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ly, in the elementary and secondary schools, and beyond that, scientific equipment, including computers, but other things as well, This is more and more an integral part of education. Is that correct?

Mr. THOMSON. Yes, it is. Most high schools now have, as part of their curriculum, computer literacy. That word gets tossed around, but basically it simply means an understanding of how to program computers at the simple level and what the limitations and possibilities of computers are. We need more hardware to accomplish that goal to have that goal as a part of graduation requirements in most schools.

Mr. BOTTOMS. Senator, in vocational and technical education it is a fundamental. It is essential to teach the technical knowledge and skills that are needed. And particularly the computers can be used to teach an awful lot of the related theory that is core to many of the technical areas, where it could be individualized, and the student can be recycled until they master that technical knowledge base.

Mr. THOMSON. We don't even know what all the possibilities are, but, for example, at Lyons Township High School, in suburban Chicago, the school has over 100 microcomputers. And because they have an imaginative English department and someone that can program, they are teaching English composition now through the word processing capabilities of the micros. It goes on and on. The possibilities are tremendous.

Senator DANFORTH. This equipment is expensive, isn't it?

Mr. THOMSON. A microcomputer is only $2,500 to $3,000. A printer, $1,500. It is not expensive in an individual sense, but, collectively, if you could buy 5 or 10; given the limited budget, it becomes a big item.

Senator DANFORTH. And finding money for education now is not said to be the easiest pursuit in the world.

Mr. THOMSON. It is difficult at best. Mr. BOTTOMS. Throughout the testimony, Mr. Chairman, we have identified the difficulties that several States are having in getting funds to replace obsolescence in equipment. It is a major problem, and it is a major cost factor in the modernization of these programs.

Senator DANFORTH. You are in pretty good shape at the University of Missouri financially, aren't you? You never concern yourself about money.

Dr. Olson. I am sure that question was not to provoke a long speech on my part. [Laughter.]

As is true of many State universities, we are having very serious difficulty. The States are finding it difficult to appropriate adequately for their institutions. And I think that anything which encourages non-State support is bound to be beneficial. I am particularly pleased with the way in which your legislation, for example, encourages non-State support.

Senator DANFORTH. Mr. Scheier, what would be the effect of 1194 with respect to your company and its participation in helping schools, colleges, universities? Can you state for us what it would do? Would you be doing the same thing anyhow without the legislation? Would it have some practical effect?

Mr. SCHEIER. No, Senator. It would be impossible, frankly, for Apple Computer to conceptualize the program such as we are contemplating. We could not donate upwards of 80 to 100,000 microcomputers to schools within the Nation if we did not have this legislation.

Senator DANFORTH. 80,000 to 100,000 computers, microcomputers. That is the Apple computer.

Mr. SCHEIER. What we are donating in California is the Apple // e, a disc drive monitor, Apple logo software, and other brochures and materials that I think the schools will also find valuable. We also have reached agreement with approximately 30 educational software publishers to have them supply software to the schools at substantially reduced prices for a limited period of time, and each of that will go to each school.

Senator ĎANFORTH. So the software program, plus the 80 to 100,000 units.

Mr. SCHEIER. Well, assuming one per school-and there are approximately 100,000 schools in the Nation, perhaps a little bit more, perhaps a little bit less—we are talking about one machine for each of those institutions, yes.

Senator DANFORTH. One for what?

Mr. SCHEIER. One machine for each of those schools, for each of the schools in the nation.

Senator DANFORTH. Your program would be to contribute one machine for each school?

Mr. SCHEIER. Right, if we have a national program. In California, it is one machine per school, in California at this point.

Senator DANFORTH. And but for this legislation you would not do that. Is that correct?

Mr. SCHEIER. No, there would not be any possible way we could do that.

Senator DANFORTH. Now, this bill last year was called generally by its detractors the Apple bill. [Laughter.]

Mr. SCHEIER. Well, it is certainly a moniker we wouldn't want to discourage. [Laughter.]

Senator DANFORTH. The view was that this is a great competitive advantage for Apple. Apple thought it up. Apple is going to go forward. Apple will lock in a whole generation of future customers by contributing one of its computers per school. Why should Congress get itself in the business of trying to create an advantage for one competitor in a very competitive field? Should we be concerned about that?

Mr. SCHEIER. Well, I think you should be, Senator. But as you see in California, other companies are donating equipment to schools. Hewlitt-Packard has said they will donate approximately $700,000 worth of equipment. IBM has recently said that they would donate 1,500 systems in the States of California, New York, and Florida. Tandy has extended an offer of training. Atari has said that they will make some sort of offer, but it has not been forthcoming as yet. So I think that clearly the other companies are participating. Whether they will participate the same extent that we are, is difficult to say at this point. That is certainly an individual corporate decision.

Senator DANFORTH. But you would expect that this would be an act of Congress that would be useful, not only to Apple but your competitors as well.

Mr. SCHEIER. Most definitely. We applaud the efforts that our competitors have made in this arena. We think it is important. I don't think that we are anywhere near the point of saturating elementary and secondary schools in the Nation with microcomputers. And we certainly don't think that it is important necessarily for children to become fluent in the use of an Apple computer, but rather to have some basic ability in understanding this technology. I also think that it is very important that people understand that we understand that there may be some long-term financial benefit to the company. We do not deny that. There very well might be. But in the short term it is going to cost us money right off the top. In California, it is going to cost us a million dollars. We estimate that a national program would cost us somewhere in the neighborhood of $10 million. That is after all the tax deductions have been taken.

Senator DANFORTH. So when Mr. Chapoton says that, in effect, the Government is simply paying for the computer, and there is no risk at all, no participation on the part of the company, your response to that?

Mr. SCHEIER. I would say he has not seen my budget items. He has not taken into account the other items that I have to pay substantially for. For example, my mail costs alone in California are going to run me $85,000.

Senator DANFORTH. All right. Thank you all very much. Now I am told that Dr. McCrea is here and I would like to hear from him at this point.

STATEMENT OF DR. PETER F. McCREA, VICE PRESIDENT AND DI

RECTOR OF RESEARCH FOR THE FOXBORO CO., FOXBORO, MASS.

Dr. McCREA. Senator, thank you for hearing my testimony out of sequence. An unnamed airline should use some operations research on scheduling.

My name is Dr. Peter McCrea. I am vice president and director of research of the Foxboro Co., which is headquartered in Foxboro, Mass. In 1982, my company had a total sales volume of $603 million. And of this amount, approximately 50 percent represented products sold outside of the United States.

I am appearing before you today on behalf of the Scientific Apparatus Makers Association. SAMĂ is a national trade association representing this country's manufacturers and distributors of a wide range of scientific, industrial and medical instruments and equipment. In 1979, SAMA member companies expended an average of 5.6 percent of their sales on R&D. This number represented 87 percent of their after-tax profits, or about 150 percent of their capital investments These numbers show that SAMA companies are clearly R&D oriented and R&D dependent.

I am appearing before you today to comment upon the effect that the R&D credit has had upon our industry and my company, and to convey my support for your bill, 738. Shortly after the R&D credit was enacted into law as a part of ERTA, SAMA conducted a survey of its membership to find out if the R&D credit would achieve its stated objective of increasing R&D expenditures. Results of this survey showed that ERTA would cause an 86-percent increase of the responding SAMA companies to increase their R&D activities, with over one-half of the companies expecting an increase in 1982 beyond that they had originally planned to spend for R&D. These predictions were certainly borne out in the case of the Foxboro Co. Our 1982 R&D expenditures was approximately $43.7 million, which was about 15 percent more than would have been spent without the R&D credit. And we plan to spend more in 1983. In these difficult economic times, with incoming order rates down, shipments down, and profits down, there is a very strong pressure to cut expenditures of all types, including R&D expenditures. Were it not for the R&D credit, we would find it difficult to resist these pressures, never mind increase them, as we should. Thus, I can clearly state that in the case of the Foxboro Co. the existence of the R&D credit is having its desired effect.

New products and new processes do not materialize over night. Competitive high technology products are a result of an evolutionary process which requires the efforts of significant numbers of talented people. In my view, it is necessary to maintain and even increase the levels of R&D spending in my company and in our country if we are to continue to meet foreign competition. The R&D credit is helping to meet that need.

Sir, I am a researcher, not a tax expert. I cannot comment on the various ways to implement incentives or to remove disincentives. I just know that from my perspective, as director of research of Foxboro, anything that you can do to support my request for expanded R&D budgets is good for my company and its competitiveness in the world marketplace and is, therefore, good for our country. I hope that Congress will make the R&D tax credit permanent.

Senator, SAMA thanks you for the opportunity to present these views.

Senator DANFORTH. Thank you, sir.
[The prepared written statement of Dr. McCrea follows:]

STATEMENT OF DR. PETER F. McCREA

THE FOXBORO COMPANY

ON BEHALF OF THE

SCIENTIFIC APPARATUS MAKERS ASSOCIATION

BEFORE THE

TAXATION AND DEBT MANAGEMENT SUBCOMMITTEE

UNITED STATES SENATE

MAY 27, 1983

SUMMARY OF RECOMMENDATIONS

**

SAMA strongly supports S. 738 to make the R&D tax credit

D

permanent.

*****

SAMA believes that certain provisions of S. 1194 and S. 1195 will

provide needed incentives to attract private industry dollars to

universities to assist in the conduct of basic research.

SAMA believes that the present moratorium on Treasury Regulation

*****

1.861-8 should be made permanent as is proposed by S. 654.

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