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OVERSIGHT HEARINGS ON THE IMPACT AID LAWS
AND TESTIMONY ON H.R. 5181
THURSDAY, FEBRUARY 27, 1975
HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON
' , , Risenhoover, Simon, Zeferetti, Miller, Mottl, Hall, Quie, and Goodling.
Staff members present: John F. Jennings, counsel of the subcommittee and Christopher Cross, minority senior education specialist.
Chairman PERKINS. The Subcommittee on Elementary, Secondary, and Vocational Education is holding a hearing today to oversee the implementation of the amendments to the impact aid laws which were adopted in the Education Amendments of 1974, Public Law 93–380.
Our prime purpose in conducting this hearing is to ascertain from the administration how far along it is in implementing those amendments, whether it anticipates any additional costs in the program due to those amendments, and what sections of the amendments it sees as needing corrective, technical changes.
In addition to testifying today it is my understanding that the administration would like to present us with its new proposal for amending the impact aid laws.
We will also be hearing today from various Members of Congress and from administrators of school districts receiving impact aid.
Our first witness this morning is the Honorable Pete V. Domenici of New Mexico.
TESTIMONY OF HON. PETE V. DOMENICI, A U.S. SENATOR FROM
THE STATE OF NEW MEXICO, ACCOMPANIED BY DR. LARRY HUXEL, ASSISTANT CHIEF, PUBLIC SCHOOL FINANCE DIVISION, DEPARTMENT OF FINANCE AND ADMINISTRATION, STATE OF NEW MEXICO
Senator DOMENICI. Thank you very much, Mr. Chairman.
Mr. Chairman and committee members, 'I greatly appreciate this opportunity to spend a few moments with you. I won't take long.
I have with me Dr. Larry Huxel, assistant chief, Public School Finance Division, for technical questions.
Mr. Chairman, we in New Mexico have implemented what has been acknowledged as one of the finest equalization plans for public school financing in the country.
We think we have removed the inequities which formerly resulted in property wealth differences among local school districts.
No longer are children in New Mexico penalized in their educational opportunities due to the wealth of their particular community.
At the same time New Mexico provides for the varying needs of children through the use of higher weights for each child
participating in higher cost programs such as special and vocational education.
Our concern at this time is in the use of Public Law 874 funds. New Mexico does include Public Law 874 funds in its equalization program. Exclusion of Public Law 874 revenues creates the peaks and valleys characteristic of gross disequalization. The experts in the State Division of Public School Finance feel an equitable equalization plan must take into account these funds.
Since last October our officials from New Mexico have been working closely with officials from other States and the U.S. Office of Education to develop rational guidelines for equalization programs.
However, over this period of 4 months there have been apparently difficulties in getting definitive answers to specific questions, which is basically the reason we are here today and which I understand from the chairman's introductory remarks is the basic reason for the hearings.
We are confident that New Mexico can meet any reasonable criteria for financial equalization. So we are not here as a State that doesn't think we have such a plan nor can we qualify under any reasonable definition.
Qualifying within the equalization plan guidelines will allow New Mexico to utilize Public Law 874 revenues in our plan.
There is no major concern on our part with this section of the law or the guidelines currently being discussed by the U.S. Office of Education.
Our primary concern is with the interpretation of the Meeds’ amendment by the U.S. Office of Education in the determination of the proportion of Public Law 874 revenues which may be included by a State in its equalization program.
I understand the New Mexico officials have received no satisfaction in working with the Office of Education on this issue in attempting to develop reasonable criteria.
The issue centers on the definition of "local revenue" as utilized within the law as it pertains to Public Law 874 funds. Specifically the question is the inclusion or exclusion of debt service revenue within the definition of "local revenue."
The State of New Mexico argues and urges that debt service has no rational relationship to Public Law 874 funds and should therefore be excluded.
Public Law 874 funds, as we in New Mexico understand, were intended to help offset the loss of property tax revenue for the current expenditures of public schools. Current expenditures, as defined by Public Law 874 itself excluded debt service revenue The input data utilized to calculate Public Law 874 allocations exclude debt service revenue,
Public Law 874 is unrelated to debt service. Public Law 815 was designed and is intended to provide funds for building construction on Federal property.
Debt service and Public Law 815 do have a rational relationship. But our concern today is Public Law 874, not Public Law 815.
With no evident rational relationship between Public Law 874 and debt service, why is there now an apparent desire to tie the two together thereby lowering the proportion of Public Law 874 which could be included by a State in an equalization plan?
To date no direct answer has been provided to us by U.S. Office of Education personnel.
It is apparent, however, that part of the problem and probably most of the problem is that some States have utilized Public Law 874 funds for debt service when they could not receive aid through the legitimate avenue of Public Law 815.
There would seem to be a push to distort Public Law 874 since there has been a problem with Public Law 815 funding.
It would seem the more logical approach would be to correct deficiencies in Public Law 815, if that is indeed where the problem lies.
Typical State school finance plans treat current operational expenditures and debt service as distinct entities. Without a doubt this fact accounts in part for the existence of two Federal laws
regarding impact aid, one, Public Law 874, for current expenditures and the second, Public Law 815, for building construction. The two phases of school financing are separate and we believe should be handled that way.
"Local revenue” in the Meeds amendment language pertaining to the use of Public Law 874 revenue should be defined as the revenue produced by local school taxes levied for current expenditures of the public schools."
This type of language is directly related to the "in lieu of local property tax” nature of Public Law 874 and takes into account the vast majority of local revenues utilized by public schools to meet their current expenditures.
Mr. Chairman and members of the committee, I thank you for putting me first on the list of witnesses and giving me this opportunity to make this brief statement.
I do have New Mexico's expert here if you care to ask him what the effect of our equalization plan would be.
Chairman PERKINS. It is my understanding of the Meeds amendment that it would consider only current expenditures and not debt service and capital outlay.
But I defer until the gentleman from Washington arrives in connection with pursuing that question.
Let me ask you for your interpretation.
Mr. HUXEL. Yes, sir, our interpretation was just the same as yours, Mr. Chairman.
In that since Public Law 874 is related directly to the current expenditures of the public schools that when we are defining the local revenues we are talking only of current expenditures and only that which is produced by a tax levy with the purpose of current expenditures thereby excluding such other revenues as earnings from investment, fees from patrons, those types of revenues should also be excluded. Chairman PERKINS. Mr. Goodling, any questions? Mr. GOODLING. Nothing at this time. Chairman PERKINS. Mr. Simon? Mr. SIMON. Senator—and I forget the other gentleman's name. Mr. HUXEL. Huxel. Larry Huxel.
Mr. Simon. Just a very general question about impact aid in your State. My observation in a very limited way is that impact aid first of all has this liability, that sometimes it helps wealthy districts that really don't need some assistance.
The other thing that concerns me—and I am from a rural area in southern Illinois-is that sometimes it seems to help areas of urban poverty of need but not rural areas of need.
I am for helping our urban areas of need. But I am also for balancing.
I am just curious as to your observations in the State of New Mexico.
Mr. HUXEL. Yes, sir, your points are quite good in that the reason that a State must have an equalization plan and must meet the criteria for an equalization plan is that it takes into account the needs of all the school districts and all the students within that State.
And so, to make the point that you brought out, the State's plan would have to acknowledge both the needs of the urban and the rural.
And if the State plan does that then the State could and must in our opinion take into consideration Public Law 874 funds to help meet the cost of that identified need within the State plan.
But the first key is to have an equalization plan within the State which is indeed an equitable plan which meets the needs of all the students.
Mr. Simon. And you find in the State of New Mexico-if I may pursue—that in your State plan you do not find inequities in distribution?
Mr. HUXEL. If we had not gone to the equalization plan—to preface that, prior to our equalization plan we did have gross inequities where some school districts who were the rich in property were also rich in Public Law 874 so that we created the peaks.
There were also other school districts that were poor in property and had no 874.
So we had gross inequities between the two.
Then we moved to an equalization plan where we identified the needs of students by a number of criteria which addressed both the urban and rural, the Indians, Spanish of our State, and tried to do what we feel is a very creditable job of establishing a need basis.
From there we look at the sources of revenue that a school district has, both the local property and Public Law 874. And since the two are essentially offsets—the Public Law 874 in lieu of a local property taxwe treat the two in an identical manner in our plan.
Mr. Simon. Thank you very much.
Let me add just one other word. I like the State of New Mexico, the way you blended the three cultures there is a magnificent thing.
I am pleased to hear you say what you are doing in the school system there.
Chairman PERKINS. Mr. Miller?
Chairman PERKINS. I want to thank you gentlemen very much for your appearance here this morning.
Senator DOMENICI. Thank you, Mr. Chairman.
Will you gentlemen come up at this time?
TESTIMONY OF HON. ANDREW J. HINSHAW, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA, AND HON. CLAIR BURGENER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Hinshaw. Mr. Chairman, my name is Andrew Hinshaw. I am a Congressman from California. Sitting beside me is Clair Burgener, also of California.
We are Congressmen in two districts which are contiguous in the southern California area of Orange County and San Diego County.
There are three school districts which are affected. Then in addition to that there is a school district which is affected in my own district in Orange County.
What we would like to do with the chairman's permission is to give a brief overview of the broader picture of section II, which is the only portion we are talking about here, and get into a few of the details.
Mr. BURGENER. Mr. Chairman, members of the committee, we deeply appreciate this opportunity to present what we hope will be a relatively minor problem to the committee but a very major problem to our school districts.
If you will forgive me if I make mistakes in numbers—and they certainly will not be intentional—but it is my understanding that there are some 16,000 school districts in the United States roughly. There are some one-fourth of that involved in impact aid, Public Law 874.
But in section II, which is the subject to which we address ourselves today, there are only some 170 in the Nation, which would really be closer to 1 percent of the school districts in the Nation. And of those Mr. Hinshaw and I have three that are most directly affected.
Section II does not have to do with A and B chilldren who live or whose parents live or work on or off the base. They have to do with real estate. And they have to do with a majority of the school district's land being in a Federal Establishment.
We represent the communities of Oceanside and Fallbrook and the great Marine base at Camp Pendleton is the area in question.
Under Public Law 93–380, I understand is H.R. 69, we think and we hope that inadvertently section II somehow got seriously affected and we hope unintentionally so.