I remember talking with several people from Preston County, W. Va., recently, and they spoke of qualified teachers who live in that county, but who go across the Maryland line into Garrett County, Md., an adjoining county, to teach there because of the approximate $1,000 more a year available in salary at least in some classifications. Is that a true picture?

Mr. REEDER. That is a true picture, yes.

Of course, in West Virginia, bordered by Pennsylvania, by Ohio, and by Maryland, we have an exodus of our teachers to those States, particularly, as well as to Florida. Of this 7,500 teacher turnover I mentioned a moment ago, more than 2,000 of them have gone to other States to teach.

Since you have mentioned Preston County, I would like to cite what I consider to be a tragic situation. The superintendent of Preston County schools, Mr. Paul Watson, reported, if you recall, at our conference, Senator Randolph, that they are completely at the bottom of the barrel insofar as concerns the finding of capable teachers under existing conditions.

They had a case where the teacher had to be dismissed. The teacher was placed in a mental institution as an alcoholic.

Then they began to look for a replacement for that teacher within their county. They came up with this decision which they had to lay before the parents of that particular school. They could find no one to make the replacement, so they held a meeting with parents and said: "Now, you have this choice: We can either close your school or we can put back in your school the teacher who is a known alcoholic. He is not working, but definitely is a known alcoholic. That is the only choice that you have. It is either to close your school or return that individual to your classrooms as the teacher of your children. Of course they had to take the chance and placed the alcoholic person back in the classroom. But this sort of situation and other equally difficult problems face us in many of our counties.

Now, moving further into this particular part of our testimony, as I pointed out in summarizing Mr. Staggers' statement, from a property tax standpoint it is true that West Virginia is a comparatively poor State. Especially is this true of many of our wage earners, a condition brought on by the economic recession and the technological revolution in the coal industry which is basic to West Virginia's economy.

My purpose today, however, is not that of discussing our property values but, rather, that of West Virginia's seemingly unreachable wealth. In basic natural wealth, West Virginia is not a poor State by any measurement. That I shall show later on.

For a few minutes I should like to talk about economic literacy. This past winter I attended a national conference in which a leading industrialist from United States Steel called upon the schools of this country to develop economic literacy among our youth.

Educators do have a tremendous responsibility in seeing that each generation of youth understands and appreciates our economic structure, but always with the view of improving it for the common good of all.

In a rejoining challenge to this industrialist, I called for an economic literacy program for the present-day adult generation. That point I should like to emphasize here.

To what extent have economic practices and tax structures kept pace. with the jet age in which we live? How outdated is the financial structure for the support of local and State governmental needs as compared with the present-day patterns and flows of wealth?

I should like to use my State as the basis for an answer to these questions.

It is well established that man's basic needs consist primarily of food, shelter, clothing, transportation, entertainment, self-improvement. Prior to the turn of this century these needs of our people in West Virginia and many other States were met mostly on a local and certainly on a State basis. West Virginia grew most of its own food, made most of its own clothing, produced and equipped most of its own transportation, made its own building materials. In those bygone days our State, along with many others, was practically selfsufficient insofar as meeting the needs of its people was concerned. Naturally, the business, property, and people of those days were taxed. But practically all of the tax revenue of that era remained in the State. It remained there to serve the governmental needs of those days.

But what about today? These same basic needs and many more are met from outside the confines of our State. The automobile, TV set, refrigerator, clothing, food, building materials, furniture, appliances, books, and magazines-even the gadget items are practically all manufactured or processed by other States, and this is the important point. Within the price of these consumed products West Virginia pays to those other States a share of their taxes. From that share of taxes paid to other States there is no return for our governmental needs or for our schools.

Yes, prior to the turn of the century we produced and met our own needs, taxed what we produced, and used that tax revenue to meet the local and State governmental services. This system adequately worked for that economic period. Today most of our needs are met through the production of other States, and through the sale of those products the other States shoulder on the citizens of West Virginia and like States a share of their tax burden.

What about the business structure of West Virginia today?

In this mid-20th century our State is a producer of basic natural resource wealth. Our wealth goes out in bulk production. The great chemical production-we are the heart and center of the basic chemical production in this country-goes out in tank cars. Steel moves out on flatcars; coal goes out in railroad gondolas and river barges; apples are moved by train and truck; oil and gas by the big-inch lines. This basic natural wealth goes out in the raw and semiraw state. The extent to which we are able to shoulder a part of our tax responsibility on other States and countries of the world is quite limited.

About 5 years ago the West Virginia Education Association became quite concerned about the wealth which our State adds to that of the Nation. We began a long series of research studies. Data that would provide acceptable comparisons with other States were quite limited. Federal measurements of ability were primarily limited to the personal income series. We knew that personal income could never reflect the real wealth of our State. Therefore, we had no way of truly measuring West Virginia's real wealth. Federal statistics did not

show what each State added to the overall wealth of the Nation, nor a picture of each State's share of corporate income. You see, corporate income is reflected at the top management office level and not at the source of production.

We did not give up. We employed Dr. Walter Heller, an outstanding economist of the University of Minnesota, to do research for the purpose of measuring the basic wealth which each State adds to that of the Nation and of determining each State's share of corporate income earned. He developed for us a satisfactory measuring stick. Out of that research of Dr. Heller and the published studies of Dr. Harry Perloff, formerly of the University of Chicago, we concluded that there are four basic things that add to the wealth of the Nation aside from personal services which include salaries and wages. We left the personal service category to stand on its own because it is reflected in the income measurement.

The four basic additives to the wealth of the Nation are (1) the dollar value of the manufactured product, (2) the dollar value of mineral production, (3) the dollar value of farm production which includes lumbering, and (4) the dollar value of fishery production. The composite of these four gives a reasonably true picture of the basic wealth of this Nation as produced by each of the respective States.

We found these values of each of the 48 States and then ranked the States according to the per capita amount of such wealth added to that of the Nation. Today only 14 States add more of such basic wealth to this country than does West Virginia. Think of that. Only 14 States produce more basic wealth than does this little mountain State.

Now to the corporate income.

Through a formula developed by Dr. Heller, we ascertained each State's share of corporate income produced and earned in the United States. The States were ranked in this category. Again we find that only 15 States produce more corporate income per capita than does West Virginia.

You see there is a very close correlation between the corporate income produced and the dollar value added. We rank 15th in the basic wealth we add to the Nation, and we rank 16th in West Virginia's share of the corporate net income.

Senator RANDOLPH. Mr. Reeder, I want you to rest for just 10 or 15 seconds because perhaps it is good to have a little break. This subject is of a very interesting and intense nature.

When you talk about the dollar value, I recall a banker who was not feeling well and who went to his physician and asked for a physical examination. It was given, and when the results were made known to the banker, the doctor said, "You have no worries. You are as sound as a dollar." The banker almost fainted and said, "Is it as bad as that?"

Perhaps that dollar value you are speaking of varies at times.

Mr. REEDER. That is right. But even with its variance, you see in West Virginia's relative position within the picture of the corporate dollar earned, we rank 16th among the 48 States.

Now this is the important question:

But is that wealth reflected in West Virginia?

Not by any means. Its reflection is to be found in the State where the top-management office is located.

Yes, West Virginia is rich in the basic wealth it adds to that of the Nation. It is rich in the corporate income it produces for this Nation. But what is the degree of "fall-out" from this wealth to the people and governmental services of my State?

In the per capita income earned out of all this produced wealth, West Virginia ranks 38th among the 48 States. Compare, if you will, a rank of 15th in the basic wealth added to that of the Nation with a 38th place ranking in the income earned.

What about schools? To what extent do they share in our State's wealth?

We rank 42d in the money expended per pupil, but we rank 16th in the per capita corporate income resulting from our basic wealth. As previously stated, West Virginia's production goes out in the tank cars, coal cars, and on flatcars. Our State produces very little in the way of finished products which carry a high ratio of local and State taxes that can be passed on to others. No, we are not getting a fair share of tax yield from our produced wealth. We will never be able to get it under the prevailing tax structure of the country.

Our basic wealth provides important producing arms of giant corporations home officed in other States. Aside from wages, limited property, and-gross sales taxes, our produced wealth is reflected at the top-management office level. In fact, we learned only this winter from the internal revenue office that the income tax paid on wages and salaries earned in our large industrial corporations such as Carbide, Du Pont, International Nickel, and large coal companies is not credited to West Virginia. The withholdings are made at the production level, but the Federal tax is paid through the top-management offices which are located in other States. Therefore, the tax is credited to those States.

At this point I should like to note that any form of Federal aid, distribution of which would be based on a percent of the Federal income tax paid by the respective States, would be grossly unjust to States like West Virginia for the reasons set forth above.

What about the future? Is the prospect for our State any brighter?

The answer seems to be a negative one. As you well know, coal is the major source of our basic material wealth. The coal industry is in the midst of a technological revolution. Even before the economic slump of 1958 coal miners in West Virginia and other like coal-producing States felt the biting sting of automation. Thousands upon thousands of miners lost their jobs and thousands more are destined to lose jobs. In the peak year of the coal industry 168,589,000 tons of coal were mined in West Virginia. The peak employment was 142,095 men. From the peak year, the 1958 tonnage dropped approximately 30 percent to something over 117 million tons, but employment dropped better than 55 percent. In other words, 79,095 fewer miners are now working in the mines in our State than were employed in the coal industry at the peak year.

The coal industry itself has forecasted an eventual comeback in tonnage. However, those who are in the know estimate that the coal industry of the future will mine even greater tonnage of coal but will

do so with approximately 30,000 to 40,000 men as compared with better than 142,000 at the peak employment period.

Just think of that. We are going to be mining as much tonnage, but we are going to be doing it with not more than a third of the manpower that we employed at the peak year.

The result: The return in wages and salaries will increasingly diminish.

Can't you see what is happening to a State like West Virginia? We produce a large segment of the basic wealth for this Nation. Yet, in this jet-age wealth structure, coupled with horse-and-buggy tax principles, we cannot possibly get a fair share of our produced wealth. We, formerly were told that our produced wealth was reflected in wages and salaries. Automation in raw materials industries has destroyed any semblance of equitable return from that source. We shall

go on producing as much coal as ever in the years ahead, but we shall do it with fewer and fewer employees, which means less and less wages and salaries. It also means a greater flow of wealth leaving the borders of our State.

Yes, we live in a jet-age wealth structure while we hold on to horseand-buggy tax principles. No longer can the basic wealth of States be taxed adequately and equitably at local and State levels.

Let us consider this simple illustration. Assume that my wrist represents the home office location of the top management of a large industrial corporation, and my fingers represent the production arms of that industry, each finger representing a separate producing State. If our State or any other at the State or local level taxes its production arm too far out of proportion to what is being done to the production arms in other States we dry up future investment and industrial development. Therefore, it cannot be done at the State and local level. The only answer lies through a fair Federal taxing system which treats all production arms alike, followed by a proper distribution of the tax yield to the States of this Nation.

Mr. Chairman and members of the committee, it is upon the basis of this thesis that West Virginia makes its appeal for Federal support to education. In other words, we have the basic natural wealth that is being produced and added to the overall wealth of this Nation. But no longer under the horse-and-buggy local and State tax systems can we capture that wealth. It has to be captured at a national level where economic equity can be applied to the nationwide holdings of that industry and then the distribution of that captured tax wealth properly must be distributed to the States.

Mr. Staggers in his statement clearly has shown you the plight of the public schools in West Virginia. Naturally, similar problems of public education prevail throughout the country. No longer can local and State tax procedures cope with a jet-age wealth structure. The only answer is at the Federal level.

There is no degree of fairness to States like ours which contribute so much to the wealth of this Nation and, in return, the people get so little. Yes, in meeting our daily needs in West Virginia we pay to other States which furnish those needs a share of their taxes. Our people pay to the Federal Government their fair share of the Federal tax. All of these taxes are an outgo which yield little return for local and State services.