The divorcement of some of these programs from the others and their transfer to an independent agency for the handicapped, which the bill proposes, would, we believe, be unsound from the standpoint of good government organization and not in the best interests of the handicapped. It would also be untimely in view of the recent creation of this Department. In submitting Reorganization Plan No. 1 of 1953 to the Congress, the President said "I believe, and this plan reflects my conviction, that these several fields of Federal activity should continue within the framework of a single department."

2. As you know, Public Law 109, 83d Congress, approved July 10, 1953, provided for the establishment of the Committee on Intergovernmental Relations to make a thorough study of grants-in-aid activities and of the problems of finance and Federal-State relations which attend them, including the question of justification for existing Federal programs, the need for additional programs of Federal aid, and the ability of the Federal Government and the States to finance activities of this nature. Apart from this, any new proposal involving substantial increases in Federal expenditures would have to be appraised in the light of the determination of this administration to move as rapidly as possible toward a balanced national budget. This is particularly pertinent to the proposal of the bill (title IV) to establish a program of 100 percent grants to the States for payments to totally disabled persons unfeasible for rehabilitation, which evidently would overlap with title XIV of the Social Security Act which now provides for grants to assist the States in aiding totally and permanently disabled needy persons.

This Department is aware of certain gaps in the services to the handicapped and of the lack of facilities available under the Federal-State program of rehabilitation. In addition, as the department most vitally concerned with the health, education, and welfare of the people and the rehabilitation of the handicapped, we share with the Congress the sincere desire to expand and improve rehabilitation services to the handicapped. Nevertheless, for the reasons indicated above, we are unable to recommend favorable consideration of this bill.

The Bureau of the Budget advises that it perceives no objection to the submission of this report to your committee.

Sincerely yours,

OVETA CULP HOBBY,

Secretary.

Senator PURTELL. Thank you very much. If we have no other witnesses, the hearings will stand in recess until tomorrow morning at 10 o'clock in the same room.

(Whereupon, at 11:20 a. m., the committee adjourned until 10 a. m., the following day, Thursday, April 8, 1954.)

PRESIDENT'S HEALTH RECOMMENDATIONS AND

RELATED MEASURES

THURSDAY, APRIL 8, 1954

UNITED STATES SENATE,

COMMITTEE ON LABOR AND PUBLIC WELFARE,

SUBCOMMITTEE ON HEALTH,
Washington, D. C.

The subcommittee met at 10:08 a. m., pursuant to recess, in room P-63 of the Capitol, Senator William A. Purtell (chairman of the subcommittee), presiding.

Present: Senators Purtell, Goldwater, and Lehman.

Also present: Roy E. James, staff director; Melvin W. Sneed and William G. Reidy, professional staff members.

Senator PURTELL. The hearing will come to order.

We are very happy this morning to have Members of Congress here to testify.

We are particularly pleased to have my colleague, Hon. Charles E. Potter, Senator from the State of Michigan.

Senator Potter.

STATEMENT OF HON. CHARLES E. POTTER, A UNITED STATES SENATOR FROM THE STATE OF MICHIGAN

Senator POTTER. Mr. Chairman, it is a pleasure for me to appear before such a distinguished committee, chairmanned by my able colleague from the great State of Connecticut.

Mr. Chairman, I have a brief statement that I would like to make concerning the administration's proposed rehabilitation program. I heartily endorse the principle underlying the administration proposal with regard to vocational rehabilitation which, as I understand it, seeks a broadening and strengthening of the existing program. Today more than ever the conservation of our human resources is vitally necessary. The enemy against which we are arming at such enormous cost outnumbers us more than 5 to 1. How shortsighted not to avail ourselves of the latent talents of our physically handicapped or disabled citizens which, in almost countless instances, merely await an assist from the rehabilitation services to become productive. There is indeed no investment that can so surely translate a liability into an asset as that which returns a disabled person to work of a productive nature.

We are currently paying out many tens of millions of dollars every year in public assistance to the disabled. For every person that is returned to economically useful work, a saving to the taxpayers of

the cost of his public assistance payments, averaging some $600 a year, is realized, plus, the income from taxes that his earnings would yield when placed on a job. All in all, it is conservatively estimated that for every dollar spent on rehabilitation, society receives a return in one form or another of $10.

To the economic factors, of course, must be added the intangible but very real dividends flowing from the salvage of human values, the restoration of a feeling of self-respect, of usefulness to the community that comes to the rehabilitated person.

From any angle it is important that we build a strong and effective rehabilitation program. I regret to say that there is some doubt in my mind that S. 2759 will accomplish this desirable end.

It is natural that I should look to see what would appear to be the effects of the administration measure, as now written, upon the program in my own State of Michigan. So doing, I am disturbed at what

I see.

As I understand S. 2759, a new formula is proposed covering the distribution of Federal moneys for rehabilitation work to the respective States.

The present formula, as your committee is undoubtedly aware, provides for distribution of Federal funds to each State on a basis consistent with the character and scope of the program being conducted in that State. If a State has a broad, comprehensive program, more Federal aid is allowed than if its program is restricted. In short, under present law, to the extent that each State has seen the need for rehabilitation work within its borders and has done something about it, to that same extent the Federal Government has participated. The proposed formula appears to abandon this principle which has worked so well, at least so far as my own State is concerned.

Under S. 2759, the distribution of Federal funds to many States which have active, advanced programs will be sharply reduced from the levels presently existing except that these States are able to realize in a comparatively short period of time what amounts to a precipitate increase in their own spending on this work.

Now, I strongly believe that there should be an increased emphasis on this vital conservation activity at all levels-Federal, State, and local. I believe that the history of the rehabilitation program in my State will show that this recognition has been manifest.

In the year 1944, the State of Michigan spent only $87,240 in this work. In the following year, 1945, we approximately doubled our effort, spending $173,869. By 1948 we had doubled our outlays again with expenditures of $377,109. In the succeeding period, while we have not gone ahead as rapidly as I would have wished, we have maintained an average annual level of expenditures for rehabilitation of about $475,000, the actual amount for the current year of 1954 being $477,000.

As I have said, I wish this record were even better, but I believe it is a good one and will compare favorably with that of most other States. That is why I wish to see nothing done that would cause a setback or disruption in the present effort. S. 2759, as I understand it, poses such a threat.

The new formula for distribution of Federal money which the bill advances would confront Michigan with the requirement of boosting

outlays for rehabilitation from the existing level of $477,000 annually to $910,942, a raise of 93 percent. Yet, at the same time, the incentive to put forth such an effort would be reduced, since even that spending level, could it be attained, would not mean the receipt of Federal money at the present rate. There would, in fact, be à reduction of some 24 percent in these funds, or a drop from $991,000 at present to $754,400.

I cannot but believe that the administration did not intend any such shock to existing programs as the authors of this bill would apparently risk.

I fully appreciate that the matter of the most equitable distribution of Federal funds to the States to aid the many joint programs that are in operation is a question upon which there can be room for honest differing opinions.

There is precedent for distribution based on the relative economic status of each State. There is precedent for distribution of funds based on relative population of the respective States.

Distribution of Federal funds for public assistance, under the socialsecurity program, is based on number of cases and means a Federal share up to as much as 75 percent of total costs.

I would not profess to attempt to say what division is the most equitable to use in the sharing of costs of rehabilitation programs as between State and Federal participation; but I do say this: When a program has been established and is in operation over a period of years, as has been the case with the rehabilitational work, any proposed changes should be scrutinized with the utmost care to see to it that existing activities are not impaired.

Our problem here might be different if we were just beginning a rehabilitation establishment; but that it not the case. We are not starting from scratch. We face a practical condition, one in which we have many State programs actively and successfully functioning. In no instance should we hazard a State operation through drastic revision of the basis upon which it is now receiving Federal support.

It is appreciated that S. 2759 does provide for a transition period before the full effects of the new proposed method of sharing costs will be felt, and during which it is proposed that State funds be raised to compensate for declining Federal funds; but I suggest that there are very few, if any, States that can accomplish an increase so great as Michigan is called upon to realize, nearly a doubling of their outlays, in the short space of 2 years time. In fact, the demand is even more drastic than this. In order for Michigan to continue to receive the same amount of Federal funds as at present the State participation would have to increase by some 250 percent.

Mr. Chairman, in the bill which I have introduced, in an effort to avoid what seems to me to be an injustice for States in the position of my own, I have stipulated the use of the year ending June 30, 1953, as a base year below which level of distribution Federal funds to any State would not be allowed to drop.

This bill, S. 3039, is not offered as the last word on the subject. The committee may well wish to combine some of the features which are contained in the administration measure with the provision covering funds distribution contained in my bill, or it may well be that upon further study still more practicable and equitable solutions may present themselves.

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