D. Evaluation of Alternative Bridging Provisions The comparisons of Table I and II indicate significant differences between the allotments which certain states would receive under the current formula This situation implies that, and under the two recommended alternatives. if either new formula were introduced immediately, some states would experience substantial reductions in their allotments, while other states would experience substantial increases. Though either of the two recommended formulas will ultimately distribute funds more equitably than the current formula, it must be insured that the introduction of a new formula will not significantly disrupt the on-going VR programs in the states. Το avoid these abrupt changes, two methods by which a new formula may be introduced for FY 1976 were considered. 1. Hold-Harmless Funds. Apply the new formula to the total 2. Five-Year Transition. Over the next five years, apply the dered. Initially, two alternative "hold-harmless" methods were consiIn the first hold-harmless method, the new formula was applied only to the increment in Federal funding after FY 1975, and each state was guaranteed to receive, as a base, an amount equal to its FY 1975 allotment. The second hold-harmless method was described in (1) above. The latter procedure is equivalent to allocating new funds only to states that would gain under a new-formula, no-hold-harmless allocation. The former procedure was discarded, since it represented a slower transition to the new formula. Since Standard Formulas 1 and 2 are similar in their allotment characteristics, the properties of each transition method have been illustrated only for Standard Formula 1. The results will be quite similar for Standard Formula 2. Clearly, if no growth occurs in the total allotment, the "holdharmless" transition procedure results in no change in the allotments - the new formula never has any effect. Table III illustrates the effect of Because of the declining rate of increase of VR allocation funds, it is unreasonable to depend solely on program growth to bring about the transition to a new formula. Tables IV and V indicate, for the "Five Year Transition" procedure, the transition from the current formula to Standard Formula 1. Table IV assumes a "no-growth" situation, in which the total allotment remains at $680 million for the next five years. Table V assumes a "moderate/optimistic" growth of $60 million per year in the total allotment. |