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Chairman HILL. I am sure that Dr. Douglas is proud of his pupil this morning. You have brought us facts and presented us arguments on this matter that we haven't had before. You have made a very fine contribution, and we deeply appreciate it.

Miss BORCHARDT. Thank you, Senator Hill. We are so happy to have you continuing to lead the fight for our children.

Chairman HILL. Andrew J. Biemiller, member, national legislative committee, American Federation of Labor.

STATEMENT OF ANDREW J. BIEMILLER, MEMBER, NATIONAL LEGISLATIVE COMMITTEE, AMERICAN FEDERATION OF LABOR

Mr. BIEMILLER. Mr. Chairman, my name is Andrew J. Biemiller. I am a member of the national legislative committee of the A. F. of L., with offices at 901 Massachusetts Avenue NW, Washington, D. C.

Senator NEELY. Mr. Chairman, let me state that Mr. Biemiller was formerly an outstanding Member of the House of Representatives. Chairman HILL. The Senator is exactly right. We welcome Mr. Biemiller here this morning.

Mr. BIEMILLER. Thank you, Senator.

It has been only a little more than 3 weeks since I appeared before this committee to present the views of the A. F. of L. regarding Federal assistance for school construction. In my testimony January 28, I stated the support of the A. F. of L. for Federal grant-in-aid system on an emergency basis to help States and localities meet the current crisis in school construction.

The bill to which we give our support, S. 5, introduced by the chairman of this committee, Senator Hill, (Democrat, Alabama) had been worked out only after many months of discussion, argument, and public hearings. Its provisions have won a surprisingly large measure of support from all types of individuals and organizations, including veterans, religious, educational, labor, and other public-interest group. Agreement on this type of legislation was largely bispartisan since S. 5 is almost identical to a bill sponsored in the 83d Congress by Senator Cooper (Republican, Kentucky) and unanimously approved by this committee last summer.

In fact, almost everyone who recognizes the need for action in the field of education has favored S. 5 except the present administration. While the Secretary for Health, Education, and Welfare put forward a most compelling case for Federal aid to education in her testimony before this committee on April 2, 1954, she steadfastly refused to be convinced by the logic of her own charts and graphs. At that time she took refuge behind the administration's program for State and Federal educational conferences, arguing that Federal action in this field should be delayed until these conferences could meet and review this entire problem. This attitude was largely responsible for the failure of school construction legislation to become law during the last session of Congress.

More recently, however, there has been a change in attitude on the part of the administration. In his state of the Union message the President stated very clearly, in discussing the current school crisis, that "affirmative action must be taken now." Thus the administration now recognizes the need for emergency action even before the State and Federal educational conferences can discuss this issue. A

presidential message scheduled for February 15, was actually sent to Congress a week in advance, perhaps because this committee quite properly has been moving so promptly to meet the emergency.

The President's message gave only the rough outline of a program which minimized the need for direct Federal grants-in-aid and instead placed more emphasis on a system of Federal loans and guaranties. The administration's proposal has been spelled out in more detail by Secretary Hobby and Commissioner of Education Brownell when they came before this committee on February 16. Their recommendations have been embodied in a bill which Senator Smith has introduced as S. 968.

The proposal submitted by the administration is, to say the least, extremely involved and complex. We have given it very careful thought and study. We have analyzed it from every possible angle and have tried to do it justice in terms of constitutional law, municipal finance, and educational theory.

Despite these efforts, I must report to this committee that no matter how hard we in the American Federation of Labor try, we cannot visualize this proposal as the answer to America's critical school emergency.

Even if the Nation's educational crises could be attacked in a leisurely fashion, this proposal would not accomplish its stated objectives. Since time is of prime importance, the proposal would not even make a small dent against the accumulated shortage of school facilities. The proposal is a halfhearted and pinch-penny approach to today's school crisis. Its complex requirements and special procedures would take the heart out of any local school superintendent waiting for Federal help to build that much needed schoolhouse. Its provisions throw all types of roadblocks in the path of anyone seeking direct Federal assistance and limits direct spending by the Federal Government to only $67 million a year for a 3-year period.

Allow me to analyze the proposed bill title by title.

Title I and title II: It is best to consider these two titles together since they both are designed to offer alternative methods of financing school construction to hard-pressed local authorities.

Title I would authorize the Federal Government to purchase bonds issued by local school districts to finance school construction when such bonds could not be sold to the public at reasonable rates of interest.

Title II would authorize the Federal Government to help support bonds issued by State school building agencies which would construct schools and lease them to local communities.

In support of these two titles, Commissioner Brownell in his testimony marshalled an impressive set of charts explaining the intricacies of local school finances. We wish to commend this presentation because it points out very clearly the very difficult problems which today confront many of our local school districts. You will recall that the charts emphasized such obstacles as limitations on borrowing authority, restrictions on the imposition of taxes, the underassessment of property, the small size of many school districts, and the lack of local financial resources.

We believe that Secretary Hobby and Commissioner Brownell once more have done an excellent job in presenting the basic problem.

Unfortunately, as usual the solution they recommend simply will not prove effective in meeting the obstacles they have so graphically portrayed.

In our opinion, the basic question is this:

What communities could profitably utilize the procedure set forth in either title I or title II? After careful analysis, we have concluded that there is hardly any community across the Nation that could be expected to utilize this new proposal.

We must start off by noting that many communities do not utilize bond issues as a method of financing school construction. Many of the larger cities throughout the country prefer to finance their needed school construction from current funds rather than by resorting to the bond market. On the whole we believe that financing out of current funds should be encouraged by the Federal Government. Yet titles I and II offer nothing to their communities unless they are willing to change their method of financing.

Even for those communities which do finance school construction by bond issues, titles I and II are largely a mirage. A great many communities, both large and small, across the Nation already market their school bonds on far more favorable terms than would be provided by this proposal.

Interest on school bonds is exempt from Federal taxation. School bonds themselves are looked upon by the banking fraternity as the safest possible investment in the municipal field. For these reasons the going rate of interest on these bonds is 2 to 212 percent.

Although separate statistics are not maintained for school bond issues, it is significant that the yield on all municipal bonds for the week of February 9 is 2.41 percent. Certainly, communities marketing bonds at this rate of interest will not be interested in a program under which the Federal Government would buy their bonds at an interest rate of 31% percent.

Senator DOUGLAS. Mr. Chairman, may I ask Mr. Biemiller a question?

You quote the interest rate of 2.41 percent for the week of February 9. Is that Dow-Jones?

Mr. BIEMILLER. Standard & Poor's.

There is absolutely no evidence to indicate that many communities have been unable to issue school bonds or have found a market only at an excessive rate of interest. Available statistics show that only about $75 million of school bonds have been issued in the past year at interest rates higher than the 3% percent which the Government would pay under title I. This is an insignificant proportion of the total.

Moreover, there is no evidence that other communities have found their bonds unacceptable in the market. The Investment Dealers' Digest, a prominent financial weekly, in its issue of February 14, 1955, in commenting on the President's message said:

It was impossible to find anyone who could recall a school bond coming to market in recent years without a buyer.

Secretary Hobby argues however, that title I would be utilized by many communities which have so far been afraid to market their bonds because their credit rating may not be as high as other localities. It is undoubtedly true that many school districts simply do

not have the economic base sufficient to support the higher taxation which would be required to make yearly payments on a bond issue.

These are the districts whose credit ratings are less satisfactory. They are the districts that desperately need help. But what help is offered by title I? Before the Federal Government could buy bonds of any hard-pressed local community the following steps would have to take place (sec. 104):

1. The local school district would have to go through the detailed expensive procedure of actually making a public offering of its bonds. 2. An opinion would be necessary by a qualified attorney that the bonds "had been legally issued and are binding" on the local educational agency.

3. The Commissioner of Education has to be satisfied that the local educational agency "is financially able to pay such obligations (on the bond issue) as they become due."

Obviously, title I does not lift the burden of a local school district whose economic base is inadequate to finance new school construction. Rather it imposes an additional burden by requiring this community to support interest payments and debt service charges at a rate of 3% percent when all over the country most communities are paying from 2 to 212 percent. Surely this is a very distorted concept of Federal aid. Nor can these communities obtain relief through title II. This title involves the establishment of special State agencies to handle school construction and financing. Only four States now have such agencies and in two of them the new groups are hardly operating. Not only is this a new and relatively untried approach to the school-construction problem, but there are grave doubts about the constitutionality of such a proposal in many States. Even though in the end these agencies must be constitutional, the prolonged litigation over a period of several years would nullify any immediate relief that could be granted under this title.

Even granting that these new agencies could be established, they would be of little value to hard-pressed local communities. Under the proposal, the State agency would build the schools and lease them to the local school district. The local school districts would pay rent to the State agency. According to section 209 (d) of the bill, these rental payments would have to cover the following:

1. The annual debt service including interest and payment on principal.

2. An additional amount contributed to a supplemental reserve fund which would equal one-fourth of 1 percent of the bonds issued by the State agency.

3. The cost of maintenance, repair, replacement and insurance to the schools concerned.

4. Additional contributions toward the administrative and other expenses of the State school building agency.

It seems clear from this listing that the rentals which these hardpressed local communities would have to pay involve an even heavier burden than if they had been able to issue their bonds. The fact that the rentals must cover payments to a supplemental reserve fund and contribute to the administrative and other expenses of the State agency are two extra items which the local community would not have to pay if it was shouldering the financial responsibility by itself.

Under these circumstances, how can anyone argue that title II offers any substantial measure of relief to any community hard pressed to finance new school construction?

Title III: This is the only section in the bill which provides any direct Federal aid for school construction. But even here, the grants are so hedged in by restrictive provisions and complicated procedures that the title is almost completely worthless.

According to the bill, any Federal aid under this title must be contingent on the following conditions:

1. The local community has to utilize the cumbersome procedure under either title I or title II for as much of its capital requirements as possible.

2. A statewide plan for administering these grants has to be adopted, meeting several requirements regarding administration, accounting and reporting procedures as well as setting forth the standards and procedures for determining the eligibility of local educational agencies for Federal assistance.

3. The State must match any Federal funds granted under this title. Indeterminable delays will be necessary in order to meet their requirements. At best a mere trickle of funds would flow to needy communities under this title. Meanwhile the crisis becomes more acute as the school population steadily rises.

Title IV: This title is quite insignificant as a means of alleviating the schoolroom shortage. It provides for an appropriation of $20 million to help the States with the administrative expenses involved in developing long-range plans to overcome some of these major obstacles to school construction. This is a worthy objective although in many cases the State and local communities are already doing as much as they possibly can in this direction. There is a possible danger that this section might prove to be an entering wedge for Federal control of educational policy.

Labor standards: One other issue of special concern to organized labor is worthy of mention. To protect the labor standards and working conditions in the construction industry, any bill utilizing Federal funds for construction purposes normally includes a provision requiring the observance of the Davis-Bacon Act and other applicable statutes. While such a provision is included in S. 5, we notice that it appears only under title III of S. 968 but has been completely omitted from the other sections of the bill. Compliance with labor standards statutes should be an integral part of any school construction legislation.

Summary: Viewed as a whole, S. 968 is woefully inadequate to meet the present school building emergency. Its emphasis is entirely upon preserving traditional methods of financing. The result must be reassuring to the financial community but it can hardly be deemed a realistic program to meet the present emergency.

The American Federation of Labor believes that today's shortage of classroom facilities represents a crisis for the entire Nation. We believe that the present emergency can be overcome only through an energetic program enlisting the cooperation of Federal, State, and local authorities.

The only effective way this can be accomplished is by the application of a generous grant-in-aid program under which the Federal

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