MAY 1, 1959. Hon. JAMES E. MURRAY, Chairman, Subcommittee on Education, Senate Committee on Labor and Public Welfare, Senate Office Building, Washington, D.C.

Mr. Chairman and members of the committee, the National Education Association has asked me to submit to your subcommittee a statement in reply to the request Senator Lister Hill made on February 5, 1959, for information on the probable effects of the maintenance-of-State-and-local-effort provision (sec. 8) of Senate bill 2.

This bill would distribute $25 per school-age child to all States during the 1959-60 fiscal years. The amount would be increased to $50 per child during the second year, to $75 per child during the third year, and to $100 per child each year thereafter. Although these are uniform payments per child, their impacts vary considerably from one State to another. The $25 per child payment would have amounted to 16.8 percent of the estimated total public-school expenditures in Alabama during the 1958-59 fiscal year, but only 4.8 percent of the estimated public-school expenditures in New York. Thus, the first year's payment would permit an increase of public-school expenditures varying from 4.8 percent in New York to 16.8 percent in Alabama, with an increase of 7.6 percent in the national average. The proposed payments do not exceed amounts which the States could expend wisely and efficiently for better schools.

After 4 years the Federal contribution is expected to vary from approximately 15 percent to approximately 50 percent of the total public-school expenditures among the States. The average is expected to be about 25 percent of total school expenditures for the Nation as a whole. Such support would have a substantial impact upon public education and could lead to significant gains in the quality of education, provided States and local districts continue to make a reasonable effort to support schools.

Senate bill 2 seeks to assure continued State and local tax effort for public schools by the "maintenance of State and local financial support for schools" provision contained in section 8. This provision is similar to a provision found in several former Federal school support bills. These bills provided for a reduction in the amount of Federal support if the percent of personal income devoted to education in a State fell below the corresponding national average. Under such provision, if a State spent only 2 percent of its total personal income for reduction and the average State spent 2.5 percent, the Federal allotment would be reduced by 20 percent.

Section 8 of Senate bill 2 provides for a reduction in Federal support for schools in a State if the combined State and local tax effort in that State falls below the national average State and local school tax effort. The allocation to a State under Senate bill 2 would be reduced by the percentage (if any) by which its "school effort index" is less than the "national school effort index." The bill defines a State's "school effort index" in terms of the amount of public-school revenue it raises from State and local sources as compared with its fiscal capacity to pay as measured by the personal income of its people. Specifically, the State-school-effort index of any State for a fiscal year is the quotient obtained by dividing the revenue a State raises for public schools from State and local sources by the number of children in average daily attendance in public elementary and secondary schools. The quotient so obtained is then divided by the personal income of the people in the State per school-age child. Expressed as a formula the school-effort index for any State is:

The effect of this formula is more readily apparent if it is rewritten with elements regrouped as follows:

From this statement of the formula it is apparent that the State-school-effort index is the product of two factors: The first is essentially the percent of personal income devoted to public schools in the State and the second is the ratio of the school census to the public-school average daily attendance in the State. It is helpful to note that if in all States the same percentage of school-age children attended public schools, the second factor would have no significant effect.

Essentially, the maintenance-of-effort provision penalizes a State if the percent of personal income in that State devoted to education falls below the national average, but an adjustment is made so that a State in which a large proportion of children attend private schools would not be required to devote as great a percent of its personal income to public education.

To avoid inflicting the penalty for lack of effort before a State has had opportunity to bring its school tax effort up to par, the penalty is postponed until after the third year of the program.

Table I, II, and III (based on official figures from the U.S. Office of Education and the U.S. Department of Commerce) illustrate how the maintenance-of-effort formula would have operated during the 3 school years 1951-52, 1953-54, and 1955-56. Table IV summarizes the computed effort indexes of the States for these years.

Although figures are accurate for past years, they have only limited predictive value. It will be observed that since 1955-56, some States have increased substantially their tax efforts for schools. Personal income has advanced faster in some States than in others. In some States the effort to support public schools has lagged behind increases in personal income since 1955-56.

Table IV shows changes in the school effort indexes of the States from 1951-52 to 1953-54, and to 1955-56. One State shifted from 2.1 percent above the national average in 1951-52, to 26.4 percent below the national average in 1955-56. Wide shifts within 2-year periods are also evident from some States. These changes emphasize that penalties to be operative upon States 3 years hence under this bill will depend upon action to be taken by States in the immediate future.

Table IV clearly illustrates that it is possible indeed for a State which relaxes its tax effort to lose a substantial portion of the funds which would be provided under Senate bill 2. Such losses are necessary, of course, if the penalty for lack of effort is to be effective.

Again, it is emphasized that these tables cannot predict the effect of the maintenance-of-effort formula on any State 3 years hence, when the provision is scheduled to take effect. However, these tables show clearly that section 8 of the bill would be effective as an incentive to encourage States to maintain a reasonable effort to support their public school programs, thus assuring that the added Federal support will supplement and increase the total funds available for public schools.

In other Federal aid programs other methods of accomplishing this objective have been used. The highway support program has provisions restricting the amount of highway-user taxes which may be diverted to nonhighway purposes. The welfare programs inaugurated during the 1930's usually had provisions requiring States to match Federal funds on a dollar-for-dollar basis. The excessive burden which this plan imposed upon low-income States was alleviated in the hospital construction program which called for a reduced State contribution from low-income States.

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FEDERAL SCHOOL GRANTS TO STATES

Provisions to assure continued State participation have been a part of most successful Federal-State finance programs, but the provisions used to accomplish this goal have differed from time to time and have been tailored to fit each program. In my opinion the approach used in section 8 of Senate bill 2 is admirably suited to the broad purposes of the bill.

I am grateful for the opportunity to express to your committee my views on Senate bill 2.

Respectfully submitted.

ERICK L. LINDMAN,

Chairman, Department of Education,
George Peabody College for Teachers.

NASHVILLE, TENN.