probably the premier or pilot State endeavor in both community development and housing?

Do you feel that other States have learned how to avoid those pitfalls?

Governor MILLIKEN. Mr. Lundine, certainly the lesson of New York has not been lost on other States in the country. It has not been lost on Michigan, and I can better, I think, cite the example of Michigan which is also typical of a number of other States where we have been able to develop a housing authority program which is totally solvent, which has done really a magnificent job in getting low-income, moderateincome housing where it is needed throughout the State, and particularly in our urban areas.

And I think it is unlikely-I don't see the prospects in any other State of which I have any knowledge where we have the potential possibility of duplication of the very difficult problems that New York got itself into.

Mr. LUNDINE. You said you had a billion dollars of authority in your housing finance agency in Michigan. You are not having any trouble marketing those securities?

Governor MILLIKEN. None whatever. And not only not any trouble marketing, but at very favorable rates.

I might observe, as you already know, that in 1976, for example, the State housing finance agencies across the country accounted for more than 75 percent of the total construction, new construction, in the low-income areas under section 8. And I think that is a good example of how the States have been able to modernize their procedures and to mute their basic problems.

Mr. LUNDINE. I agree. And in fact the State-sponsored projects are working a whole lot better, or are getting financed a whole lot more easily, certainly than the private market, for a number of reasons that we could debate.

But what I am interested in is that you indicated that the 20,000 unit set-aside for section 8 for State housing agencies is not adequate. Would you like to suggest an amount that you think would be adequate?

Governor MILLIKEN. I have indicated that 33,000 units, in our judgment, as we look at it through the eyes of the National Governors Conference, would be a desirable level to establish.

Mr. LUNDINE. You think that is the most that States could probably utilize?

Governor MILLIKEN. I would say it is probably the minimum, and we could very well absorb even more responsibility. But I would hope that at the very minimum it would go from 20,000 to 33,000 units.

Mr. LUNDINE. One final question, returning to community development for just a minute. I still don't understand the role that you envision for the States in allocation of the metro community development program.

Putting aside, for a moment, the nonmetro discretionary balances, are you saying, by using the word coordination, that the city of Detroit should not get a block grant until the State of Michigan signs off?

Governor MILLIKEN. I am not saying that at all. I am saying that the State of Michigan increasingly is involved in cooperation with the

city of Detroit in many activities. Millions of dollars are flowing from the State of Michigan into Detroit in various programs that have recently over the last 2 years been adopted. I am saying there has to be greater cooperation among all levels of government.

Mr. LUNDINE. I would be interested in anything that you have from your perspective in Michigan, or that the National Governors Conference has, perhaps in writing, on what we can do to make that role effective.

Governor MILLIKEN. We will be very happy, Congressman, to follow through on that request and see that not only do we have the Michigan recommendations but that they reflect the whole conference. Mr. ST GERMAIN. Mr. Wylie?

Mr. WYLIE. Thank you, Mr. Chairman.

Welcome to the subcommittee, Governor Milliken. We are glad to have you here. I'm not sure that I understand the thrust of your proposal, now, after Mr. Lundine's question.

You are not suggesting that the State of Michigan or the State of Ohio have any particular role as far as the program for the city of Columbus is concerned, are you?

Governor MILLIKEN. I am suggesting that the States have a very major role in the discretionary balances outside of the entitlement. cities.

Mr. WYLIE. So that wouldn't have any particular effect on the city of Detroit in Michigan?

Governor MILLIKEN. Except to the extent that the States' overall priorities can be a factor in the actual expenditure of the funds in Detroit and elsewhere. It is our hope that cities like Detroit consider State priorities in determining how Federal funds will be spent.

Mr. WYLIE. Well, you could do that through your State legislative appropriations process, I would assume. You could look at the needs of the city of Detroit and say most of those needs are provided for in the area of housing, at least, by the Federal Government and therefore they don't need as much as some of these nonmetro area communities might need, and allocate in that manner.

Governor MILLIKEN. That is one way.

Mr. WYLIE. Without taking the Federal Government role into. account necessarily.

Governor MILLIKEN. I guess it is impossible not to take the Federal Government role into account. And I would hope that the Federal Government can take the States' priorities and its role into account as it functions. It is a two-way approach.

Mr. WYLIE. I understand generally what you are saying. It has to be an overall plan for each State, which would be drafted and approved in partnership with the Federal Government, the State and the local communities as far as that is concerned.

But you are primarily interested in the nonmetropolitan areas right now, aren't you?

Governor MILLIKEN. That is our primary interest. Yes.

Mr. WYLIE. I think Garry Brown asked this question: Do you favor the Ford proposal which generally went to the nonmetropolitan areas as far as housing needs are concerned, or do you favor the Harris proposal which is a modification of that and would take into account smaller communities in metropolitan areas?

Governor MILLIKEN. I would hope the Ford proposal, on that particular point, could be adopted by this subcommittee and by the Congress.

Mr. BROWN. Will the gentleman yield?

Mr. WYLIE. Of course I will yield.

Mr. BROWN. I thank the gentleman for yielding.

I think it is the Governor's position, and I know it is my position, that there is such a commonality, if I could call it that, of the needs of smaller communities in the nonmetropolitan areas, and smaller communities within the metropolitan areas. All of them are subject to discretionary funding. They could be combined, and the State could play a particularly significant role in either one of two ways: Either the State just assumes the function that HUD is presently performing in that area of approving discretionary grants, or through the giving of funds, in effect, to the States, and then let the funding in the smaller communities be an eligible activity of States. So there are a couple of different ways.

But, in any case, we are not talking about hold harmless or entitlement. We are not talking about central cities or entitlement cities over 50,000. We are talking about all of those others that today are really out in left field insofar as the whole program is concerned.

Mr. WYLIE. Well, I thank you for adding that. And that is the way I had understood it a little earlier until Mr. Lundine propounded his question.

But the city of Columbus, which I represent, for example, would be very unhappy with the proposition which would say that the State of Ohio would have anything to do with their block grant program. They think they do a pretty good job, and I think they do, too, as a matter of fact. I think the administration there at the local level knows more their needs, and if they had to go through the State for any kind of approval, they would be, as I say, most unhappy about it.

Mr. BROWN. If the gentleman would yield further, I would say it is a political impossibility.

Mr. WYLIE. Well, I would think it would create all kinds of problems. That is the point I was going to make. If you had the city of Columbus competing with the city of Cleveland and the city of Youngstown, I don't think you would ever get very much done. Every city would feel it would not get its fair share.

So, I think it would be a real difficult proposition, a Pandora's box, for someone to administer the State program. Do you agree with that? Governor MILLIKEN. Yes, I do.

Mr. WYLIE. Have the States carried out their Statewide housing rehabilitation loan programs satisfactorily in your judgment, Governor?

Governor MILLIKEN. I can only speak again in Michigan in that respect, and I think we have. We have a very good program going. Mr. WYLIE. If the Federal section 312 loan program provided for the State administration over smaller city areas

Governor MILLIKEN. How did you start the question again?

Mr. WYLIE. If the Federal section 312 loan program provided for the State administration in rural and smaller city areas, do you think the States would be able to perform that responsibility satisfactorily? Do you favor such a proposal?

Governor MILLIKEN. Very much so.

Mr. WYLIE. Thank you very much, Governor. Thank you, Mr. Chairman.

Mr. ST GERMAIN. Governor, I would like to make an observationthanking you for your testimony today-I remember when we were having hearings on LEAA, when you were Lieutenant Governor, and you testified pro-LEAA. And in separate views that I wrote on that particular report, I paid tribute to your efficacy as a witness by quoting from you and your appearance at the hearings at that time.

I don't know if that was ever brought to your attention, but it was one of the highlights of your career. [Laughter.]

Governor MILLIKEN. Thank you, Mr. Chairman.

Mr. ST GERMAIN. Governor, we do thank you and the National Governors Conference for vour contribution. There may well be questions from Members who could not attend. Some of them may have questions as well as the chairman of the Housing and Community Development Subcommittee, who is unfortunately in a dentist's chair right now. But he usually has quite a few questions, and they may well be sent to you for a reply.

Governor MILLIKEN. Thank you very much.

Mr. ST GERMAIN. At this point I would ask Representative Patrick A. Sweeney to come to the witness table. Also, I would ask our old friend, Mr. Floyd Hvde, would you also come as an old hand at this? Mr. Hyde can proceed, I'm sure.

Representative Sweeney, you have been very elaborately introduced for the record, and we want to welcome you. You are testifying on behalf of the National Council of State Legislatures, and we will put your entire statement in the record, and you may proceed.

STATEMENT OF HON. PATRICK A. SWEENEY, MAJORITY LEADER OF THE OHIO HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES

Mr. SWEENEY. Thank you, Mr. Chairman and gentlemen of the committee.

I come here as a representative of the National Conference of State Legislatures, a public interest group comprised of some 7.600 State legislators and their staffs, and also the Ohio House of Representatives, where I serve on the Housing Subcommittee of the Economic Affairs and Federal Relations Committee.

The National Conference of State Legislatures is very much in support of the community development block grant program. We endorse the proposal to enhance the funding. We also support the targeting of those funds to economically depressed areas.

I want to make it unequivocal that the National Conference of State Legislatures does not want States to involve themselves in anv passthrough, governance over, or vetc power over the entitlement funding of block grant programs to local governments. We do. however, express disappointment today with the noticeable absence of involvement with the States, and I would like to denart from the prepared text and respond to a section of Secretary Harris' testimony that did not support the State administration of the nonmetro area funding as recom

mended by President Ford. She is going to hold that in abeyance pending further policy review.

I would suggest, though, Mr. Chairman, that this subcommittee has the ability to make that kind of judgment. And I think we, in the State governments, would like to know if in fact we are going to participate. The link that is missing between the State, local, and Federal relations is the point that disturbs both the National Conference of State Legislatures and, as expressed by Governor Milliken, the National Governors Conference.

The States are only allowed today to have discretionary grants. Yet no State has received a grant for technical assistance activities. Few States had their applications funded, and they were specifically for projects sponsored by a State for a community. States are eligible to participate in the program. However, HUD has just not funded many State-sponsored programs.

Many States have undertaken their own community development programs and are becoming active in these issues. Many State legislatures have recently established committees dealing with housing and urban affairs.

Most States now have departments of community affairs. For example, the Ohio Department of Economic and Community Development provides a number of services, including interlocal cooperation and coordination of State activities, local planning assistance and regional planning coordination, and housing.

Thirty-nine States, including Ohio, have a State housing finance agency. States are providing direct assistance for new housing construction and for rehabilitation of existing housing. In addition to that, many States have been able to give tax incentive capabilities to local government to encourage their own capability to expand housing. States are providing funds for public services and for capital improvements to arrest declining neighborhoods and provide a base for viable economic activity.

Other State legislatures are considering alternative neighborhood preservation efforts, such as incentives for reinvestment, tax credits for rehabilitated housing, and tax credits for industries generating employment opportunities in depressed areas.

Both the executive and the legislative branches of State government are becoming more active in growth management activities in their States. Several States have a well-articulated strategy for economic development. Massachusetts, for example, has indicated its goal of utilizing existing infrastructure and revitalizing its central cities in any State growth management strategy. Other States are targeting their public investment programs to economically declining urban areas in order to reverse their conditions.

The fact that States have undertaken these activities on their own initiative compounds our disappointment with the States exclusion from the community development program. It further hampers States from realizing their role in coordinating community development programs with a State growth strategy or in coordinating Federal with State efforts.

It is important. then, that the Federal and State community development activities be dovetailed to improve the cities' capacity to help