ELIMINATION OF "b" PAYMENTS

Mr. Stokes: According to the budget justification, you propose to terminate payments for "b" children; why?

Ms. Dorsett: Payments under Section 3 of the Impact Aid program are intended to compensate school districts that are burdened as a result of Federal activities. The Department proposes to eliminate payments for "b" children, who either reside or whose parents work on Federal property or are in the uniformed services, because the presence of these children does not create a significant burden for their school districts:

O Their parents contribute to State and local tax bases from which educational expenditures are funded at almost the same rate as the parents of non-Federal children. They pay property taxes, sales taxes, and frequently income tax.

Economic benefits from Federal activities generally accrue to the community at a much higher rate than school expenditures increase because of the presence of these children.

BASIS FOR "b" PAYMENTS

Mr. Stokes: Specifically, what are the eligibility requirements for "b" funds, and how many and which children fall into this category?

Ms. Dorsett: To be eligible for funding under Section 3(b), a school district must be providing a free public education to children who either reside on Federal property or reside with a parent employed on Federal property or on active duty in the uniformed services. The district must have an average daily attendance of at least four hundred "a" and "b" children or a number of "a" and "b" children equal to at least three percent of the total number of children in average daily attendance in the district, whichever is the lesser.

The number and types of "b" children for fiscal years 1986 and 1987 are shown below:

Mr. Stokes: How much was awarded to this category in fiscal years 1986, and 1987, and what is the fiscal year 1988 estimate?

Ms. Dorsett: Recent appropriations for "b" payments are as follows:

Mr. Stokes: Over the years, how have the "b" school systems utilized these funds?

Ms. Dorsett: Funds under Section 3, including funds for "b" students, are awarded directly to school districts where they are usually commingled with State, local, and other funds and used for general operating expenses that benefit all students enrolled in the district. However, the additional funds provided for handicapped children or children with specific learning disabilities must be used for programs and projects designed to meet the special educational and related needs of those children.

BURDEN OF "b" STUDENTS

Mr. Stokes: To what extent has the agency assessed the burden of "b" students on local school districts; elaborate.

Ms. Dorsett: The Department has not conducted a formal assessment of the burden of "b" children on school districts. However, we do know that real property taxes are paid either on the place of employment of the parents or the place of residence of the families of "b" students. These families also generally pay other types of taxes at the same rate as non-federally connected families. In many instances, the Federal activities "b" families are connected with generate more revenue to their communities than the educational services for "b" children cost.

PAYMENTS RELATED TO LOW-RENT HOUSING

Mr. Stokes: The budget justification states that payments for children in low-rent housing would continue but at a reduced rate of no more than 15 percent of entitlement; what impact will this have on the students served and the school systems providing service to these needy students?

Ms. Dorsett: The Congress has specified in recent annual appropriation acts that payments for "a" children who reside in federally subsidized, low-rent housing be made at no more than 15 percent of entitlement. Therefore, this provision should have no impact on these students or their schools. The Department has proposed to continue this congressional policy for 1989 because the presence of these children in a school district is generally not a direct result of Federal activities.

REDUCTION IN REQUEST

Mr. Stokes: A $128.498 million cut, an 18.7 percent decrease, is proposed for Impact Aid Maintenance and Operations; why such a drastic cut?

Ms. Dorsett: The Department is requesting a total of $557.0 million for Maintenance and Operations activities for 1989. This includes $547 million for payments for "a" children (an increase of $10.8 million over the 1988 enacted amount) and $10 million for Section 2 payments for Federal property (a decrease of $5.3 million from the 1988 enacted amount). The elimination of payments for "b" children accounts for most of the $128 million reduction in the overall 1989 request.

Mr. Stokes: What impact will this have on the areas served?

Ms. Dorsett:

We expect the proposed funding level to have a minimal impact on the areas served.

CONSTRUCTION ACTIVITIES

Mr. Stokes: How many of the approved applications for the Construction program go unfunded due to insufficient funds?

Ms. Dorsett: There are currently on file applications for over $62 million for 105 Section 5 and 14(c) projects and applications for over $154 million for 76 Section 14(a) and (b) projects. Applications are funded in priority order and those that are not reached in the year for which they apply may remain on the waiting lists until they are funded.

Mr. Stokes: What portion of the Construction funds are allocated to "b" schools?

Ms. Dorsett: Construction funds are not allocated on this basis. Section 5 authorizes assistance for school construction in areas experiencing an increase in the number of federally connected children, that is, "a" and "b" children.

Section 10 directs the Secretary to make arrangements for constructing or otherwise providing school facilities for children who reside on Federal property where, for legal or other reasons, the local educational agency cannot spend State or local funds on the education of federally connected children.

Sections 14(a) and 14(b) authorize grants for school construction to local educational agencies that are comprised mainly of Indian lands or that provide a free public education to children who reside on Indian lands. Section 14(c) authorizes construction assistance to school districts that are comprised mainly of Federal lands and that have a substantial number of inadequately housed students.

FORMULA FOR "a" PAYMENTS

Mr. Stokes: Which current program areas would be adversely impacted by the revised Impact Aid formula?

Ms. Dorsett: For 1989, a more equitable distribution formula is proposed for payments under Section 3(a). This revised formula would still provide higher rates of payment for districts with higher proportions of federally connected children. However, the formula would contain a sliding scale with several stages at which payment rates are decreased instead of the current, abrupt transition from full funding or nearly full funding to a much smaller amount. As the chart below shows, only, those school districts with 20-34 percent "a" children and those with less than 10 percent "a" children would receive smaller percentages of their entitlements. At the same time, districts with 10-14 percent "a" children would receive somewhat higher percentages of their entitlements.

Mr. Early: Your fiscal year 1989 request proposes to eliminate payments of $5,000 or less to otherwise eligible school districts. Is this provision contained in either the House or Senate version of H.R. 5?

Ms. Dorsett: Neither the Senate nor House version of H.R. 5 contains a provision to eliminate payments of $5,000 or less to otherwise eligible school districts. However, this provision was included in the appropriations acts for fiscal years 1982-1984.

Mr. Early: How much would the Department be saving overall in fiscal year 1989 if this provision was implemented? Give estimates including and excluding payments to category "b" students.

Ms. Dorsett: The Department would not be saving money by implementing this provision because the funds not used for payments of less than $5,000 would be redistributed to increase payments to other districts.

Mr. Early:

DISASTER ASSISTANCE AWARDS

Provide for the record a list of the awards made under the disaster assistance program during fiscal year 1987, and indicate the amount of each award and whether or not it was a continuation grant.

Ms. Dorsett: The following is a list of recipients of disaster assistance and the amount of each grant for fiscal year 1987. All were new awards.