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I am pleased to hear you say what you are doing in the school system there.

Chairman PERKINS. Mr. Miller?

Mr. MILLER. No questions.

Chairman PERKINS. Mr. Mottl?

Mr. MOTTL. Mr. Chairman, no questions.

Chairman PERKINS. I want to thank you gentlemen very much for your appearance here this morning.

Senator DOMENICI. Thank you, Mr. Chairman.

Mr. HUXEL. Thank you.

Chairman PERKINS. We now have a couple of Congressmen, the Honorable Andrew J. Hinshaw of California and Mr. Burgener. Will you gentlemen come up at this time?

Just go right ahead.


Mr. HINSHAW. Mr. Chairman, my name is Andrew Hinshaw. I am a Congressman from California. Sitting beside me is Clair Burgener, also of California.

We are Congressmen in two districts which are contiguous in the southern California area of Orange County and San Diego County.

There are three school districts which are affected. Then in addition. to that there is a school district which is affected in my own district in Orange County.

What we would like to do with the chairman's permission is to give a brief overview of the broader picture of section II, which is the only portion we are talking about here, and get into a few of the details.

Mr. BURGENER. Mr. Chairman, members of the committee, we deeply appreciate this opportunity to present what we hope will be a relatively minor problem to the committee but a very major problem to our school districts.

If you will forgive me if I make mistakes in numbers-and they certainly will not be intentional-but it is my understanding that there are some 16,000 school districts in the United States roughly. There are some one-fourth of that involved in impact aid, Public Law 874.

But in section II, which is the subject to which we address ourselves today, there are only some 170 in the Nation, which would really be closer to 1 percent of the school districts in the Nation. And of those Mr. Hinshaw and I have three that are most directly affected.

Section II does not have to do with A and B children who live or whose parents live or work on or off the base. They have to do with real estate. And they have to do with a majority of the school district's land being in a Federal Establishment.

We represent the communities of Oceanside and Fallbrook and the great Marine base at Camp Pendleton is the area in question.

Under Public Law 93-380, I understand is H.R. 69, we think and we hope that inadvertently section II somehow got seriously affected and we hope unintentionally so.

The amount of money to fund section II at 100 percent would b about $11 million. If we got 60 percent of that money we would b getting $6 or $7 million.

So the money we are talking about is $4 or $5 million, in that range But a majority of that or a large part would come to these 170 schoo districts throughout the country.

So when the Fallbrook School District for example, probably S percent of all the land has been acquired by the Federal Governmen since 1938 and is in the school district. So that is the basic problem.

Maybe what we are seeking would require a change in the law. W don't know. We would ask our counsel to help us later on that. It may be beyond the capacity of this committee to make the change without legislation. We don't know that.

So I call on Mr. Hinshaw to give you some of the figures.
Thank you, Mr. Chairman.

Chairman PERKINS. All right.

Mr. HINSHAW. Mr. Chairman, dealing with just section II only fo the Fallbrook Union School District, which is an elementary schoo district, to receive 100 percent of funding they would have received or have been receiving $565,000.

Under the tier 1 provision of existing law, 93-380, they receiv $141,250.

Under tier 2 they receive $197,750 for a grand total of $339,000.
This means a loss to that school district of $226.000.

When we recognize that the enrollment in that elementary school district is 2.840 students that is an operating budget for that school district of $3,818,000.

With the loss of $226,000 under the changed provisions of section II that means that is a loss of 6 percent of the operating budget, solely to this provision of the law.

When we go to the Fallbrook Union High School District we find under tier 1 they are getting $110,750 and under tier 2, $155,050 for a grand total of $265,800.

Previously at 100 percent it would have retained $443,000.

This means there is a loss over the previous year of $177,000.

In that high school district they have an enrollment of 1,700 students. They have an operating budget of $2,808.000. A loss of $177,000 is 612 percent of the operating budget due solely to the loss of this section II money.

In the Oceanside Unified School District under tier 1 they would get under the existing law $312,500.

Under tier 2, $437,500, for a grant total of $750.000.

At 100 percent funding they would receive $1,250,000. That means a loss to this unified school district of Oceanside of $500,000.

Mr. Chairman, I should point out that the assessed value of the land only at Camp Pendleton, Calif., a Marine base in California which Mr. Burgener has indicated was acquired since 1938, the total assessed value of that land in the school districts is over $50 million and there are 128,000 acres on that base.

We have a tremendous impact on just these three school districts, as you can see, losing fantastic percentages of their budget.

Mr. Chairman, I also do not know whether it will require a change in the law but it doesn't seem to me possible that for such a small fraction of impact aid the change in the law would have such a dramatic

impact on school districts in an urban area as well as in somewhat of a rural area.

Mr. Chairman, I thank you for the opportunity of appearing before the committee today. I sincerely hope that we can solve the dilemma of the school districts in this respect.

Chairman PERKINS. Let me thank you gentlemen very much for your appearance here this morning.

We will do our best to see if we cannot correct some of these inequities.

Mr. BURGENER. Thank you, Mr. Chairman.

Mr. HINSHAW. Thank you.

Chairman PERKINS. Our next witness is the Commissioner of Education, Dr. Bell.

Go ahead, Dr. Bell. We would like for you in general to depart from your prepared statement and give us the reasons why you have these cutbacks and are considering only current expenditures, whether you are going ahead with considering debt service and all these things. Just go ahead.

[Prepared statement of T. H. Bell follows:]


Mr. Chairman and Members of the Committee: It is my pleasure to appear before you this morning to review the status of the changes in the Impact Aid Program called for in P.L. 93-380, The Education Amendments of 1974, and to discuss the Administration's proposed changes in the law for Fiscal Year 1976. The Education Amendments of 1974 have revised substantially the P.L. 874 authorization language. Entitlement formulas and methods of making payments are drastically changed. As a result, what was a complex law has become even more complex and confusing to both applicants and administrators.


The major implementation problem for Fiscal Year 1975 relates to the question of equalization. As you know, a provision exists in Section 5(d) (2) of P.L. 874 which prohibits States from taking impact aid payments into consideration when determining eligibity for, or the amount of, State funding. Because of this prohibition, school districts in some States received payments under the State aid program and under P.L. 874 which in some cases result in windfalls. To Counteract the adverse effects of this prohibition Congress has added via P.L. 33-350 a means whereby this prohibition may in effect be waived in cases where States have a viable equalization program.

Under Section 5(d) (3), a State is permitted to take into consideration SAFA payments to a school district in the determination of State aid under a State aid program designed to equalize expenditures among local educational agencies. The SAFA payments may be taken into account in determining relative resources or relative need for purposes of the State aid program but only (to use the statutory language) "in proportion to the share that local revenues covered ander [the] State equalization program are of total local revenues".

In order to implement this amendment, the Commissioner is required to promulgate regulations containing standards for determining which programs of State aid qualify for the exception. Members of my staff have worked hard to develop these regulations from a number of alternative approaches. We set forth ar tentative approach to the problem in a so-called "concept paper" which was shared and discussed with representatives of affected state educational agencies, local educational agencies, and other interested persons, as well as with interested congressional staff members. We are now considering comments received in connection with drafting the actual notice of proposed rulemaking for clearance within the Office of Education and the Department.

Under our current thinking, a State aid program would be evaluated under Section 5(d) (3) in terms of a basic standard which would measure the degree of disparity in revenue or expenditure per pupil among local educational agen

cies in the State. If such disparity was no greater than 20 percent, then the pr gram would be deemed to qualify for the exception and SAFA payments cou be taken into account for the affected districts but only in the proportion allowe by the statute. In the calculation of the disparity, allowance would be made f expenditures for children with special educational needs so as not to adverse affect a State aid program which took such needs into account in its distributic of State aid. If the program did not qualify under this so-called "disparity" tes but the State could show that the application of that standard to the progra was inequitable because of peculiar circumstances related to expenditures in tha State, then the program might, nevertheless, qualify under a set of evaluativ criteria which would take into account such matters as the degree of schoo revenues equalized, whether education expenditures were predominantly a fun tion of school district wealth, and the like. Provision, of course, would be mad for administrative determinations and hearings.

In our reflection on this subject, we have been guided by indications in th legislative history that the Section 5(d) (3) exception was not to be "widel used" and that the Commissioner should make "very careful and deliberate deter minations" in granting exemptions (H.R. Rept. 93-805, at 42-43). In addition our views have been refined as a result of comments on our concept both from affected State and local educational agencies and congressonal staff. We wil move as quickly as we can to place in the Federal Register a notice of propose rulemaking which will permit all parties to react formally to our regulatory pro posal. At the conclusion of the rulemaking process, we will be in a position t make determinations under Section 5(d) (3), including determinations for thos several States which were previously found out of compliance with Section 5(d) (2).


A number of other important changes are scheduled to go into effect in FY 1976. These include:

Creation of several subcategories of “A” children;

Exclusion from A and B categories children whose parents are employed out side the State of the school district (but school districts must continue to survey and claim these children for possible eligibility under one of the hold-harmless clauses);

Counting all children who reside on Indian lands in the A category regardless of the employment status of their parents;

Establishment of new subcategories for B children to provide varying local contribution rates for children who reside on Federal property only, those whose parents are employed in the same county as the school district, those employed out of the county but in the same State, and those in the Uniformed Services Addition of a payment for handicapped children of parents in the Uniformed Services in both A and B categories equal to one and a half times the usual rate if a special program for their educational needs is being provided;

Provision of three tiers for making payments when appropriations are not sufficient to provide full entitlement;

Authorization of payments for low-rent housing children in the first and third tiers but not in the second. Such payments must be used for programs and projects designed to meet the special educational needs of educationally deprived children from low-income families;

Modification and extension of assistance for decreases in Federal activities; New hold-harmless provisions (two of which begin in FY 1975).

While we agree with some of these changes, and. in fact, include them in our own bill, we do anticipate major administrative problems with the majority. Entitlements

I shall try to illustrate the complexities of computing an entitlement for a local education agency by referring you to the chart we have supplied each member. The upper half of the chart shows the various categories of "A" children and entitlement assuming a uniform local contribution rate of $500. The lower half of the chart reveals the various "B" categories of pupils in the same manner. In this illustration a school district would be entitled to the dollar amount times the number of pupils in each category or subcategory. If the district has 25 percent or more of its Average Daily Attendance comprised of "A" category pupils it is entitled to 100 percent of the local contribution rate of each subcategory "A" pupil.


It is even harder to determine how much a district should receive in payment. The Act calls for three levels or tiers of funding. The first tier provides for 25 percent of the funds for each category of entitlement including children residing low-rent housing. Template No. 1 shows the first tier funding. Template No. 2 stows the second tier funding. This is authorized only if sufficient funds are avillable to fully fund each of the categories. Tier 3 would fund each category proportion to the amount of unpaid entitlement if appropriations were insufflGet to fully fund all entitlements.

Estimated requirements for regular entitlements in Fiscal Year 1976 and the payment tiers are attached. In order to estimate payment tiers, it was necessary to place all low-rent housing pupils in the "B" category even though we are certain that some qualify as "A" students because we believe that some Uniformed Services personnel and some employees working on Federal property reside in low-rent housing. Although this causes an inaccuracy in the table showing estimated entitlements, it may be necessary to retain all low-rent housing pupils in the "B" category for both entitlement and payment purposes in order to monitor the funds.

Another complication in the tracking of funds will occur with the handicapped Cad of the Uniform Services parent residing in low-rent housing, or the handicapped child of the Uniformed Services parent residing on Indian lands.

The table reflects rough estimates especially of pupils "in-county", "out-ofCounty", and "out-of-State." We hope to refine some of the estimates soon by Ting a newly-created Property Certification Automated System—perhaps as early as late March or April,

The amendments creating new subcategories of "A" and "B" children present mejor administrative problems especially with regard to our present automated yment system. For example, where formerly two computations were necessary to compute entitlements for "A" and "B" children, now at least 21 separate eputations must be made. This large number is essential in order to treat the subcategories differently in the second and third payment tiers, identify amounts for low-rent and handicapped pupils, and determine amounts for use in the various hold-harmless provisions. Formerly there was only one additional smputation (for proration) following the entitlement computation. Now there will be four, one for each of the three payment tiers and the total. Moreover, the present computer form which details the computation of entitlement, prorated entitlement, and payment and which is sent to the applicant along with his check, to Congress for notification, and to the States, undoubtedly will expand from one to two pages. The computer can, of course, accomplish these computaties without difficulty once it has been programmed and tested for accuracy, E this total process which includes collection and verification of data and processing of applications will make it difficult to pay local educational agencies en a timely basis.

Another action consuming time and manpower will be the necessary explaining to applicants and State Departments of Education by visit, telephone inquiry, and letters, in more detail than can be provided by a computer form, the basis of entitlements, payments provided in the various tiers. amounts provided by the hold-barmless provisions, and/or reasons for ineligibility under any of the provisions.

Hold-harmless provisions

There are four new hold-harmless provisions which:

Guarantee minimum payment of 80 percent or in cases where 10 percent or more Federally connected children are involved 90 percent of previous year's pument to all applicants;

Guarantee minimum payment of 90 percent of previous year's entitlement to school districts losing 10 percent or more Federally connected children during FY 1974 and FY 1975 due to decrease or cessation of Federal activities affecting military installations announced after April 16, 1973;

Guarantee minimum payment of 90 percent of previous year's payment for "B" children if the number of out-of- county and out-of-State "B" children is at last 10 percent of total “B” children; and

Guarantee the difference between payment received from an appropriation shared with low-rent housing pupils and the payment that would have been received if the appropriation were not so shared.

The first two of these provisions are applicable in Fiscal Year 1975.

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