Consider conditions in Idaho. Over 34 million acres or two-thirds of the total land area of the State is federally owned and therefore not on the tax rolls. In some districts the percentage of Federal ownership is as high as 80 percent.

According to the "Commissioner on Education's Sixteenth Annual Report on Administration of Public Laws 874 and 815," published June 30, 1966, applications from Idaho for Public Law 874 funds in fiscal 1966 were claimed against about 21 million acres of eligible Federal properties. This acreage figure closely approximates the total national forest acreage in the State or over 40 percent of the total land area. Forest funds apportioned to Idaho schools in fiscal 1966 equaled about $370,000 and Public Law 874 funds paid to Idaho that year equaled about $2.4 million. These total $2.770 million.

A Forest Service study in 1962 showed that the estimated yearly tax revenue from national forest lands in Idaho if these lands were on the tax rolls would be $5.3 million. Discounting the fact that by 1966 this estimate would have become higher, it is still abundantly clear that, if these lands were not federally owned, there would be considerably more money available to school districts.

Local taxing in Idaho distributes as much as 80 percent of revenues to education. If $5.3 million were added to the sums already collected from the present private property tax base the aggregate which could be released from schools would be substantially higher than the $2.770 million contributed by the Federal Government in recognition of the effects of its ownership.

Public Law 874 payments to Idaho schools do not begin to meet the full cost of educating the federally connected children. The table entitled "Idaho Public Law 874 Applicant Districts" prepared by Idaho Deputy Superintendent of Public Instruction Harold Farley and submitted to this hearing by Senator Church graphically illustrates that in nearly every applicant district the percent of 874 students to total students is substantially higher than the percent of 874 funds to current expenditures.

The point I wish to make is that it doesn't make real sense to speak of double payments when the aggregate of Federal payments made with respect to Federal property is woefully inadequate to do the job such payments are intended to do.

Mr. Chairman, let me emphasize that the districts affected by the change in deduction requirements are the very districts which are fighting merely for financial survival. They can scarecly hold the line, much less indulge in the luxury of planning to upgrade programs. Further, the areas affected are making a strong local tax effort. Some are levying the maximum allowed under State law. With the narrow tax base impelling high taxes on such private land as is available, bond issues are understandably a monumental task to pass. The deduction amendment which would take over $178,000 away this year imposes new hardships on districts already in a constricted financial position. They can ill afford any losses.

Part of the difficulties facing these districts this year are the direct result of the timing of congressional action on education matters. Public Law 89-750 was signed into law in November. The school districts had completed their planning for 1966-67 the preceding April. They had no chance to anticipate the revenue losses resulting from the new

deduction amendment. I do not believe it was ever the intent of Congress to penalize these districts in this way. Therefore, in the interests of simple fairness we should suspend for the 1967 fiscal year the new deduction requirements under Public Law 874 approved last year.

But we should also try to provide for the future. In consultation with the Office of Education on this matter we have agreed that future deductions of "other Federal payments" should be made on the basis of the same ratio that local tax funds are allocated to maintenance and operation. This formula gives some credence to the proposition that double payments should be disallowed, but it will reduce the losses in M. & O. funds incurred under the law as it presently stands and allow for planning on the basis of reasonable projections for revenues which can be used for capital outlay. We believe this formula will be more equitable than the present deduction of all "other Federal payments" from Public Law 874 entitlements.

Senator Church in his statement has included a number of letters which provide evidence of the favorable sentiment for S. 382 among officials of the Idaho districts affected. I do not wish to belabor this point by adding more of the same to the record, but I do want to point out that my correspondence corroborates the sentiments which the letters to my colleague express.

In conclusion, let me underscore the need for rapid action on this bill. This fiscal year is rapidly drawing to a close and in order for the 1 year suspension of the deduction requirements to take effect in time, the measure if it is to be approved, must be approved prior to June 30. I respectfully urge the subcommittee to give quick and favorable consideration to S. 382. I thank the subcommittee for allowing me to offer my views on this urgent matter.

I request that House Joint Memorial 3 passed by the Idaho Legislature be included in the hearing record.

H.J.M. No. 3

A joint memorial to the Honorable Senate and House of Representatives of the United States in Congress assembled

We, your Memorialists, the members of the Senate and the House of Representatives of the Legislature of the State of Idaho, assembled in the Thirty-ninth Session thereof, do respectfully represent that:

Whereas, Public Law 874, as amended, has provided Federal funds to school districts for Federal impact students whose parents live and/or work on Federal property within a state's boundaries; and

Whereas, for sixteen years the Federal government has considered payments of funds to school districts on the basis of school district's current expenditures as a basis for fund payments; and

Whereas, the Eighty-Ninth Congress amended Public Law 874 in November, 1966, after school districts' budgets had been committed for major expenditures for the school year and districts would have no opportunity to replace funds which are reduced due to the amendment requiring that all funds received from property claimed be subtracted from available funds if one thousand or more dollars are received from property of Federal ownership; and

Whereas, Idaho State Law requires that funds received by school districts from Federal Forest cuttings be expended for capital outlay items and this type expenditure is usually committed for school construction and equipment early in a school year: Now, therefore, be it

Resolved by the Thirty-ninth Session of the Legislature of the State of Idaho, now in session, the Senate and House of Representatives concurring, That the Congress and the President of the United States are respectfully requested to delay the effective year of the amendment until the 1967-68 school year, which will give school districts an opportunity to make budget income adjustments: be it further.

Resolved, That the Chief Clerk of the House of Representatives, be authorized and he is hereby directed to immediately forward certified copies of this Memorial to the President of the United States, and to the Senators and Representatives in Congress from this state.

This joint memorial passed the House on the 6th day of February, 1967. PETE T. CENARRUSA, Speaker of the House of Representatives.

This joint memorial passed the Senate on the 8th day of February, 1967.

JACK M. MURPHY, President of the Senate.

I hereby certify that the within House Joint Memorial No. 3 originated in the House of Representatives during the 39th session of the Legislature of the State of Idaho.

DRYDEN M. HILER, Chief Clerk of the House of Representatives. Senator KENNEDY of New York. Would you comment, Mr. Lillywhite?

STATEMENT OF B. ALDEN LILLYWHITE, ASSISTANT COMMISSIONER FOR SCHOOL ASSISTANCE IN FEDERALLY AFFECTED AREAS, OFFICE OF EDUCATION, DEPARTMENT OF HEALTH, EDUCATION AND WELFARE

Mr. LILLYWHITE. Mr. Chairman, I have been introduced for the record at the beginning of the hearing and it was stated also that the prepared testimony on the bill, S. 382 would be inserted in the record.

I see no reason to take very much time, but I would like to summarize a couple of things from the statement, and will do it just as briefly as possible. There are a lot of payments made to local government bodies on account of various kinds of federally owned property and taxes on private improvements on federally owned property. When Public Laws 815 and 874 were enacted, their purpose was to alleviate burdens on local school districts, most of which were caused by Federal property. It was felt advisable to deduct from the entitlement computed from a school district these other Federal payments and that was done in the law.

There were some problems developed after the law was in effect about a year. One amendment was made to deduct shared revenue payments only to the extent of the entitlement computed with respect to children on the Federal property. That was not done for tax payments. In 1957 another amendment was made because it was found so difficult in some cases to tell when we should or should not deduct, particularly in things like TVA payments. The amendment was that the deduction would not be made unless the funds were received and the district actually had them available for current operating expenses.

Districts began, after this amendment went into effect, to transfer the money to capital outlay, and therefore it wasn't available for deductions. One State, Idaho, went so far as to pass a law requiring school districts to put all money into capital outlay, therefore avoiding all deductions. They could avoid putting into capital outlay only if they certified they didn't need any more school facilities.

One other problem that developed was the expenses of administering-some of these amounts are as low as $25 or $30 and you have to go up to the Treasury office to find out where they are. The school district didn't know where they came in.

Then there was dissatisfaction with the differences in the way some of these school districts were treated under the shared revenue payments and the tax payments.

So last year the administration recommended a number of amendments to 815 and 874. Some of them were minor and technically designed to improve administration and avoid minor inequities.

The deduction provision had three things: One, treat taxes and payment-in-lieu-of-taxes the same as shared revenue payments in making deductions.

Two, make no deductions if the amount was under $1,000; and three, it eliminated that "actually available" language, to prohibit the school districts from avoiding the deduction.

Now, we think that is proper, but the amendment was not enacted until November 2. The school budgets were made in May and June, and in some places earlier. They had operated on the other basis for several years, they didn't know there was going to be a change when they set these budgets.

S. 382 was designed to defer for 1 year that amendment. The administration takes this position: If the Congress wants to alleviate this burden on the small number of school districts, we have no objection. The deferral is only for 1 year. The Church bill also provides a slightly different method of making the deductions when it is picked up July 1, 1967.

The Church bill defers two of the provisions that were made last year; one that would help the district and the other that would prevent this avoidance of the deduction.

We feel that we can improve the language of S. 382. We have talked to both Senator Jordan and Senator Church. They agree with this objective completely. We have drafted language to accomplish the following: Defer only the one amendment for the current year and keep the other two in effect. All three of them would go into effect next year, but we would make a slight alteration in the method of making the deductions after July 1, 1967. I would add one other thingSenator KENNEDY of New York. Place that in the record at this point.

(The proposed language of the bill follows :)

PROPOSED TEXT OF S. 382 AS RECOMMENDED BY OFFICE OF EDUCATION, DEPT. OF HEATH, EDUCATION, AND WELFARE

A BILL To amend Public Law 874, Eighty-first Congress, with respect to the amount to be deducted from payments pursuant to such law on account of certain Federal contributions

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) subsection (e) of section 3 of the Act of September 30, 1950 (Public Law 874, Eighty-first Congress), is amended to read as follows:

"CERTAIN FEDERAL CONTRIBUTIONS TO BE DEDUCTED

"(e) (1) In determining the total amount which a local educational agency is entitled to receive under this section (other than subsection (c) (4) thereof) for any fiscal year ending prior to July 1, 1967, the Commissioner shall deduct (A) such amount as he determines that agency derived from other Federal payments (as defined in section 2(b)(1)) and actually had available in such year for current expenditures, but only to the extent such payments are not deducted under the last sentence of section 2(a), and only to the extent the payments are made with respect to property on which children, counted for

purposes of this section, live or on which their parents work, and (B) such amount as he determines to be the value of transportation and of custodial and other maintenance services furnished such agency by the Federal Government during such year.

"(2) In determining the total amount which a local educational agency is entitled to receive under this section (other than subsection (c) (4) thereof) for any fiscal year ending after June 30, 1967, the Commissioner shall deduct"(A) the greater of (i) such amount as he determines that agency derived from other Federal payments (as defined in section 2(b)(1)) and actually had available in such year for current expenditures, or (ii) an amount which is the same percentage of the total of such payments in such year as that percentage of such agency's total revenues from local taxes in such year which was used for current expenditures, but only to the extent such payments are not deducted under the last sentence of section 2(a), and only to the extent such payments are made with respect to property on which children, counted for purposes of this section, live or on which their parents work; and

"(B) such amount as he determines to be the value of transportation and of custodial and other maintenance services furnished such agency by the Federal Government during such year.

"(3) The Commissioner shall make no deduction under this subsection from the entitlement of any local educational agency for any fiscal year in which the total amount to be deducted from such entitlement is less than $1,000."

(b) The amendments made by this section shall be effective as of July 1, 1966. Mr. LILLYWHITE. I would add one other thing, the draft bill was just completed this morning. It has been sent to the Senators, they haven't had a chance to review it. My statement refers to the fact that they are entirely in agreement with what it was intended to accomplish.

Senator KENNEDY of New York. That will be fine, we will be happy to have their comments on it.

(The information referred to follows:)

MEMORANDUM FROM OFFICE OF EDUCATION RE STATEMENT EXPLAINING THE SPECIFIC EFFECT OF THE CHURCH-JORDAN BILL AMENDING PUBLIC LAW 874 AS MODIFIED BY LANGUAGE SUGGESTED BY THE OFFICE OF EDUCATION

When Public Law 874 was originally enacted, it provided that there should be deducted from the gross entitlement of any applicant school district "other Federal payments" as defined in the Act to determine the net amount that should be paid to the district. The term "other Federal payments" means payments in lieu of taxes, and any other payments, made with respect to Federal property pursuant to any law of the United States other than this Act. It was appropriate to make these deductions; otherwise, school districts would receive double payment for the same Federal property.

An amendment approved in 1958 provided that "other Federal payments" would not be deducted from P.L. 874 entitlement unless they "were actually available for current operating expenses." A number of school districts began the practice of setting these funds aside for capital outlay purposes thereby avoiding the deduction because they were not available for current operating expenses.

In fiscal year 1966 the Administration recommended and Congress enacted a number of minor technical amendments to both P.L. 815 and P.L. 874 that were designed to remove inequities and improve administration. One of three amendments relating to deduction removed the "actually available for current operating expenses" language put in the Act in 1958, thus preventing districts from avoiding the deduction by not making the Federal payments available for current operating costs. This amendment, effective for the 1966-67 school year, because law on November 3, 1966, by approval of P.L. 89-750. It required the Office of Education to deduct from P.L. 874 entitlements for fiscal year 1967 all "other Federal payments" received by school districts even though this requirement was not in effect when school budgets were adopted for the year.

S. 328 as modified by substitute language defers this amendment for fiscal year 1967 permitting the deduction provision to stand as it was when school budgets were prepared for the year. It also provides that when this deduction