One of the things that has concerned me is that under the new proposals, there will be no local matching.

Now, as you well know, one of the criticisms that has been made of revenue sharing is that there is no responsibility on the part of the local government unit in securing these funds. As a result the local unit will be less careful of State funds that it does not collect from its taxpayers.

I wonder why some kind of a matching program wouldn't help meet that argument.

Next, many people felt that matching funds was a way of trying to get the local units to meet their own responsibilities.

I recognize that because of the hundreds of local programs the Federal Government often leads local governments down the primrose path in that they become involved in programs that they didn't recognize they were ultimately going to have to pick up the tab for.

Would there not be any reason for at least partial matching as a means of trying to insure greater responsibility in the part of local units?

Secretary ROMNEY. The partial matching tends to distort the use of the funds. That is the principal reason it is left out.

Where the matching requirement is involved, it doesn't result in a clear-cut decision based on priority of use.

Furthermore, the types of matching we have had where you have had soft matching principally, rather than hard matching, they haven't had to put up hard money, anyway. They have put up what they have already been doing, anyway. My experience is that the soft matching is relatively meaningless, and hard matching tends to distort the use of funds.

I think those are the principal reasons.

Senator ROTH. That would even be true under the proposed special revenue-sharing programs?

Secretary ROMNEY. Yes. I think that tends to affect it.

Furthermore, it helps those communities that are best able to help themselves more than those that have greater difficulty in meeting their need, because to the extent that they have to raise funds, why, they find it more difficult to use the Federal funds.

Senator ROTH. I was glad to read and hear your testimony on the need of simplification of guidelines and application forms.

You also made some reference, I believe, in the beginning of your testimony as to Senate Joint Resolution 52, which provided additional fund authorization for the comprehensive planning program. During the hearings we had some complaints from the local level about the extremely complex forms that had to be filled out and the time that it took to follow through on these applications.

For example, I have here a letter from the Commonwealth of Massachusetts, where it is said that for planning grant requests totaling $2.498,750 the Commonwealth of Massachusetts spent $81,293 and 611⁄2 man-years to produce the necessary 2,082 pages of documentation. We had the same kind of testimony in our hearings by Francis Francois, who is councilman of Prince Georges County, it was proposed that there be a streamlining of procedures under existing pro

grams.

Is it not possible under existing categorical grants that something couldn't be done to further simplify the application requirements?

For example, the proposal was made that HUD should eliminate all substantive requirements beyond those clearly based in the statute. It was proposed that all requirements should be drastically simplified and made more flexible, and in applying for funds, applicant should be required to submit little more than abbreviated statements of activities to be included with grants of no more than 10 pages.

My question to you, Mr. Secretary, is: Because of the extreme costs and time delay of the present application forms, is it possible—and perhaps you are doing this to set up some special procedures to drastically reduce the requirements to apply for grants under the categorical grant programs?

I know progress is being made, but can't more be done.
Secretary ROMNEY. We have reduced them greatly.

As a matter of fact, one of the first things I did was to ask the people in the department to develop flow charts showing the points of action involved in processing these various applications. And as a result of that we reduced the paperwork on our major programs by over 50 percent.

Secretary Gulledge has reduced the paperwork involved in the housing applications substantially and, as a result, has been able to get much greater production because of the fact that he has been able to get the funds out faster.

Now, Assistant Secretary Jackson is in the process of reviewing this 701 paperwork to see the extent to which they can be reduced.

Saying that it should be reduced to the statutory level is not always a very good guideline, because if you will take a look at statutory requirements, they are not always very clear. They are sometimes quite general. Consequently, you find yourself confronted with the necessity of undertaking to develop an application under the general guidelines that are given that can't be dealt with just in general terms.

But we have greatly simplified this paperwork. Assistant Secretary Hyde has greatly reduced the processing involved in community development programs.

Do you want to talk about what you are doing?

Mr. HYDE. Yes. I think it relates directly to your question, Senator Roth. The Secretary's reorganization of the Department to bring these community development grants in one place gave us for the first time. an opportunity to look at the seven, or if you want to break it down into subcategories, nine or 12, community development grants. We immediately undertook to analyze each of those as to the statutory and the administrative requirements of processing, and we were amazed-I personally wasn't amazed-but it amazed those that had been working with these programs from the Federal level, how diverse they were, for no logical reason. Now, we have completed our study of that. We are in the process of circulating recommendations for the consolidation and administrative simplification of what would in effect be literally single community development application against which each one of these grants would be measured.

Now, the difficulties we are running into, which gets to the essence of the point the Secretary has been making today, quite vigorously, is this: We can only go so far under this present system, because we have such a variety of fund recipients. It isn't the city that is applying for these seven to 12 grants. It is 15 or 20 different applicants from the

same area. And as long as that condition prevails, and this is in response to Senator Stevenson's question, we will never have effective local government, and the Federal Government itself, through the proliferation of these categorical grants, has done more to immobilize and make local government ineffective, and if we want structural reform, we are going to have to put that responsibility there, but we are going as far as we can under the existing legislative constraints, but we can't go far enough.

Senator ROTH. Well, I agree very strongly as to the need of structural reform as you are proposing today, and I also think the Secretary should take great satisfaction in the progress that his department is making, but at the same time, I would urge further simplification within the present framework. I do not think we can wait until Congress acts on the legislative proposal.

Secretary ROMNEY. Senator, in connection with the urban renewal program, for example, when we confronted this 36-month period just to process an application, we moved to the proclaimer procedure, by which the Urban Renewal Agency and the city certified that they will comply with certain requirements, and we moved on the basis of certification, but as a result we have gone just as far as we could along that line. We could only cut that time from 36 months to 15 months. There is still a 15-month period to process a conventional urban renewal application. My point is the whole process is inherently too complex. And furthermore, one of the things the Federal Government has done is to require State governments and local governments to create agencies at the State and local level that they wouldn't have created if it wasn't for the requirement of the Federal Government. We have required them to create housing authorities; we have required them to create agencies that are almost autonomous at this local level, the same thing at the State level.

At the State levels, one of the first experiences I had as Governor was he fact that the department head had the authority to require me to structure a program in a certain way and to create a certain structure within State government, even though it didn't make any sense in our State government, simply because the Federal Government had set it up that way.

Now, all I am saying is, this deals with one aspect of the situation, and we think it is a very constructive thing to do.

Senator ROTH. My time is up.

The CHAIRMAN. Did you want to say something further?

Senator ROTH. I wanted to make one further comment, if I might. I was going to ask you some questions about the SMSÁ because it has been our experience that here again we are having forced planning in areas that are not alike at all, and it makes very little sense. The only question I would like to ask you, is there any basis of relief in those situations where the SMSA is illogical?

Secretary ROMNEY. You mean planning on an SMSA basis? Senator ROTH. SMSA-wide planning. My concern is that applications are turned down where there is no SMSA planning and the socalled SMSA area is illogical.

Secretary ROMNEY. Well, Senator, I would have to know what program you are talking about. I think in most instances, where we require SMSA planning, it is a statutory requirement.

Senator ROTH. I will take that up at a later date.

Secretary ROMNEY. I will be glad to take a look into that, but as far as I know, that is the case.

In connection with water and sewer, for example, the grant has to be related to a comprehensive plan, and that is true of open space grants as well.

Senator ROTH. My original argument is that the SMSA is not always a logical answer.

The CHAIRMAN. Senator Stevenson?

Senator STEVENSON. Thank you, Mr. Chairman. I will be brief this time. Mr Secretary, let me say, we really do not disagree about the need to eliminate redtape, the need for structural reform, the need for consolidating grant-in-aid programs, and the need for latitude at the State and the local levels. I think our differences are not so much in objectives, as over methods.

There are many of us who have grave doubts about the consequences of distributing Federal money to the States and local governments without any concern for how it is spent.

Now, this proposal assumes, unlike some revenue-sharing programs, what I regard to be a very real financial need on the part of both units of local governments and the areas affected, the metropolitan areas. How does the $1.9 billion authorization you are asking for in the first year of community development revenue sharing compare to fiscal 1971 authorizations for the programs being eliminated? I understand that waters and sewers are not being eliminated. We are talking about model cities, urban renewal, and rehabilitation loans.

Secretary ROMNEY. And neighborhood facilities. That is right. First, let me say this, Senator. The money is being distributed by the Federal Government now, anyway. The issue involved here that you are raising, it is not a question of whether the State and local units of government are going to get the money from the Federal Government. They are getting the money. But they are getting it in a very inefficient way, and getting it with Federal officials telling them how it is going to be used.

Now, what I am saying is that it is not as good a system as what is being proposed, so it isn't a question of whether the Federal Government is going to make money available to the Federal, State, and local units of government. The Government is doing it.

Now, going to the second part of your question.

Senator STEVENSON. The first part was not really a question. Secretary ROMNEY. The amount of money that went into these programs in 1971 was $1,644 million, and what the President is proposing for next year is $2 billion.

Senator STEVENSON. Is that authorization?

Secretary ROMNEY. That is program levels, actual program levels. Senator STEVENSON. Do you know what the-I don't, I regret to say what the authorization level is?

Secretary ROMNEY. Well, it was greater than that, because Congress appropriated a larger amount than the President asked for in the case of urban renewal, and in the case-I think principally urban renewal. In the case of urban renewal, the Congress appropriated last year $1,200 million, and we used about $1 billion.

Senator STEVENSON. What I am getting at is the $1.9 billion authorization that you are requesting, won't get us up to appropriation levels, will it, in fiscal 1971?

Secretary ROMNEY. Senator, as I pointed out, Congress has been appropriating at a level way beyond what the administration could spend, because Congress appropriates up here, and then an outlay ceiling down here, and consequently, the President has to live within the outlay ceiling, and something has to give, and one of the things that gave was the fact that Congress appropriated more for urban renewal, so we didn't spend as much as you appropriated, but you made it impossible to do it overall. Look, the only way that Congress can establish the priorities with respect to expenditures is to keep the level of appropriations equal with their outlay ceiling. If the two differ, if the President has an outlay ceiling established by Congress, below the level that Congress appropriates, then the President has to cut appropriations to live within the outlay ceiling, and that is what has been happening.

Senator STEVENSON. It seems to me the authorization level that you are seeking is pegged to spending levels which are artificially low, for one reason or another, outlay ceilings, or impoundments, or whathave-you. I just don't see how, leaving aside the need for more money, some communities aren't going to seriously suffer and get less.

Secretary ROMNEY. Senator, that is not right, because the President has asked for more than they have been getting.

Senator STEVENSON. Is the hold-harmless provision which you were talking about earlier written into the law? Where does that come from?

Secretary ROMNEY. It is not written into the law, but it is a firm. commitment that has been given in connection with the administration program.

Senator STEVENSON. I see. Thank you, Mr. Chairman.

The CHAIRMAN. Well, Mr. Secretary, we are certainly grateful to you and those who came with you in this presentation. I think it was a most helpful statement, and it will be helpful to us in working out this legislation, and I assure you that I am hopeful that we will be able to select the best features of the bills before us and come up with a satisfactory bill.

We are not closing the hearings. We are having another day tomorrow, and then after the recess is over, we probably will have some more, and we may want you up again.

Secretary ROMNEY. Good.

The CHAIRMAN. I tell you something I would like to request. I don't want to go into any lengthy discussion of this, because I need to get to the Senate right now, but the committee is getting a great many complaints about discount points in connection with FHA mortgages. You have heard of them, haven't you? I don't know what the solution is. Goodness knows, over the years we have tried everything that we could think of, and we haven't been able to get rid of them.

Apparently, there is plenty of money in the savings institutions to provide funds for mortgages, and yet we are plagued everywhere by points.

I wrote a letter to Secretary Connally some time back and brought up this point and some other suggestions. I would like to give you a