, of course, what the Bureau of the Budget recommends is what you abide by and that there are some rules or procedures that prevent your going behind the Budget recommendations but that does not preclude our asking about it.

Was the amount recommended by the Budget for 1966 less than what we would ask the Budget for to give 100 percent entitlement?

Mr. KELLY. Let me say, Senator, at the time that we appeared before the Congress and that the Congress appropriated the $347 million, in all good faith, we had said that this would cover full entitlement and we thought it would.

Two events occurred. The Congress enacted legislation which modified Public Law 874 and made eligible some districts which had not heretofore been eligible; and secondly, the number of students enrolled that constitute a Federal impact and the average cost per student exceeded our estimate somewhat. This explains the $41 million we had not anticipated we would need when we appeared last year.

ADEQUACY OF 1967 REQUEST

Senator COTTON. Is that the amount that you are asking for fiscal 1967 or is that amount the Bureau of the Budget has authorized you to ask for?

Here again I am requesting information which you might be precluded from presenting, but has the Budget requested what, in the opinion of your Department, is the full amount necessary for 100 percent entitlement under the new reduced formula.

Mr. KELLY. Yes, in the formula under the legislation proposed to the Congress yesterday, it has. The estimate fully covers that.

Senator COTTON. In the absence of any new legislation by the Congress that would increase demands or requirements, the amount that you are requesting under the new formula you are confident is all that you will have to request for 100 percent entitlement under that proposed new formula?

Mr. KELLY. Yes, sir; that is correct.

INFLATION OF ACTUAL COST

Senator COTTON. I would regret if anything appeared in the nature of a caustic exchange, Mr. Secretary, so I apologize for it, but I do

want to ask this: Mr. Secretary, you indicated that one reason for the cynicism and for the tendency of expert educators to find reason for joking and laughter about the impacted-area program was the fact that it forced districts to juggle their bookkeeping or falsify their accounts to get their total allowance.

Of course, I realize this would involve your predecessor, but what have you done about that falsification?

Mr. GARDNER. I am sorry, I did not use the word "falsification." Senator COTTON. You may not have used it and incidentally, I have seen these records go back for correction and a lot of things removed bodily. I trust that this full colloquy will appear because it is of extreme interest to me and it should be in the record.

I do not mean that sentences should not be corrected but I hope that these statements will not be removed. No doubt you did not use "falsification." What have they been doing?

Mr. GARDNER. They have been behaving entirely properly in terms of the law. The law permits them to use as a basis for per pupil costs the State averages or national averages and for many districts this does permit an inflation of the actual cost.

Also, as the Stanford research study shows, the whole program inplies that there is greater impact at these Federal establishments than there actually is.

Those were the two elements I was referring to. I certainly was not referring to anything concerning improper behavior on the part of school administrators.

Senator COTTON. I believe what you indicated was then that you could not wholly approve of a law that permitted and invited local school authorities to stack their needs to get the full entitlement and there are no instances where the law has been violated so far as you know.

Mr. GARDNER. No, sir; I don't know of any.

TRANSMITTAL OF STANFORD RESEARCH REPORT

Senator HILL. When did the Department of HEW conceive the Stanford research report? How long have you had that report? Mr. GARDNER. I can't answer that.

Mr. COHEN. Before last fall.

Senator HILL. This past fall?

Mr. COHEN. Yes, sir; we received the preliminary report and then the final report. I think the law required it to be submitted last June 30, and it was so submitted if my memory serves me correctly.

Senator HILL. The record shows it was transmitted on June 30, 1965.

Mr. Secretary, you may proceed.

Mr. GARDNER. Our proposals to modify this program in 1967 are aimed at bringing the level of aid more closely in line with the actual economic impact of Federal activities on local school districts.

SUPPORT FOR HIGHER EDUCATION

The enactment of the National Defense Education Act in 1958 marked the beginning of Federal assistance to students through the student loan program. Since 1959, 1.7 million loans have been made. under this program, totaling over $800 million.