Institutions have a strong built-in incentive not to increase their prices in their knowledge that, if tuitions rise too high, students will go elsewhere or not at all. Trustees increase prices only when they feel it is necessary to maintain the quality of the educational program, or when alternative income sources are inadequate to conduct the programs which the leaders of the institutions judge to be necessary.

Furthermore, there is some concern in the community that state legislatures might seize on any type of tax allowance as an excuse for decreasing state appropriations for higher education. Public institutions, and their national association, the American Association of State Colleges and Universities, remain firmly committed to the principle of low tuition. Although Congress cannot control what other legislative bodies do, it should make clear that any tuition tax credit enacted is designed to aid taxpayers, and not to aid institutions or to substitute for state appropriations.

2. Maintenance of existing aid for higher education

Many within the higher education community are concerned that the resources necessary for a tax allowance may be provided at the expense of higher education programs such as student aid. They fear that enactment of a tuition tax allowance may make it difficult for Congress to increase support for existing programs, or to initiate any new higher education programs.

The aid that is being proposed under the tax credit programs would primarily benefit parents of students. It would not remove the necessity for existing direct federal assistance and current tax incentives to meet the student and institutional needs of American higher education. If anything, the rising cost of living will result in a need for increased appropriations for student assistance, and inflation together with the costs of meeting federally mandated social programs will require continuation of existing categorical programs and will increase the need for institutional support in the near future. Certainly, the higher education community will look to the authorizing and appropriating committees of Congress to provide continued leadership and support, as they have in the past, to see that tax credits do not substitute for increases in existing student aid and categorical programs.

A related issue is the coordination between a tax credit and the existing student aid programs. Under the accepted "needs analysis system" by which a student's need for financial aid is calculated, a federal income tax credit would increase the amount of family resources available, which would reduce the amount of grant aid a student would be eligible to receive. In addition, since the proposed bills provide for a reduction of the credit in the amount of scholarship assistance received, most lower- and middle-income students who are recipients of federal, state, or private scholarships would receive little help from a tax credit. Neither, of course, would those families whose incomes are so low that they do not pay any income tax.

OTHER ISSUES

1. Treatment of part-time students

Proposals to provide financial relief to parents should not disregard dependents who attend school at least half time. Some bills would apply to part-time students, but others are restricted to full-time students at degreegranting institutions.

In recent years there has been marked increase in the number of part-time students attending institutions of higher education, until they now represent 40 percent of enrollments. Part-time undergraduate students, if they attend school at least half-time, are already eligible for Basic Grants, Supplemental Grants and most other Office of Education student assistance programs. It would be inequitable to bar such students, many of whom are working part-time to meet their financial obligations and the monetary needs of their families. 2. Inclusion of graduate and professional students

Several bills would cover graduate and professional students, others do not. Graduate and professional students should be eligible for tuition tax relief on the same basis as undergraduates. The cost of tuition at graduate and professional schools often exceeds the cost of an undergraduate education, and is borne by individuals who typically have already incurred debts in securing their undergraduate education, and have other financial obligations. In addition, many

stipends received by these students to aid them in their educational pursuits are considered taxable income by the IRS. Yet, graduate and professional students are not eligible for existing grant programs.

Any program of tuition tax relief should recognize the plight of this class of student and provide equitable treatment for them.

3. Coverage of living expenses

Most of the tuition tax credit bills cover tuition and fees, but do not extend coverage to room and board. Such coverage should be considered, since they are an essential part of college costs, recognized in all federal student aid programs. A residential educational experience is a valuable part of going to college for many students.

4. Problems of jurisdiction and verification

Most of the tuition tax credit bills impose a number of duties on the Internal Revenue Service to determine what constitutes a qualified education program. This raises the possibility of extending jurisdiction of the tax-writing committees into areas which are the responsibility of the education committees of Congress. Rather than establishing duplicate procedures, the existing accreditation mechanisms within HEW should be utilized for such functions to avoid further federal involvement in the determination of educational standards.

In addition, we would hope that any tuition tax credit legislation would not impose additional paperwork burdens on institutions, by requiring recordkeeping or certification of attendance of students, beyond that normally carried out by an accredited, nonprofit institution of higher education.

*

The range and complexity of these issues, and the differing implications of the various alternatives, illustrate why there is no broad consensus of any single proposal for tax credits for educational expenses. We have a great deal of data and analysis which we would be glad to make available to the Committee, and we will be glad to answer any further questions.

The CHAIRMAN. Mr. Gunn.

STATEMENT OF ANDREW LEIGH GUNN AND EDD DOERR

Mr. GUNN. I am Andrew Gunn, representing Americans United for Separation of Church and State. You have my printed testimony which will be made a part of the record, so my comments will be brief, and I will try to make a brief summary of our testimony.

Our remarks are directed toward H.R. 9332, which is comparable to the Packwood-Moynihan bill in the Senate. Americans United feels that tuition reimbursement tax credits and refunds as applied to sectarian schools are unconstitutional and contrary to sound public policy. The Supreme Court, we believe, has been very clear and precise in not allowing public funds to go to sectarian schools at the primary and secondary levels, and they handed down decisions that clearly show that this legislation, this bill, would be unconstitutional. And, further, we believe that this bill would trample upon the religious liberty of all Americans.

Thomas Jefferson said that to force any man through taxation to pay for another man's religion or religious institution is not only sinful, but tyrannical. We believe that this bill is a form of double taxation, where the public would be forced to pay for not only the public school system but for the private and parochial school systems. This bill is also, in our judgment, against the public school system. It discriminates against the public school system. Ninety percent of the American people who send their children to public elementary and seconday schools will not get any benefit from this bill.

In our judgment, this bill is also sectarian in nature. It is a strange mixture of religion and politics. The National Catholic Reporter reports that five clerics were the architects of the Packwood-Moynihan bill. We believe this bill would be devisive adn harm interfaith harmony in this country.

Also, this bill would interfere with racial integration. This bill would diminish the freedom of private and parochial schools, and would be a huge tax giveaway. We believe this bill does not really help higher education and that the administration's alternative is a bill that would help higher education.

These are some of our points. I am going to ask Mr. Doerr to continue with some of our other pertinent testimony.

Mr. CHAIRMAN. Mr. Doerr.

Mr. DOERR. I shall also be brief. One thing that has not been discussed at the hearings here has been the fact that public opinion has been measured on the subject of various forms of assistance to parochial elementary and secondary education. There have been 10 statewide referendum elections in the last decade, and in every case the people in the nine States voted against aid for nonpublic schools. Another problem with the bill is that Senator Packwood, in the hearings last month in the Senate, conceded that the so-called refund or grant provision of H.R. 9332 could very well be unconstitutional under several Supreme Court rulings-Nyquist, Sloan, et cetera. If that occurred, then the remainder of the bill would be regressive. It would assist the affluent, certainly at the expense of the poor. The poor would be totally left out.

One of the other bad features of this bill is that while we all control public schools through elected or responsible school boards, under this bill we would be supporting schools for whose boards we are not allowed to vote. We would have no voice in the selection of the governing boards in schools receiving aid under this program.

There is further concern that the independence and freedom of nonpublic schools would be seriously jeopardized by this bill. They could lose their denominational distinctives. If public schools are not allowed to begin the day with a Government-sponsored devotional or to include denominational instruction, is it possible that nonpublic schools supported through this bill with public funds would be allowed to do that which public schools are not allowed to do?

We have also heard-I believe Senator Roth made the analogy of this proposal to the GI bill. We would like to add simply that the GI bill was a form of compensation to men and women for services rendered to their country and was not intended as a form of aid to education. We would be happy to answer any further questions if the committee has any.

[The prepared statements follows:]

STATEMENT OF ANDREW LEIGH GUNN, EXECUTIVE DIRECTOR, AND EDD DOERR, EDUCATIONAL RELATIONS DIRECTOR, AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE

SUMMARY

A. Tuition reimbursement tax credits and "refunds", as applied to sectarian schools, are unconstitutional and contrary to sound public policy.

B. Objections to tuition reimbursement tax credits as applied to elementary and secondary schools.

1. Unconstitutional, per Committee for Public Education v. Nyquist, 413 U.S. 756 (1973).

2. Would create "political division along religious lines."

3. Would subsidize religious (divisiveness, harm interfaith harmony.

4. Would interfere with racial integration.

5. Would benefit the affluent more than the less affluent.

6. Would favor nonpublic school academic selectivity.

7. Would balkanize society, weaken public education, reduce academic

freedom, lessen educational pluralism.

8. Would favor larger over smaller religious bodies.

9. Would diminish independence of private and parochial schools.

10. Would reduce public control of education.

11. Opposed by public opinion, as shown in state referenda.

C. Objections to tuition reimbursement tax credits as applied to higher education.

1. Unconstitutional as applied to pervasively sectarian schools.

2. Would favor private over public colleges.

3. Opposed by public opinion, as shown in state referenda.

D. Objections to tax credit as applied to vocational schools.

E. Conclusions: Public and secular private colleges may be aided by expansion of existing programs.

STATEMENT

Mr. Chairman and Members of the Committee: We are grateful to the Committee for allowing us this opportunity to comment on proposed legislation which raises very serious questions for the Congress and the American people. Americans United for Separation of Church and State is a thirty year old public interest organization dedicated exclusively to promoting religious liberty and the constitutional principle of separation of church and state. Our members, who live in every state, span both political parties and virtually the whole religious spectrum. Our immediate past president was Dr. Jimmy R. Allen, currently president of the Southern Baptist Convention, the country's largest Protestant denomination. Our current president is the Rev. Calvin W. Didier, pastor of House of Hope Presbyterian Church in St. Paul, Minnesota. A short while ago, it may be recalled, Mr. Didier officiated at the funeral service for Senator Humphrey. Since the principal bill to provide tuition reimbursement tax credits is H.R. 9332 (S. 2142, introduced by Senators Packwood and Moynihan), we shall devote our attention to that specific bill. H.R. 9332 would provide massive federal aid to nonpublic elementary and secondary schools, to vocational schools, and to public and nonpublic institutions of higher education by means of tuition reimbusement income tax credits and grants (mislabeled “refunds").

Our analysis of this bill shows it to be unconstitutional in part and contrary to sound public policy in a variety of ways.

Before analyzing the bill, let us note that the estimates of its annual cost to the federal treasury and thus to American taxpayers, ranking from $4.7 billion to $6 billion, are probably low estimates. Including vocational schools in the plan will undoubtedly add considerably to the bill. In any event, these are only the start-up costs. The bill invites increases in tuition to take maximum advantage of the plan. In addition, passage of H.R. 9332 (assuming that it could survive a court test) would lead to intense and increasing pressure on Congress to increase the percentage and amount of tuition reimbursed to higher and higher levels. The eventual cost of the plan could easily reach several times the start-up cost.

In addition, passage of H.R. 9332 by Congress (again assuming survival of a court test) would unleash pressures upon state legislatures to enact similar legislation. In the long run, the tuition reimbursement plan could cost American taxpayers many, many billions of dollars per year.

In analyzing the defects of H.R. 9332, it is necessary to separate the three basic levels or kinds of educational institutions which would stand to benefit from the bill: elementary and secondary nonpublic schools, public and private colleges, and vocational schools.

Objections to H.R. 9332 as applied to elementary and secondary schools: 1. As applied to denominational elementary and secondary schools, which enroll over 90% of nonpublic school students, H.R. 9332 violates the First Amendment. State legislation quite similar in intent and effect has been ruled unconstitutional by the U.S. Supreme Court in recent years. (Committee for Public

Education and Religious Liberty v. Nyquist, 413 U.S. 756 [1973]; Sloan v. Lemon, 413 U.S. 825 [1973]; Essex v. Wolman, 409 U.S. SO8 [1973]; Grit v. Wolman, 413 U.S. 901 [1973]; Franchise Tax Board v. United Americans, 419 U.S. S90 [1974]).

Since the First Amendment principle of church-state separation has been "regarded from the beginning as among the most cherished features of our constitutional system," as Justice Lewis F. Powell has stated, the First Amendment must prevail over even the "most appealing "arguments for benefits which would inescapably go to sectarian institutions.

2. The genesis and promotion of this bill represents a certain confluence of religious and political interests. As the Supreme Court pointed out in the 1971 Lemon parochiaid ruling, "In a community where such a large number of pupils are served by church-related schools, it can be assumed that state assistance will entail considerable political activity. Partisans of parochial schools, understandably concerned with rising costs and sincerely dedicated to both the religious and secular educational missions of their schools, will inevitably champion this cause and promote political action to achieve their goals. Those who oppose state aid, whether for constitutional, religious, or fiscal reasons, will inevitably respond and employ all of the usual political campaign techniques to prevail. ...

"Ordinarily political debate and division, however vigorous or even partisan, are normal and healthy manifestations of our democratic system of government, but political division along religious lines was one of the principal evils against which the First Amendment was intended to protect." This bill could so entangle religion and politics that two centuries of progress in our country with regard to religious liberty and church-state separation could be obliterated. 3. Denominational elementary and secondary school faculties, student bodies, and curricula tend toward religious homogeneity. H.R. 9332, by aiding such schools, which include at least 90 percent of nonpublic school enrollment, would be federal government subsidization of sectarian division and divisiveness in education. The result of this could only be a decline in interfaith and community harmony.

4. While many nonpublic schools are well integrated racially, in general they tend to serve smaller percentages of minority students than do public schools. H.R. 9332 would in the long run harm the cause of racial integration and worsen public school racial imbalances.

5. According to the 1977 report of the National Center for Educational Statistics, 57 percent of elementary public school parents earn less than $7,500 per year (in 1967 dollars) while only 34 percent of nonpublic parents fall in that category. While 45 percent of nonpublic elementary parents earn over $10,000 per year (in 1967 dollars), only 25 percent of public school parents are in that category. On the secondary level, public school parents have a median income of $12.300 while nonpublic school parents have a median income of $15,962, which is 30 percent higher. H.R. 9332, thus, would exclusively benefit nonpublic school parents, who tend to be more affluent, and provide no benefit whatever for generally less affluent public school parents.

6. Since nonpublic schools are often selective academically, H.R. 9332 would enhance the competitve position of nonpublic schools in relation to public schools.

7. By subsidizing nonpublic schools which tend to be religiously homogeneous, and to serve proportionately fewer minority and less affluent children, H.R. 9332 would

A. Encourage the religious, ethnic, and class balkanization of American society and increase the centrifugal forces in society which have proven so destructive in other countries, such as Northern Ireland.

B. Weaken the competitive position of the democratic, religiously neutral, more open public schools which serve 90 percent of our children. This would gradually convert public schools into shrunken "wastebaskets" for poor, minority, handicapped and behavior problem students. The American dream of a great common school system would be shattered.

C. Invite Congress and state legislatures to reduce their support for public schools and colleges, which are presently not adequately funded. D. Reduce academic freedom and lessen the educational pluralism and diversity to which the individual child is exposed more in public than in nonpublic schools.

8. H.R. 9332 would tend to favor larger religious bodies, capable of assembling sufficient students to operate viable schools at reasonable cost, over smaller re