propose to the Bureau of the Budget that absorption be introduced into this budget. The dollar rate was different. The Office of Education proposed a budget of $271 million. The Department requested a budget of $250.8 million, and the final allowance with a 3-percent absorption factor for those children whose family both live and work on Federal property, and a 6-percent absorption factor for children of families who work on Federal property but live in the community and pay community taxes, produces a final amount of $183 million.

ESTIMATE OF FULL ENTITLEMENT UNDER PRESENT LAW

Mr. FOGARTY. Assuming the present law is going to be extended,, how much will it require in both areas to meet the full entitlements? Mr. CARDWELL. The latest estimates I have, payments to school districts, would be $217 million, and the school construction assistancewould be $50 million.

Is that correct?

Mr. LILLYWHITE. That is not correct.

The appropriation for payments to school districts is $347 million for 1966. This is approximately $40 million short of paying full entitlements.

Mr. CARDWELL. You say it will approach $400 million?

Mr. LILLYWHITE. $416 million is the present estimate for 1967.

STANFORD REPORT

Mr. MICHEL. What did this Stanford report have to say about the immediate Washington area-Virginia and Maryland? Some of us. who have had some questions to raise about this program, have leveled a great deal of our criticism at this immediate area.

Mr. LILLYWHITE. It is not easy to pick out from the report application to one area without looking at the context of the entire report.. But the study found that some districts are being overpaid.

INTENT OF THE LEGISLATION

In the first place, they interpreted the intent of Congress in passing the legislation as being this: that the Federal payment, when added to the contribution made to the local tax resources by the federally connected families, just equaled what the community got from the nonFederal families. This was the measure they used, and when it did. that precisely, then it was meeting the burden. If it fell below that,, it was not, and if it went above that, it was making payments more than were necessary.

PAYMENTS TO ARLINGTON COUNTY, VA.

The study had a small sampling of districts in which they made studies in depth. There was not enough time. Actually, we did not get. the contract signed until January and it had to be completed and sent in by June 30, but they did do some studies in depth on a few areas, and then they had some information which they had gotten from other studies which they could relate to this which gave them a broader base for so-called field studies, and the rest of it was really

statistical calculations from various information and from records in our office.

One report was-I am not sure if it is spelled out-Arlington County is not getting paid the full amount it should be paid. The study also recommended

Mr. FLOOD. What county?

Mr. LILLYWHITE. Arlington County, in accordance with this concept.

Mr. FLOOD. Are you joking?

PAYMENTS TO STATE OF MARYLAND

Mr. LILLYWHITE. I am stating what the study said.

They also said if the State of Maryland would change its basis for determining the rate of payment-this is a complicated matter too: there are four ways to determine the rate-they would get more money in the State of Maryland. The State of Maryland has taken that suggestion, has revised their request for changing the rate of payment, and the rates will go up this year in the State of Maryland.

Mr. MICHEL. That ends up as being a pretty expensive report.

Mr. FLOOD. The thing that gets in my mustache about this program is the people who go down there in the well of the House on both sides of the aisle and with righteous indignation vehemently holler about this outrage even if they are against everything else with the exception of the Ten Commandments.

GENERAL CHARACTERIZATION OF STANFORD STUDY

Mr. CARDWELL. Could I make a general characterization of the Stanford study?

I think the Stanford study concluded several things:

First, several school districts were receiving windfalls; secondly, the school districts, where there were large concentrations of Federal families, were becoming very dependent on this form of assistance and self-reliance was not in the future. There were no mechanisms to develop substitute State-supported programs that would provide self-reliance:

Thirdly, that there was unfair distribution of this form of assistance in that many of the families, particularly in those cases where the families reside in the community, the families were paying taxes, they were participating members of the local community, and this resulted in inequity.

I think these are the things the report really included, and this is the basis for proposing this change at this time.

RECOMMENDATIONS OF STANFORD REPORT

Mr. LILLYWHITE. Let me comment on the way the Stanford report. said they thought it ought to be done.

The first recommendation, if you want to get a precise measurement of what this payment ought to be, there would be a study, or data obtained for each one of the Federally impacted school districts. The ssessed value of the housing in which the military and the federally onnected families live, where they buy their groceries, did they com

mute outside for work on the base, if the base was outside the school district, and what the contribution to the local tax effort was by the non-Federal families.

There would be no eligibility, but this analysis would show the amount of money which the Federal Government ought to put into a district to just exactly equal this payment required on the basis that I stated a few minutes ago.

We had to reject that as a way of measuring the payment because it was so complicated. They even suggested that a study should be made to set up the ways by which the data would be obtained and that it may be necessary to make Federal payments to the school districts for administrative expenses in making this determination.

Now, this was the most precise way.

They suggested a second and less precise method of measuring the burden if the first method could not be accepted. The office would have certain information reported on assessed valuation of housing and other factors and make the determination on this basis. If we did not accept the second method because data were not available, or for some other reason, then the present rate of payments should be changed. A school district can either take the expenditures from local revenue sources from comparable districts or, as Congress put it in 1953, can take one-half of the State average, if that is a higher rate. In 1957 Congress said a district also could take one-half of the national average per child. It is these alternative minimum rates which were most frequently associated with overpayments and should be eliminated.

They also found, and the administration has made this recommendation a number of times, but it has never been accepted, that the present eligibility requirements of 3 percent is inequitable. For example, if a school district has to have 500 federally connected children to be eligible, if it has 502, it gets paid for every child. If it has 490, it does not get paid for a single child.

They felt the principal of absorption, requiring each school district to educate without Federal funds a percentage of the federally connected children before it started to receive payments was fair. This is nothing different than the administration has recommended in the past.

As a matter of fact, Congress put in absorption provisions in 1953, deferred it for 3 years and then abolished it. We have always felt that it was inequitable for one district to get paid all the way down to zero children, and another district not get paid anything if it did not quite meet the eligibility percentage.

PROVISIONS OF PROPOSED AMENDMENTS

Mr. FLOOD. I have voted for this bill every year it has been up, holding my nose at the time. You city slickers have been had down through the years in many places on this one and you will never find out until the day you die what has been happening in some of these

areas.

What are the provisions of the administration's proposal to change the existing law? You have touched on that three or four times in the last 3 minutes but answer it flatly.

60-627-66-pt. 225

Mr. LILLYWHITE. Specifically there are three major amendments. The first amendment would eliminate these two alternative ways of determining the rate of payment and require that each school district go back to the costs from local revenue sources.

The second amendment is the so-called absorption provision. Under this absorption provision a district would be required to subtract from the number of "A" category children those who live on Federal property, a number of children equal to 3 percent of the total children in the district and then be paid on the number after the subtraction.

The district would also be required to absorb without payment 6 percent of the total attendance in the school district subtracted from the so-called "B" category children and be paid on what is left after the subtraction.

Mr. FLOOD. What is the status of the proposal?

Mr. LILLYWHITE. The temporary provisions of this law were extended to June 30, 1968 by Public Law 89-10 so it will take positive action to bring about the amendments.

Mr. FLOOD. On that point, what indication of congressional support or approval have your antennae produced?

Mr. LILLYWHITE. Just about the same as Mr. Fogarty expressed. Mr. FLOOD. What can you lose? They have the votes. In this business you pay off on votes. The Bureau of the Budget knows that and so does your grandmother.

Mr. LILLYWHITE. We have had hundreds and hundreds of calls by the Congressmen and Senators wanting to know what it would do to their district and how much they would be cut.

Mr. FLOOD. All righteously indignant.

Mr. LILLYWHITE. Yes. I think there are one or two exceptions. They just want to see what it is.

The third amendment is to eliminate as Federal property, for the purposes of the act, federally owned property leased out for private use which can be taxed on the leasehold interest. We see no more justification for counting that as Federal property to determine payments to a district than counting any other private real estate. We have said that before in the Congress and had it turned down, but we can see no justification for this.

Mr. FLOOD. Of course, you are right.

ENTITLEMENTS UNDER EXISTING LAW AND UNDER PROPOSED AMENDMENTS

Will you place in the record a table showing, by State, and also in total, the entitlements under the existing law and under the administration's proposal?

Mr. LILLYWHITE. Yes, sir, I have it right here and I can leave it right now.

(The document referred to follows.)

Estimated entitlement under Title I of Public Law 874 for fiscal year 1967 and estimated number of districts eligible for assistance with and without proposed amendments to reduce the cost of the program, by State 1

1 Estimates for 1967 are based on projections from data reported by applicants for 1965. Only entitlements under subsec. 3(c) (1) are included. This subsection accounts for about 99 percent of all entitlements of school districts under the act.