I take it that the legislation dealing with institutions of higher learning properly belong to the Elliott committee. So we will confine our discussion this morning to the one piece of legislation.

Doctor, you may further identify yourself to the reporter and proceed with your testimony.

STATEMENT OF HON. ARTHUR S. FLEMMING, SECRETARY OF HEALTH, EDUCATION, AND WELFARE, ACCOMPANIED BY ELLIOT L. RICHARDSON, ASSISTANT SECRETARY FOR LEGISLATION, AND L. G. DERTHICK, COMMISSIONER OF EDUCATION; RALPH FLYNT, ASSISTANT COMMISSIONER OF EDUCATION

Mr. FLEMMING. Mr. Chairman and members of the committee, my name is Arthur S. Flemming, Secretary of Health, Education, and Welfare.

I would like to say first of all that I appreciate the opportunity of appearing before this subcommittee. As you know, this is the first opportunity that I have had of meeting with the members of this subcommittee. I am aware through colleagues, however, of the very real interest that has been taken by the members of this subcommittee in the opportunities that confront us in the field of education.

I want to assure you that I look forward to the privilege of working with you in the weeks and months that lie ahead.

I appreciate very much having the opportunity to testify this morning on what is certainly one of the most serious problems confronting our Nation, the shortage of adequate public elementary and secondary classrooms.

The administration's proposals for dealing with this problem are embodied in H.R. 4268, as introduced by Mr. Frelinghuysen. The bill is part of a twofold program which also includes the identical bills H.R. 4267, as introduced by Mr. Frelinghuysen, and H.R. 4415, as introduced by Mr. Wainwright, to assist institutions of higher education to accelerate construction of academic and residential facilities. Taken together, both plans would help make possible, within the next 5 years, total construction in the amount of $5 billion at an ultimate cost to the Federal Government of approximately $212 billion. H.R. 4268, the administration's proposal for public elementary and secondary classroom construction, does three things:

(1) It recognizes a pressing need for additional classrooms; (2) It recognizes that emergency Federal assistance is required to help meet the need;

(3) It would provide substantial Federal assistance where it is most needed, in a manner consistent with sound fiscal policies. On three previous occasions the executive branch has submitted plans to the Congress designed to make it possible for the Federal Government to help alleviate the shortage of adequate public elementary and secondary classrooms. None of these plans was approved by the Congress.

This new plan should enlist the support of all who recognize that there is a serious classroom shortage, and who believe that the time has come for the Federal Government to act.

Other plans, I appreciate, are being considered by this committee. These plans, however, would unbalance the Federal Government's budget for 1960. The executive branch, therefore, cannot support them. We cannot support them because we believe that deficit spending on the part of the Federal Government under existing conditions would set into motion forces that would lead to serious inflationary pressures. Such pressures would undermine our educational system as well as other aspects of our national life.

Inflation makes school construction far more costly, it robs already underpaid teachers of a purchasing power they desperately need, and it destroys the integrity of teacher retirement systems that are already woefully inadequate.

Consequently, we urge that careful consideration be given to the administration plan-a plan which will not require Federal deficit spending, but will make a substantial contribution to providing the Nation with needed classrooms.

We will not have these classrooms if we continue to talk about the problem, but remain on dead center as far as action is concerned. Here is a brief outline of the way in which the plan would operate: 1. The Federal Government would undertake to assist in construction programs totaling $3 billion over a period of 5 years, at the rate of $600 million a year.

Assuming that States and local government take full advantage of the plan, it would result in the construction of about 75,000 classrooms which, in all probability, would not otherwise be constructed. 2. The $600 million a year would be distributed among the States on the basis of public school enrollment, income per school age child, and the effort exerted by each State for public elementary and secondary education in relation to national average expenditures for such education.

3. Each State would be invited to submit to the Federal Government its own plan for identifying needy school districts and for determining what would constitute a reasonable tax effort on the part of these districts.

Upon receiving such a plan, the Federal Government would declare the State eligible for participation in the program. The Federal Government would not substitute its own judgment for the State's judgment as to the best way of determining need and establishing a measure of reasonable tax effort. Nor would the Federal Government participate in any way in the administration of these State plans.

The States in developing and operating such plans would presumably take full advantage of the experience that many States have had in establishing procedures for the equalization of State support for school purposes, and the experience that Michigan and California have had, for example, in providing school construction assistance to needy districts which meet a State-established reasonable tax effort. 4. Next, a needy school district that was making a reasonable tax effort for school construction, but that could not finance a bond issue for a new building, would apply through the State for Federal-State assistance in meeting its debt service charges, namely, the payment of principal and interest.

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5. The Federal Government would pay half of the debt service. charges on the total cost of the new building, after having been assured that the State would either make available half of the cost of the building, or would advance half of the debt service charges.

This combined Federal-State commitment would assure the marketing of the bond issue at a favorable rate of interest.

6. If the reasonable tax effort on the part of the local school district should produce excess revenues in any one year, these excess revenues would be applied to the debt service charges for that year.

7. Once the bonds had been retired, the local school district would be required to maintain its reasonable tax effort for an additional 10 years and to apply any excess revenues as partial repayments of the advances made by the Federal and State Governments.

We believe that this plan would lead to the following results:

1. It would enable the States to turn the spotlight on local school districts that are not making a reasonable tax effort in behalf of school construction.

This conceivably could result in leaders in these communities conducting successful crusades for adequate expenditures for school construction. Personally, I just do not believe that we have reached the point where the Federal Government should make funds available to the communities that are able to take care of their educational needs, but are unwilling to do so.

If the time comes when we find it necessary to follow such a policy, we will be on the verge of admitting that local communities cannot handle their educational programs, and that the time has come for the Federal Government to assume what we have traditionally regarded as a State and local responsibility.

2. It would provide 75,000 classrooms in local school districts that are most in need of help.

If the Federal Government steps in and helps to break this bottleneck, States and local communities should be able to deal with whatever shortage problem may still exist.

3. It would call for debt service advances that combine the best features of both grants and loans.

In effect, they are conditional grants.

As conceived in the bill, advances are made on the stipulation that the districts would continue to exercise their reasonable tax effort for a 10-year period after the maturity of the bonds, during which period half of any excess revenues produced would be applied to partial repayment of Federal advances.

At the end of the 10-year period, the total amount of Federal advances outstanding which could well be the entire amount, in the case of a district with continuing need-would be forgiven.

In other words, debt service advances amount to grants for those who cannot repay the money, and loans for those who can.

4. The plan would make provision for participation in the construction of buildings on the part of States and Federal Government over a period of years, just as local school districts have always done. This constitutes an equitable approach to the problem, in view of the fact that the benefits derived from the construction of these buildings would be enjoyed by parents and students over a considerable period

of time.

In brief, here is a plan under which the Federal Government would help construct classroom facilities in districts where in all probability it will be impossible for them to be constructed, unless the Federal Government does give assistance.

It is a plan that can be put into effect without contributing to inflationary pressures.

It is a plan that represents common ground which can be occupied by all who are interested in seeing the Federal Government show its concern for elementary and secondary schools by deeds as contrasted with words.

That is the end of my opening statement, Mr. Chairman.

Mr. BAILEY. It is necessary that Mr. Thompson go to another committee. I will give him an opportunity to start asking some questions. I want to also give Mr. Frelinghuysen some time because he is the author of the bill.

At this time, in order to accommodate Mr. Thompson, I am asking him to direct any questions he may have on the point you have raised. Mr. THOMPSON. Mr. Secretary, it is good to see you here. I gather that we will be seeing more of you or your very able assistants.

I am particularly pleased that this program and that your testimony recognizes the two most important things:

First, the need for classrooms, and, second, the fact that emergency Federal assistance is required to help meet the need.

I note with some interest the emphasis on the fact that this plan would not unbalance the Federal Government's budget for 1960.

With all due respect to you, I can almost see the drops of sweat on the bills and on the testimony in the Department's attempt to do something toward alleviating the need which it recognizes. I have very serious doubt about the ability of most of the States to participate, however, at least for several years.

If it is assumed that most of the States would have to include indebtedness the obstacles are terrific.

Now, according to the best information available to me, 17 States would have to pass constitutional amendments in order to incur increased indebtedness. Referendums would be required in 18 States. Even if the States could finance their part of the program out of current revenues, only 17 State legislatures met in 1960 and the other 32 would have to wait until 1961.

If I understood the legislation, the moneys are not cumulative. In other words, the State cannot wait to take the legal action required in many instances to take advantage of this act. They cannot wait 3 or 4 years and pick up 3 or 4 years of whatever benefits might be in it. When you consider, for instance, Montana, Mr. Metcalf's State, is constitutionally prohibited from supporting school construction, then the problem becomes even more complicated.

Do you really think these 75,000 classrooms can be built within any short period of time with these impediments considered?

Mr. FLEMMING. Mr. Congressman, and members of the committee, I do. I appreciate the fact that you have raised a very relevant issue in connection with our proposal. If I may, I would like to indicate you how I feel that all States could participate in one way or another in this program.

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First of all, on one point you have made, I would like to call attention to the fact that under the bill a State's allocation, pursuant to the

previous paragraph, shall remain available until the end of the fiscal year following the year for which the allocation is made, which meets partially the point that you have raised.

But I would like to go into the basic issue on it.

Mr. THOMPSON. In that connection, however, it does meet that partially, but let us assume that the State legislature does not meet until 1961. It takes action in 1961 and a referendum or constitutional amendment is required which will not reach the voters until the November election of 1962.

Mr. FLEMMING. Mr. Congressman, I would like to point out that that really is not essential; that is the States that are faced with constitutional requirements or referendum provision can qualify under the bill in other ways.

If I might, I would like to state to the members of the committee just how we feel the States could qualify under varying conditions. Mr. THOMPSON. I would appreciate it, Mr. Secretary.

Mr. FLEMMING. The bill requires that each State, as we have noted, make a financial contribution equivalent to that of the Federal Government. The Government's contribution is to advance half of the debt service on bonds issued by needy school districts to finance school buildings.

The State's contribution could take one of three forms under the bill: either capital grants, loans, or debt service advances.

First of all, on capital grants: all States could participate by appropriating State funds to make capital grants to pay one-half of the construction cost of needy school districts.

In States which select this method the Federal Government would advance all the debt service on the bonds issued by the school district to finance the other half of the construction cost.

Next, let us take a look at the loans. All States could also participate by appropriating State funds to make loans to needy school districts to meet one-half of their construction cost, but States selecting this method would have to defer or waive repayment of the principal or interest on these loans in any year in which the school district's exertion of its reasonable tax effort does not produce sufficient revenues to meet repayments.

Then the third approach would be the one we have been talking about, the debt service advances.

Under the bill they could have the alternative of committing themselves to advance one-half of the debt service on bonds issued by school districts to finance school buildings in the same manner that the Federal Government commits itself to advance the other half of the debt service.

Under this alternative the States could avoid large initial capital outlays for grants or loans and, like the Federal Government, spread the cost of their contribution over the 20- to 30-year period during which the school district bonds are repayable.

However, as your question has brought out, some States may require a referendum to authorize them to enter into this type of commitment and then other States may require a constitutional amendment.

The most common constitutional provision which would be involved is that governing the power to create or incur State debt, since a binding commitment to make advances over a future period has many of the characteristics of a debt.