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I would just comment that as second vice president of the National League of Cities, I was part of the effort in 1972 to enact revenue sharing. At that time we thought revenue sharing would eliminate all the redtape and regulations associated with other Federal programs, as well as quit making mayors local managers for the Federal Government and really elect mayors for their communities. During the last several months, there has been a lot of criticism of the changes made last year to the program. Mayors are arguing that categorical grant programs should not be removed or the Governor should not have to exchange categorical grant funds for revenue-sharing funds. I think the record ought to show that when revenue sharing was enacted in 1972, the program was intended to replace categorical grant-in-aid programs. I don't have a great deal of sympathy with some of my old mayor friends that I worked with for years that now argue for both categorical grantin-aid programs and revenue sharing.

I have no problem whatsoever with revenue sharing and I will continue to work hard for the program. In addition, I will try to remove categorical grant-in-aid programs to save the original intent of the revenue-sharing program. I feel very, very strongly that the intent is as important as the money. You have to give local government officials the ability and responsibility to make decisions in their own communities rather than having 435 Congressmen and 100 Senators decide for 39,000 units of local government what is best for them.

With that editorial comment from an ex-mayor, would you please proceed. If you would summarize your statement, we will be happy to include the entire statement, together with biographical sketches, in the record.

[The statement and biographical sketches follow:]


Mr. Chairman and Members of the Subcommittee, I am pleased to appear before you today to discuss the appropriation request for Fiscal Year 1982 of the Treasury Department's Office of Revenue Sharing.

Appearing with me are:

Robert W. Rafuse, Jr., Deputy Assistant Secretary

(State & Local Finance)

Kent A. Peterson, Deputy Director for Administration
and Operations, Office of Revenue

Judith A. Denny, Deputy Director for Policy and

Compliance, Office of Revenue Sharing

Wanda Stiness, Assistant Director (Financial Management)

In addition, I have with me several key members of staff of the Office of Revenue Sharing upon whom I will call for information when appropriate.

Program Mission and Responsibilities

The Office of Revenue Sharing is a unit within the Office of the Secretary of the Treasury, established to administer the Revenue Sharing Program. The Program was established by the State and Local Fiscal Assistance Act of 1972. It was extended in 1976 and again in 1980. The current authorization expires at the end of FY 1983. The Revenue Sharing Program provides general fiscal assistance, distributed by a statutory formula, to over 39,000 general-purpose local governments. The funds are available to the recipients to use for any purpose permissible under their own laws. However, recipients must adhere to certain non-discrimination, audit, and public-participation requirements specified in the legislation.

The resources of the Office of Revenue Sharing are primarily devoted to two major tasks: making payments and ensuring compliance with the nondiscrimination, audit, and public-participation standards. The first involves obtaining and reviewing the data used in the allocation formula, computing allocations, making payments, accounting for payments, and providing for the collection and control of required forms.

The second task involves responding to citizen complaints and judicial or administrative holdings of discrimination, resolution of cases in which public hearing and notice requirements may not have been met, and ensuring that recipient governments receiving payments of more than $25,000 per year have the required audits and that all recipients meet minimum standards of financial accountability.

The Office also carries on, with minimal resources, a program of technical assistance and information to assist recipient governments and the public in understanding their responsibilities and rights under the Program.

Recent Activities

During fiscal years 1980 and 1981, the Office of Revenue Sharing undertook additional, non-operational responsibilities in cooperation with the Office of State and Local Finance relating to consideration of the future of the Revenue Sharing Program and the possible establishment of Targeted and Antirecession Fiscal Assistance programs. Most significant among these activities were the production of computer trials of possible allocation-formula options and the provision of legal assistance in the drafting of legislation. Approximately 60 computer trials, as well as numerous special analyses and reports, were produced by our Systems Division during this period in response to requests from the Congress,

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the Office of the Secretary, the White House, and the Office of Management and Budget.

As you know, the Revenue Sharing Program was extended for three years by P.L. 96-604 in December 1980. The Program authorized by the 1980 Amendments is essentially an extension of that authorized in 1976. The principal changes relate to payments to State governments. Although no payments to the States are authorized in FY 1981, payments of $2.3 billion per year, dependent upon Congressional appropriation action, are authorized in FY 1982 and

FY 1983.

The Office of Revenue Sharing is now in the process of implementing this second extension of the Program. The allocation and payment system, as well as formula data, have been and continue to be updated; current information for recipients and the public reflecting statutory changes is being prepared; the necessary revisions to the regulations are being drafted; and the minor changes in the auditing requirements in the new law are being implemented.

It is important to note that, should the Congress appropriate funds for payments to State governments in FY 1982 or FY 1983, it will be necessary to promulgate regulations implementing the new statutory requirement that State governments decline or return amounts of categorical aid to the Federal government equal to any Revenue Sharing payments they receive. In cooperation with the Office of State and Local Finance, we have been researching the matter so that the necessary regulations could be drafted in the event that funds are appropriated for State payments.

During the past year, the Office has continued its efforts to increase administrative effectiveness, especially in executing the compliance responsibilities. The activities initiated or completed during this period include:

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Development of regulations mandated by Section 504 of the Rehabilitation Act of 1973, relating to discrimination on the basis of handicap, and regulations mandated by the Age Discrimination Act of 1975, relating to discrimination on the basis of age.

Continued efforts to update and improve case- and reportprocessing procedures in the civil-rights and audit areas.

Initiation of a more extensive training program for
investigators in the Civil Rights Division.

Increased efforts to cooperate with other Federal agencies in processing discrimination cases.

Increased monitoring of closed civil-rights compliance


Implementation of an improved format for compliance agree


Development of a new processing system for referrals from compliance audits of possible violations of the publicparticipation requirements.

Continued development and application of computerized control and information systems to all three compliance functions and to the operation of the Office in general.

Mr. Chairman, last year in our statement to this Subcommittee we reported on the status of the efforts of the Office to meet its responsibilities for the auditing requirements of the 1976 amendments to the Revenue Sharing Act. At that time, we were in the process of reviewing the thousands of audit reports required of 10,946 recipient governments. I am happy to report to you that we are now essentially current in our review of these reports and that almost 9,000 (82 percent) of the governments subject to the auditing requirement are in full compliance.

Since last July, we have followed a rigorous policy of delaying payments to governments that are delinquent in reporting or that have failed to take corrective actions relating to submitted audit reports that are not fully acceptable. For example, the January-1980 payments of nearly 500 governments were delayed because of pay-holds attributable to audit-compliance matters. It is interesting to note that--as of February 13, 1981--only 295 jurisdictions remain on the pay-hold list because of problems with audit compliance. The Office is working with these governments to resolve their problems so that they will be off the pay-hold list by the time of the April payment. ORS Salaries and Expenses

Today we appear before you, Mr. Chairman, to request for FY 1982 $7,186,000 and 158 permanent positions for "Salaries and Expenses." This submission represents a net increase of $409,000 over FY 1981. No additional positions are being requested. The number of permanent positions requested is the same as that authorized in FY 1980, and is fewer than the number authorized for FY 1979. Since FY 1979, all funding increases requested have been for increases in pay and other costs associated with the maintenance of current levels of activity.

The President's FY 1982 budget calls for $4.6 billion for Revenue Sharing payments, the amount authorized by Title I of the State and Local Fiscal Assistance Act as amended in 1980, for distribution to approximately 39,000 units of local government. As I have noted earlier, the amendments authorize the distribution of an additional $2.3 billion to State governments in FY 1982. This budget does not include a request for such an appropriation.

Our submission also seeks a supplemental appropriation for FY 1981 of $293,000 for the pay increase for the Office of Revenue Sharing authorized by the Pay Act, effective last October.

My colleagues and I would be happy to respond to any questions you may have.



Mr. Jose Pepe Lucero joined the U.S. Department of Treasury in June, 1980 as Director of the Office of Revenue Sharing.

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Mr. Lucero is a general partner of Plaza Nacional Group, Ltd. the owners and developers of the Four Seasons Plaza Nacional Hotel in San Antonio, Texas. He has been active in various civic organizations in South Texas, particularly in economic development projects. He has been President of the Southwest Program Development Corporation, a San Antonio-based organization of professional program planners, since 1971 and for the past fifteen years has been professionally involved with various Federal, State, county and city governmental policy planning and program operations. He is a former Executive Director of the Community Action Agency in San Antonio and Bexar County, Texas.

Mr. Lucero holds B.A. and M.A. degrees in government and political science respectively from St. Mary's University in San Antonio. He is married and is a resident of Washington Metropolitan area.



Dr. Kent A. Peterson has been employed by the U.S. Department of Treasury since 1975. He received a Bachelor of Arts degree from Princeton University, Princeton, New Jersey, in 1963, a Master of Arts from Yale University, New Haven, Connecticut in 1965, and a Master of Arts and Doctorate degree from Princeton in 1968 and 1970 respectively.

In 1974-75 Dr. Peterson served as a consultant to the Office of Management and Budget, the Executive Office of the President and the Treasury Department, on an evaluation of the General Revenue Sharing Program. He later became an employee of the Department of the Treasury, serving first as Special Assistant to the Under Secretary of the Treasury for Revenue Sharing and Intergovernmental Relations (1975-76), then from 1976-78 as Assistant Director for the Antirecession Fiscal Assistance Program, Office of Revenue Sharing, from 1978-79 as Assistant Director for Evaluation and presently he is serving as Deputy Director.

Dr. Peterson is a resident of the Washington Metropolitan area and the co-producer of a number of published task force studies on revenue sharing.

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