Specifically then, the Council favors the approach in the Special Educational Revenue Sharing Bill submitted to Congress by the Administration which proposed to condense many of the existing categorical aid authorizations into five major educational areas as follows: (1) Compensatory Education; (2) Federally Impacted Areas; (3) Vocational Education; (4) Programs for the Handicapped; and (5) Support Services. This proposal gives the states the additional discretionary authority to transfer of up to 30% of the funds from any of the five categories, except compensatory education and the money for the "A" type children in the impacted area program, to any of the other categories where greater need existed.

The Council generally favors the earmarking of federal funds for a small number of broad educational areas of major national concern as is proposed in S. 1669 with provisions that federal funds supplement rather than supplant state and local funds. We also favor a reasonable maintenance of effort provisions to assure that the states and local educational agencies at least continue their existing levels of support for educational programs. We also favor establishing in the legislative authorization guidelines for each major area sufficiently specific to assure that the federal funds would be directed to the areas of activity for which they were authorized. This type of legislative safeguard would support the state educational agencies in resisting the pressures that arise to use the federal funds for something which might be considered by some to be politically more urgent at any given time.

S. 1669 requires that a state plan be prepared for use of the funds in each of the major areas and that there be wide participation by representatives of the various groups in the state in developing the plan. The Council favors this type of provision but also feels that there should be a specific requirement for educational planning by the state educational agency as the most viable way of achieving the most efficient use of the federal funds and in redirecting education to achieve objectives stated in the yearly plan. Equally important is the necessity for requiring states and local educational agencies to be held accountable to the general public and to the federal administering agency for results. Finally, we believe there should be a requirement for evaluation of the activities undertaken under the federal grant programs and redirection of program thrusts and activities as indicated by the findings.

This type of concept for administering federal assistance requires strengthening the capacities of state educational agencies in the important areas of planning for and management of educational activities and in particular the leadership functions of state educational agencies. Much could be said about the kinds of activities that need to be undertaken to strengthen the capabilities of state and local educational agencies to adequately plan, manage, evaluate and redirect educational programs, but that is not the purpose of this statement. Suffice to say that these are the areas to which the Council and we believe most of the states are giving greatly increased attention. Finally, it is essential that sufficient administrative funds be made available to state education agencies to achieve these goals and that sufficient program funds be made available to the states to administer the block grants. Such funds were made available under the categorical aid programs.

A final and most important point is that states are unanimous in their belief that federal funds for education should be allocated to and administered by state educational agencies who by law are responsible for administering the educational program in the states.

S. 1669 incorporates some of these major provisions considered by the Council to be desirable but does not include others. It also includes some proposals that are opposed by the Council and its individual members. Finally, it includes some provision which may be of lesser significance but which, if changed, would in our opinion improve the bill.

Perhaps the most undesirable feature is the requirement that the funds were to be allocated to the Governor's office and that he designate a single state agency to administer the educational programs to be financed with these funds. He also is required to appoint an advisory council with broad representation from the groups to be served and with broad powers to guide the disbursement of these federal funds.

Every state in the Union provides funds from state revenues to be distributed to local educational agencies to aid in financing public educational programs. Likewise, each of the states has by law created a state educational agency (a department of education or a department of public instruction) and has given this agency overall authority and responsibility for administering the program of public education in the state. Also, 49 of the 50 states have created a board of education, whose members are broadly representative of various interests in the state, to set policies for state administration of the public educational programs. In 1972 these state educational agencies will administer an estimated total of $48.8 billion of which about $16.4 billion will be from state funds and $32.0 billion from local funds. State agencies also administer a major portion of the federal funds appropriated for education.

Under these circumstances it is not difficult to imagine the confusion that would result if under the Educational Revenue Sharing Bill a Governor designated a state agency other than the state educational agency to administer, either through local educational agencies or through some other local agencies, the $3 plus billion of federal funds for elementary and secondary education under Special Revenue Sharing, which constitutes about 7 or 8 percent on the average of the states' expenditure for public elementary and secondary education, while at the same time the state educational agencies were responsible for administering the $48 billion of state and local education funds and those other federal aid programs not covered in revenue sharing. Even more chaos might result if the Governor designated the existing state educational agency to administer the special revenue sharing funds under the advice, policies and recommendations from the newly created advisory council while the same state agency was responsible for administering the states' funds for education under policies set by the state board of education.

When this question was raised with Office of Education officials supporting the proposal, the answer inevitably was that there was little question but that the Governor would designate the state education agency as the administering agency. If this is the case the question logically follows as to why go through the motion of sending the funds through the Governor's office. The objective of keeping the Governor's office informed of the amount and timing of allocations could be accomplished by simply informing that office when the funds were apportioned. This would seem to be a more direct way of accomplishing the desired purpose. Another major question for the chief state school officers is the formula for allocating the funds to each state, for each of the major blocks of funds and the flow-through to local educational agencies. Without going into detail the Administration explained that a formula was devised which would give each state and each of the five major areas about the same amount as the actual budget request for the categorical grant program covered under the proposal for the year 1971, a total of $2.8 billion plus $200 million of new funds. Specifically, the formula would have allocated 51% of the funds to Compensatory Education, 14% to Impact Aid, 12% to Vocational Education, 6% for the Handicapped and 17% for support services. This type of allocation may be as good as could have been expected at the beginning of the program. However, it raises several questions: the appropriations now are less than 50% of the authorization for all categorical aids, the amount the authorizing committees felt was needed for these purposes. In addition, some programs receive appropriations near their full authorizations, while others receive a much lower percentage. It seems appropriate to ask whether the formula should have allocated funds on appropriations for each program for a specific year, or on authorization, or on some other basis. Furthermore, this formula for initial allocation as noted above can be altered by any state for any block except compensatory education and part "A" of impact aid by 30%. Finally, the formula was such that a "hold harmless" baseline was included to assure that no state received less under the Revenue Sharing proposal than it would have received under the categorical aid programs. Each state's hold harmless baseline was calculated by adding together the obligations expected to be allocated in 1971 for programs converted to Education Revenue Sharing. The assurance that this baseline would be met was not incorporated into the legislation, but was given by the President in his message on Special Revenue Sharing.

One of the major objections to the bill results from the operation of this formula. It is our understanding that the amount derived from application of the formula is the new authorization for each block grant since existing categorical aid with their present authorizations will be repealed. Since existing authorization for the programs covered under the block grant proposal are about twice the amount of the appropriation this change has the effect of reducing the authorizations for this program by about one-half. The Council feels this would be a most serious mistake.

As finally submitted, S. 1669 did not include a maintenance of effort provision nor a requirement that the funds supplement rather than supplant state and local funds. Neither did it include guidelines for administering the funds in each major area although these probably could have been included in the regulations. There was no requirement for accountability or evaluation and no funds were specifically earmarked for state administration, although it seems to have been intended that these funds were authorized under the fifth block "support services."

One other aspect of the provisions deserves comment. The Administration sent to the Congress an Impact Aid Reform Bill during 1970, which substantially changed the formula currently in effect in that the act, reduced the amount that would be needed for the program and decreased the number of districts eligible for assistance. The Educational Revenue Sharing Bill presents a different kind of formula for Impact Aid and permits states to consider entitlement for "B" category children as block grant money, to be allocated in any amount considered desirable to other districts so long as they are eligible for Impact Aid funds. The point we would like to emphasize is that if the formula in the Impact Aid Bill needs changing, it should be changed and not authorize a situation where a school district earned entitlement on account of "B" category children in its schools, and counted on those funds in its annual budget, but had no assurance it would actually receive the funds because they might be given to another Impact Aid district.

To summarize, the Council favors consolidation of the large number of categorical aid authorizations into a much smaller number of blocks of funds with each block focused on a major educational problem as is authorized by S. 1669 which would include the desirable provisions and eliminate the undesirable provision discussed in this testimony.

Thank you.

Senator PELL. Our next witnesses represent the National School Boards Association : Mr. F. E. "Bud" Phillips, vice president, August W. Steinhilber, and Michael A. Resnick.

It is a rather long statement. As you know, we are trying to hold the statements down to 5, 10, or 15 minutes. Would you like to digest it?

STATEMENT OF F. E. "BUD" PHILLIPS, FIRST VICE PRESIDENT; AUGUST W. STEINHILBER, DIRECTOR OF FEDERAL AND CONGRESSIONAL RELATIONS; AND MICHAEL A. RESNICK, LEGISLATIVE SPECIALIST, A PANEL REPRESENTING THE NATIONAL SCHOOL BOARDS ASSOCIATION

Mr. PHILLIPS. I will try to summarize it the best I can.

Mr. Chairman, my name is F. E. "Bud" Phillips, first vice president of the National School Boards Association. I am accompanied by August W. Steinhilber, director of Federal and congressional relations of the association; and Michael A. Resnick who is Mr. Steinhilber's legislative specialist. They will both be available to assist in answering your questions.

Mr. Chairman, the subject of special revenue sharing is complex and broad in scope. Accordingly, our testimony this morning is, as you say, quite lengthy and detailed. In the interests of time, I ask we be permitted to pass over our discussion of the philosophy of the special revenue-sharing concept.

Before addressing the specific bill, S. 1669, which is, of course, the subject of today's hearing, I should like to say that we support the ease of administration of consolidation in our prepared text, and we spend a great deal of detail on this subject.

I would like to turn now to the specifics of S. 1669, the subject of today's hearing. I have an opening comment, and then I would like to list the issues of greatest concern which we have with S. 1669.

First, our comment is an expression of disappointment that the scope of the bill is limited to the State plan programs. While we are advised that some 40 programs representing most of the Federal education money are included within S. 1669, the severe cases of administrative overburden and program fragmentation will not be tended to if the direct Federal/local type of grant programs are not included as well.

Since the bill substantively affects major elementary and secondary programs, we would literally need days of hearings to fully examine in precise terms what the bill does and what its implications are for the present and future Federal role in education. But since it is not feasible to so cover the bill, we will outline our major concerns with those provisions dealing with the distribution formula, impact aid and public housing, State advisory councils, local appeals procedure, administration under the Secretary, the Secretary's discretionary fund, and the authorization of appropriations.

DISTRIBUTION FORMULA

Section 4 provides for the "Allotment and Use of Shared Revenues." In this regard, we have two items of concern which hopefully will be given further study by the administration and the Congress.

Our first concern relates to the character of apportionment among the States. As you know, under special revenue sharing, such factors as the number of vocational or handicapped pupils would no longer be considered in making payments to the States.

Rather, pursuant to a tripartite weighted formula, each State would share in one massive appropriation for elementary and secondary education according to its portion of school-aged children from the general population, low-income families, and federally connected families.

While we are not opposed to a change in the basis for making payment, we need further information before we can support the precise formula which is chosen. Indeed, data should be furnished showing how much each State would receive at various levels of appropriations. Furthermore, 5- to 10-year projections should be made as to the number of students who will comprise each element of the formula.

And, then only after combining the two and comparing the results with current distribution trends, will we be able to understand the implications of this formula in terms of State-by-State total dollar

amounts.

The mystery of the formula is found in the interrelationship of its three elements. Children from low-income families are weighed nearly twice as heavily as impact aid children and 10 times as heavily as the general student population.

Since HEW reports that there are 7.4 million children who are counted for title I purposes as compared to 52 million plus in the general population and some 2 million in the impacted program, it is immediately apparent that the precise manner in which low-income children are counted becomes extremely important, not only as to how much each State is eligible to receive in toto from the Federal Government, but also as to what portion thereof must be spent for title I purposes.

However, the bill does not define lower income children. In fact, the only definitional reference is found in section 20(9) which merely delegates the authority of defining low-income family to the Secretary of HEW. Accordingly, the Secretary may, for example, by administrative fiat eliminate the principle source of title I assistance to the big cities by cutting off the 2.2 million AFDC children from the definition now in effect. Results of similar magnitude can be achieved by raising or lowering the low-income factor.

Mr. Chairman, we do not believe that a definition which can determine by millions of dollars how much, more or less, any State can receive and the purposes for which that money can be used (that is, disadvantaged versus other programs) should be within the arbitrary control of the administration.

Finally, given the far-reaching effects of this legislation in terms of dollars and time, the administration should be held accountable even beyond revealing State-to-State appropriations trends and how it is weighting of the formula to produce such trends.

Specifically, it should be brought to task to explain its rationalethat is, the merits-for placing the relative weight which it chooses for each of the three elements. This is particularly important since the priority assigned to general aid, assistance for the disadvantaged, and the grouping of vocational, handicapped, and support service programs are directly linked, indeed controlled, by the relative weight given to the number of children from the low-income, federally connected, and general population respectively.

Furthermore, unlike the current system wherein the priorities among programs can be shifted from year to year by proportionately increasing or decreasing the appropriations for each program, that cannot be done under S. 1669. As noted earlier, the bill has one appropriation under which the share for each program is fixed by formula. That is, a change in priorities among programs could only be brought about by an amendment of the legislation.

This takes me to our second concern with regard to the distribution formula, which relates to shifts in priorities among the grouping of vocational, handicapped, and support service programs.