I might add just one note to the earlier question that Mr. Frelinghuysen raised about the fear that the State and local communities might become irresponsible, as it were, if too much of the money comes from the Federal Government.

I think it is worth noting that even if the payments were to rise to $5 billion a year under this legisation, they would still represent only one-fourth to one-fifth of the funds being spent by the State and local communities; $4 out of $5, or $3 out of $4 would still be dollars coming out of their own tax pockets.

I just do not feel that that is a sufficient proportion really to bring in a great danger of undermining the fiber of local responsibility.

Mr. FRELINGHUYSEN. If that Federal money were a replacement of what otherwise could be normally expected from other sources, it still would be a change in the method that we have been using.

I would like to have my recollection refreshed as to who made the insinuation, and what it was, about this H.R. 22 resulting in Federal control.

Mr. UDALL. I assumed from several comments that my colleague made this morning that he felt this was both undermining responsibility and interfering with local prerogatives. I just wanted to explore that point.

If that conclusion is unfair, I would apologize for it, but I thought it was warranted under the line of the statements the gentleman made. Mr. FRELINGHUYSEN. I might say, if the gentleman is interested, that I think a subsidy for teachers would almost inevitably increase the Federal Government's interest in the adequacy of our teachers, and, to that extent, very possibly lead to an undermining of what has been local responsibility.

Mr. UDALL. My point, though, is where in this bill does the gentleman find Federal control of local prerogatives with regard to teaching?

Mr. FRELINGHUYSEN. I did not say there was any such thing. I remember no such insinuation.

Mr. UDALL. You just insinuated it again.

Mr. FRELINGHUYSEN. I stated that I think if we did have a Federal program of subsidies for teachers there would logically follow from it a necessity for us to see how that money is being spent and whether it is being spent in appropriate ways. It would give us a direct interest in the adequacy of the teaching if we helped foot the bill for their salaries.

Mr. UDALL. The gentleman is saying then that it is inevitable that the Federal Government would enter the classrooms and start trying to say what should and should not be taught.

Mr. FRELINGHUYSEN. I am not going quite that far. But, of course, it is a possibility.

Mr. THOMPSON. A lot of the discussion surrounding the question of Federal control seems completely to ignore the fact that the Federal Government is as much a part of the individual citizen as is the municipality or the State government. Why one would fear the Federal Government so much more than he would the local government I just cannot understand.

And experience shows, despite the fact that there is absolutely nothing in this bill which has any Federal control except the Davis-Bacon

provisions, which are lived with, which are part of the Hill-Burton Act and every other act of this type-I just fail to understand any possibility of Federal control.

These people grab hungrily at the impacted areas, legislation money, and under Public Law 815 we build the buildings, and under 874 we maintain and operate them. Not one known instance of an allegation of Federal intrusion has come up.

Under the George-Barden and Smith-Hughes Vocational Education Acts we select the teachers, we establish the curricula, we buy the stoves, we supply the food. The Federal Government has been in this business for a long, long time, ever since the Morrill Act, and not one known instance or supported instance of interference has appeared.

I do not say that my colleague from New Jersey has said that under the construction program there would be Federal control. But he has implied that simply because we channel money which belongs to the people back to the people we are going to interfere in the teaching process. I just cannot understand it.

Mr. FRELINGHUYSEN. I am not saying we are going to interfere in the teaching process. I said that is a possibility that might result. What I really resent is the language of control. We might just as well open the Treasury doors and say, "Anybody who says they have a bill they want paid that has to do with education can come and apply to us and we will pay it, regardless of the capacity of the community and regardless of the effort that the State may have made."

I think that is a very undesirable blank-check approach, and I would like to see something more intelligent if New Jersey taxpayers' money is going to be required in fairly substantial sums to support program of this kind.

Mr. THOMPSON. Would the gentleman, because New Jersey taxpayers' money is going to be used for this, suggest that we should impose restrictions on the use of it, or standards for the use of it? Mr. FRELINGHUYSEN. I should certainly hope we would.

As I hope I indicated, I am very much opposed to a blank check, just saying, "We hope it is going to do some good. We know that you can use it." I think that is a very undesirable way.

As I say, as far as the dollar figures go, if we should assume that Dr. Heller is right—and I have no reason to contradict him-assume we need to spend twice as much as we are spending, we could put up $10 billion a year, but I do not think we should, and just say "We know you can spend it, and we know you will spend it for the right reason." I think it would be a very undesirable step.

Mr. THOMPSON. Doctor, I guess you had better continue now.

Dr. HELLER. A third reason for Federal support of education is the vastly superior taxing powers of the National Government. The whole is greater than the sum of its parts. Our single Federal Government, covering the entire United States, is not hobbled by 49 State boundaries and 100,000 local jurisdictions. Both as an economic and as an administrative matter, the Federal Government has greater freedom and greater power to tax. It is not haunted by the fear of interstate competition and interstate migration of upper-income individuals. This competitive process prevents the localities from levying property taxes as high, and the Ŝtates from levying income and con

sumption taxes as high as might be required to carry out the wishes of their voters. In contrast, the Federal tax system permits full expression of voters' wishes without the hobbling fear of interstate competition.

As I pointed out a few moments ago, the Federal Government has at its command vastly superior administrative resources, division of labor and the like. No State can match the inherent and adduced resources of the Internal Revenue Service. In other words, Federal collection of taxes, coupled with Federal aid to States, is not a case of paying the additional freight of a round trip to Washington. The freight of administrative costs is, in fact, far less for an integrated nationwide agency like the Internal Revenue Service than it is where the tax collection process is divided among over 100,000 State and local

units.

To be sure and this addresses itself, Congressman Frelinghuysen, to the point you were raising before citizens are willing to pay a considerable premium for independent taxation at the State and local levels as a cost of preserving local independence and vitality. But where this cost can be reduced without reducing the stature of State and local government-and especially where the Federal Government is getting the benefit of the existing State-local administrative mechanism in education to fulfill its own functions—the net public interest would seem to be richly served.

The Federal Government can more readily, more equitably and more economically convert our vast national economic capacity into tax dollars than can the State and local governments. Couple this with its direct interest in elementary and secondary education as an instrument for carrying out assigned Federal functions, and the positive case for Federal financial support becomes inescapable.

Mr. FRELINGHUYSEN. But, Dr. Heller, my whole point is the problem of your phrase "without reducing the stature of State and local government.

If the Federal program can be designed in such a way as to underline the basic fiscal responsibility of the State and local governments, I am going to be satisfied. I have been a proponent of Federal action, but I still think it has to be very carefully thought through so we are not so charmed by the ease with which we can collect the money and the various hobbles of operating through the State and local governments that we weaken, what has been a pretty good system as far as I am concerned, and will result in a weakening of the veto power of the community to do what it feels is adequate in building its schools and paying its teachers.

Mr. HELLER. I want to return now to this question that has come up several times, and that is the fiscal position of State and local governments.

In spite of the foregoing arguments, it is often alleged that State and local governments are in a strong fiscal position to meet the rapidly expanding needs in the field of education. Indeed, it is pointed out that very substantial advances have been made in the levels of teachers' salaries, in the building of schools, and in the aggregate provision for education, without the benefit of Federal aid.

This assertion, though true, not only ignores the Federal Government's growing responsibility for supporting schools to achieve na

tional ends, but also fails to take account of the hard fiscal facts of life with which State and local governments are confronted today:

1. They have been under relentless pressures in the postwar period, pressures which have multiplied State-local spending and gross debt almost fourfold and State-local revenues approximately threefold from 1946 to 1958, as table 3 on the next page shows.

2. State-local spending, taxes, and debt have risen relatively much faster than Federal during this period in spite of Korea and the cold war. Federal expenditures and taxes roughly doubled while Federal debt rose only 7 percent in the period ending 1958.

3. Unabated upward pressure of spending during the recent recession, combined with flattening out or actual decreases of revenue, have put many State and local governments in severe financial straits. Some-for example, Massachusetts, Michigan, and New York—are incurring deficits this year, and a recent survey by Newsweek magazine indicated that 36 of the 49 States would have to ask their 1959 legislatures to increase tax rates.

If you will direct your attention for just a moment to table 3, I think you will find the figures really quite startling. (Table 3 follows:)

TABLE 3.-Postwar growth of State-local and Federal expenditures, revenues, and debt (selected fiscal years 1946 to current)

1 Federal aids are included in both Federal and State-local expenditures.

2 Excludes expenditures of publicly owned utilities and liquor stores.

3 These figures are more than the conventional or administrative budget figures in that they include social security, highway, and other trust fund receipts and payments to the public.

Excludes Federal aids; includes taxes, charges and miscellaneous, insurance trust revenue, and excess

of receipts over expenditures of publicly owned utilities and liquor stores.

The 1947 State-local figures are not available while 1946 Federal figures are not representative because of the impact of World War II.

6 Estimated.

Sources: State-local data for 1946-52 from U.S. Department of Commerce, Bureau of the Census, "Historical Statistics on State and Local Government Finances, 1902-1953," table 1, pp. 17, 18, and for 1954-57 from "Summary of Governmental Finances," series G-GF 56 and G-GF 1957. Federal data from U.S. Department of Commerce, Bureau of the Census, "Statistical Abstract of the United States: 1958," table 458, p. 368, and Bureau of the Budget, "1959 Federal Budget, Midyear Review," pp. 19 and 42.

Mr. HELLER. The "State-local" column under "Expenditures" shows a rise from $12 billion to $47 billion.

Even granting that these are unchecked figures, for relative purposes they are quite adequate. As we run our eye down these columns to the index of postwar growth, we find that there has been an increase of 282 percent in State-local expenditures. In the corresponding period the Federal cash expenditures have risen by 160 percent for an index of 260.

As far as revenues are concerned, the pattern is repeated. At the State-local level it is somewhat over 200 percent increase; at the Federal level, about an 85 percent increase.

In gross debt we have the most striking picture of all. Statelocal debt has risen from $16 billion in 1946. I should say it is above $60 billion right now, almost a fourfold increase, while Federal debt has risen in the corresponding period about 10 percent. That is carrying it into 1959.

Mr. FRELINGHUYSEN. What conclusion should we draw from that? The fact that the State debts have been increased and their expenditures have been increased and their revenues have been increased is surely not an argument against further increase in revenues, further increase in expenditures, and further increase in State debts. Or certainly the fact that the Federal debt and expenditures and revenues have increased more than local is not an argument for loading it on to the Federal debt. If we have to do it by going into debt, surely it is just as good and perhaps even better to do it at the State level than at the Federal level. Or is that not true?

Mr. HELLER. I think that is at least open to question and open to limitations. That is to say that the State and local governments should be called upon to make every effort that they can legitimately make at the State and local levels to provide adequate support for their

services.

I would like to introduce into this discussion some evidence that these efforts are being made. This is by no means an argument that the States should no do more. Do not misunderstand me, they should do more, but the pressure they have been under, which has been compounded by the recession, is just tremendous.

For example, in terms of current deficits for the current fiscal year, 1959, California is running a $68 million deficit; Michigan is running a $110 million deficit, Texas is running a $65 million deficit.

When we turn from that to the Governors' budget messages calling for tax increases for the coming fiscal year, or biennium, we have many figures, although a 49-State survey is not yet available.

I am sure you have all seen the recent headlines in the New York Times on Governor Rockefeller's program. His budget for next year is over $2 billion, with a $400 million deficit. He proposes to close $277 million of the gap by income tax, inheritance tax, excise tax, and cigarette tax increases.

Michigan has a forthcoming requirement for new taxes of $140 million for the coming year.

Mr. THOMPSON. Michigan is in such a critical state now that they are unable to pay the people at the State university, to operate it properly. Theirs is probably the most critical in the Nation.

Mr. HELLER. Yes; it is.