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Mr. BAILEY. In discussing that matter yesterday it was brought out that last year you were able to cut into the backlog by about 1,800 classrooms.
Mr. FLEMMING. That is right.
Mr. BAILEY. The statement was made yesterday that this year you were expecting to cut into the extent of 7,000.
Mr. FLEMMING. That is correct, bringing it down to about 133,000. Mr. BAILEY. What is the ratio of bonds being sold comparable to what they were a year ago? Are they continuing to vote bonds? What is the comparison?
Mr. FLEMMING. Do we have that?
Mr. Bailey. What are they doing in that in the way of voting bonds, comparable to what it was a year ago, in classrooms? Has there been an increase or falling off ?
Mr. FLEMMING. Mr. Flynt tells me that there was a slight falling off in the fall but that now it has resumed at approximately the same rate that prevailed last year. So that we feel that that estimate of a reduction of 7,000 is a reasonably firm estimate. Of course things can enter into that which would destroy the estimate. But on the basis of the information that the States have given us we think there is a good chance.
Mr. BAILEY. Thank you, Doctor.
Mr. BRADEMAS. I understand, Mr. Secretary, as a result of this terrible fire out in Chicago, that a number of school districts are taking a second look at their classrooms and that the result of this new look may well be a higher rate of condemnation than would otherwise be the case. I wondered if you have any comment to make on what impact that devleopment might have on the school shortage problem?
Mr. FLEMMING. I might say this: That I personally hope that they will do just that. Really, not enough time has elapsed for us to get any information which we could use statistically to determine whether or not that was going to affect the shortage picture or the backlog picture. But of course let us see, when will that be reflected ?
Mr. FLYNT. Next autumn.
Mr. FLEMMING. The next autumn reports would really be the first that that would be reflected in. But I am sure that some of that will go on and I hope it will go on because it is very important for it to happen and that may move this backlog up some.
Mr. LAFORE. Will the gentleman yield?
Mr. Secretary, is it not true that that would probably be more in the form of repairs than it would be in new construction?
Mr. FLEMMING. Yes; although in some instances they might decide that the total building was in such shape that it ought to be condemned. But I agree with you, I think in many instances it will be a decision to put in safety features in the existing building, but in some cases they probably would condemn them.
Mr. Chairman, my purpose of this statement that I made up to the present time is simply to point up the fact that we believe this would produce 75,000 additional classrooms and that by and large this is
the sáme number of classrooms that would have been provided under the other bills that have been reported out by this committee.
I would also like to make the point that the present administration program also provides for just as much help to any needy school district us would have been provided under prior prosopals. The only major differences between this new program and the previous proposals concern (a) the period of time over which the Federal and State funds are paid out, and (6) the provision in the new program for termination of such assistance if a district ceases to be needy.
In addition, Mr. Chairman, there is the provision that you and I talked about the last time.
Mr. BAILEY. You are not serious about that?
Mr. FLEMMING. No; I am just being accurate now in saying that in the bill there is this additional provision, which proposes that a school district which has received Federal-State debt service advances on a school construction bond issue should repay such advances, if the bond issue has been retired to the extent that improvement in the district's financial situation may make such repayment possible. But I will say what I said the other day if in the judgment of the committee it would be just as well to drop that particular section I would have no objection from my point of view.
Any school district, therefore, which could qualify for help under previous proposals could qualify under this proposal. Any such school district, moreover, provided that it continues to be in need, will receive just as much help under this proposal as it would have received under previous proposals.
Now I would like to just for a few minutes go into just a little more detail as to how the program would work and I am going to do that by taking three different examples.
These examples group school districts applying for Federal-State assistance, under the administration school construction proposal.
First of all, let us take school districts that are unable to finance any of their new school construction needs from their own resources. Assume that the State, a particular State, has determined, in accordance with its approved State plan, that a reasonable tax effort for school district A to exert in financing its school construction needs, is 13 mills on the equalized assessed value of real property taxable by it, and let us assume further that the value of such real property is $1 million so that the 13 mills tax would produce revenues of $13,000 per year. Now, school district A that we are talking about here has already incurred indebtedness for school construction, the debt service on which is $13,000 a year. And it is levying a tax of 13 mills to meet this debt service.
If this particular school district has an urgent need for a new school building, the construction of which would cost a half million dollars and if it has priority over other school districts applying for aid, and meets all other requirements of the proposed law, it would qualify for a Federal-State debt service commitment to advance the principal and interest on the entire $500,000 in bonds it issues to finance the construction. This is so because the exertion of its reasonable tax effort of 13 mills would not produce sufficient revenues over and above the revenues required to meet its outstanding debts to meet any of the debt service on the $500,000 it needs for new construction.
Mr. BAILEY. Let me interrupt there.
Mr. FLEMMING. Yes.
Mr. BAILEY. What about the legal entanglements at that point? For instance, yesterday in the discussion I pointed out the fact that West Virginia has a State sinking fund commission. When a school district gets ready to submit a bond issue it must get a clearance from that sinking fund. How could that sinking fund
clear that proposed new bond issue when it provided for levying a certain number of mills which would be in excess of the legal amount permitted under our constitution? How could they get by the sinking fund commission in order to issue these bonds when they have no bonding capacity left?
Mr. FLEMMING. This refers to the local school district.
Mr. FLEMMING. That is that the local school district does not have any leeway to issue additional bonds. As I pointed out
Mr. BAILEY. Would it not take legislation on the part of the State legislature to clear up some of it?
Mr. FLEMMING. I think it would. As I pointed out the other day, if you got a situation where a school district can not issue bonds because it has already reached its debt limit imposed by the State constitution or by laws, we feel that the school district could still participate if either the State modifies the constitution or statutory debt limit or the State sets up a school building authority or permits the local school districts to set up local authorities through which necessary funds can be secured to finance the construction outside the constitutional or statutory debt limitation. Under this alternative the Federal and State governments would undertake to advance the debt service on bonds issued by the state or local authorities to finance the construction costs of needy school districts.
You appreciate, Mr. Chairman, there are quite a number of States where this kind of action has been taken. Just offhand I would think that might be possible in the situation that confronts West Virginia. But you are right it would call for action on the part of the legislature in order to do it.
Mr. Chairman, if I could take just the two other illustrations that I have here. This particular illustration deals with a situation where the school district is unable to finance any of the new school construction needs from its own resources. Take the second category where the school district is unable to finance a portion of its new construction needs from its own resources.
Assume that school district B is similar in all respects to school dis trict A except that (a) the annual debt service on its outstanding obligations for past school construction aggregates $7,000 rather than $13,000, and (6) it is currently levying a tax of 7 mills to meet the debt service. Since by levying a real property tax of 13 mills on its $1 million tax base it could meet its debt service on outstanding obligations and have $6,000 to spare, it would be required to assume so much of the cost of the $500,000 construction project as it can finance with this $6,000 annually. If it can market its bonds at an annual debt service charge of, say, 6 percent, it would be able to finance $100,000 of the project cost unassisted. Accordingly, school district B would be required to finance $100,000 of the construction cost itself unassisted, and the balance of $400,000 would be financed by bonds covered by Federal-State debt service commitments. District B would
be required to increase its tax levy from 7 mills to 13 mills for the life of the $400,000 bond issue, plus 10 years. The revenues produced by the 13 mills would be applied both to the debt service on its old debts and to the $100,000 borrowed to finance the new project.
Then if I might take just the third category.
Mr. BAILEY. There, Doctor, that could be met by the district voting the remaining part of its debt levies, say that $6,000 annually, they would vote additional bonds and make it a part.
Mr. FLEMMING. That is right. In other words, they would be in a position where out of this $500,000 cost with their existing resources they can handle $100,000. The remaining $400,000 would be covered under this plan.
Then to take the final category, a school district that is able to finance all of its school construction needs from its own resources. Assuming that school district has the same outstanding annual debt service charges as school district A, namely, $13,000, but has an equalized tax base of $4 million instead of $1 million, its reasonable tax effort of 13 mills on this tax base would produce annual revenue of $52,000 which would be more than enough to finance its existing debts as well as the $500,000 project, assuming it can market its bonds at an annual debt service cost of 6 percent of the principal amount. School district C therefore would not qualify for Federal-State assistance under the bill.
In other words, those illustrations are simply designed to point up how it would operate where the school district had exhausted its resources as judged by a reasonable tax effort, a situation where they had just partially exhausted their resources and a situation where they had not exhausted their resources.
Mr. BAILEY. I am kind of sorry you brought that angle of it into the testimony because it is going to cost us some votes in the Congress because there are going to be a lot of districts say, “We are not getting any benefit from it.”
Mr. FLEMMING. Mr. Chairman, I appreciate the fact that this is the philosophy that underlies
Mr. BAILEY. We have to be honest.
Mr. FLEMMING. That is right, and this is the philosophy that underlies this bill. It is an effort to pinpoint the district that is making a reasonable tax effort and is unable to do anything more but that still had a need and it is that particular district that this program would assist.
Mr. BAILEY. Mr. Brademas.
Mr. BRADEMAS. Mr. Chairman, I wanted to ask the Secretary a question in that connection, if I may.
Mr. FLEMMING. Yes.
Mr. BRADEMAS. Your bill places great stress on assistance to needy school districts. I have here some examples of how much Federal assistance under this proposal would go to a single classroom in each of several States.
For example, Alabama--and I might interrupt myself to say that these figures are taken from the amount allocated in the bill and based on figures in the fall report of the Office of Education on classroom needAlabama would get on this basis $741.50 for each classroom. Michigan, $1,135, North Carolina, $3,892.50, and Wisconsin would get $16,656 of Federal assistance for each classroom which is
Mr. FLEMMING. Could I interrupt, Mr. Congressman? Mr. BRADEMAS. Surely. Mr. FLEMMING. You are assuming an equal distribution throughout all of the school districts of the State ? Mr. BRADEMAS. Yes.
Mr. FRELINGHUYSEN. All the classrooms that have been built or need to be built. What are your bases again?
Mr. BRADEMAS. No. The basis of this question of mine is this: These figures are based on the classroom need throughout the State, as indicated in the Office of Education report to which you referred
Mr. FLEMMING. Yes.
Mr. BRADEMAS. To which you referred earlier. And I am using this blue sheet of yours here, Mr. Frelinghuysen, that indicates how much money would be allocated to an entire State. My point simply is this: I think that the answer to the question is that some States do not need as much help as other States, that is to say, there is far less of a classroom shortage in the State of Wisconsin, for example, than in the State of Alabama.
Mr. FLEMMING. Of course. I think we have to start back with the way in which this total amount of proposed capital construction would be allotted to the States, and as you appreciate, the bill that we have submitted and has been introduced calls for that allocation to be based on school age population, income per school age population, and effort up to the present time so that that does result in a difference in the allocations to the various States based on those three factors. We felt that those were three factors that it was equitable to introduce in the picture in working out the allocations.
Mr. FRELINGHUYSEN. If I could understand Mr. Brademas' basis for his figures, the comparison between the different States, is it my understanding that in effect there is no need in Wisconsin! I have forgotten what the State was that you said would get a fairly large dollar amount per classroom needed, and that there is a big need in Alabama, so à program should aim to send most of the money to Alabama instead of the State that does not need it, is that your basic contention?
Mr. BRADEMAS. The question I was raising is that there seems to be quite a gap.
Mr. FRELINGHUYSEN. Again I do not understand just how you arrived at this $700 figure in one case and $391. The amount is in the form of bonds that could be issued in each State and then you divided that amongst the number of classrooms.
Mr. BRADEMAS. That is the idea.
Mr. FRELINGHUYSEN. Actually $600 million is not the dollar amount that is going to be distributed by the Federal Government in any case.
Mr. BRADEMAS. That is the total, is it not ?
Mr. FRELINGHUYSEN. The amount of bonds that could be supported by the State-Federal debt service. So it is a meaningless figure so