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As you know,

problem at that time, and this was quite a boon to us. we boast in the State of Nevada of very few taxes. We have no income tax. We have no inheritance tax, no estate tax, no corporation tax. But we did enact the 2-percent sales tax so that we could devote more effort toward our school problem, but the school problem has, like Topsy, just "growed," and it has "growed" at a very very

fast rate.

If I remember my figures correctly now, I think we have better than 20,000 students on double time basis in our State today. The southern part of the State is hit worse than the northern part. But the school people in the north advise me that this coming year they will have substantial numbers on double time basis in the schools.

We just can't keep up, and when you keep, as I commented here, building two new classrooms a week to take care of one school district's demands based on present rates, that is certainly a tremendous burden. and we are certainly happy to try to keep up and I firmly support myself the increase of the sales tax from 2 to 3 percent in my State because it will make about $10 million in the biennium additional available for us, the bulk of which will actually go into the school


A little of that will go into some other areas, but the bulk of the money will go into the school program.

Senator GOLDWATER. I think one thing that sometimes we on this subcommittee overlook is the great job that is being done by the Western States where we own so little of our land. I think Nevada runs 86 percent under some governmental control. In Arizona we can only tax 12 percent of our land.

Now, we have been very proud of our ability to more or less carry our own, but unless we are able in some way down the line to get some of this land back so that we can either tax it for school purposes, or rent it for school purposes, we are going to be increasingly in a greater bind.

I will be very interested to see what our sister State, one of which county was created from my territory, is able to do with this 1 percent.

Senator CANNON. I thank the chairman and the subcommittee for the opportunity to appear. I certainly want to commend the chairman. He has been a leader in the field of education of war veterans for many, many years, probably the most knowledgeable man in the Senate on that particular point, and I commend him for his efforts and I am happy to join with him in the cosponsorship of the GI cold war bill this year.

Senator YARBOROUGH. Thank you, Senator. I have one question off the record.

(Discussion off the record.)

Senator YARBOROUGH. Back on the record. Thank you, Senator Cannon, for a very fine presentation here.

Senator CANNON. Thank you.

Senator YARBOROUGH. Gentlemen, ladies, we have a list of witnesses and a panel. Due to the fact that Senator Goldwater is forced to go to another committee hearing on defense and critical matters and he has a constituent here from his State, a distinguished educator from

California, bearing in mind his request to accommodate the other committee, Senator Goldwater, at this time we will call Dr. Freeman. Senator GOLDWATER. Thank you very much.

Senator YARBOROUGH. Senator Goldwater, will you present Dr. Freeman to the subcommittee.

Senator GOLDWATER. Mr. Chairman, Dr. Freeman for many years prior to his new engagement with the Hoover Institution on War, Revolution, and Peace, was actively engaged in the field of research on Federal aid to education, its impacts, its needs, and I think I can say this without qualification, that he is probably more learned in this field than any student of it in the country. I am very happy and proud to present him to the subcommittee even though he is not a constituent of mine. He has been raised partly on our water, I might say.

Senator YARBOROUGH. I realized, Senator Goldwater, that I enlarged your jurisdiction slightly.

Senator GOLDWATER. I would like to have it.

Senator YARBOROUGH. Although my residence is in El Paso, Tex., I realize from the water standpoint Arizona was modest in saying it is furnishing water for California.

Thank you, Dr. Freeman. Proceed in your own way.


Dr. FREEMAN. Thank you, Mr. Chairman. My name is Roger A. Freeman. I am senior staff member of the Hoover Institution on War, Revolution, and Peace, Stanford University, Stanford, Calif.

For the information of your subcommittee I would like to mention that I directed the research for the Education Committee of the U.S. Commission on Intergovernmental Relations in 1954-55, was a consultant on school finance to the White House Conference on Education in 1955, and subsequently served on the White House staff.

Previously I had been assistant to the Governor of the State of Washington.

Opinions I may express are my own and do not necessarily reflect the views of any of the organizations with which I am or was connected. I appreciate the invitation of your subcommittee to testify on pending proposals for Federal aid to education, and have prepared a statement which focuses primarily on aid to construction of academic facilities in institutions of higher learning which I have submitted for the record and with your permission, Mr. Chairman, I would like to Summarize the statement orally, except for the introduction.

The President in his message on education of January 29, 1963, emphasized the paramount importance of education to the well-being and security of the Nation and described the precarious situation which many of our schools, colleges, and universities face in adequately fihancing their activities. Since the end of World War II educational enrollment has jumped from 28 to 50 million, an increase of 76 percent. This was accompanied by a growth in funds from $4 to $29 billion which, when adjusted for the simultaneous loss in the value of the dol

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lar, amounts to an increase of 334 percent. The share of the national income devoted to education meanwhile tripled-from 2.3 percent to 6.8 percent.

Senator YARBOROUGH. Dr. Freeman, you said you were summarizing your statement. At this point I want to order the statement to be printed in the record, your entire statement, including the appendixes you have attached. You may proceed with your summary.

Dr. FREEMAN. Thank you very much. Even this tremendous increase in financial support has not been enough, the President pointed out, to meet and correct some of the educational deficiencies which continue to plague us. Prompt action is called for.

Few will question that there is a strong national interest in education. Under a division of labor, such as was established by our Federal System of Government, each member-that is, each level of governernment--has a vital interest in the activities and satisfactory performance at the other levels. The world "Federal" itself implies an obligation of mutual aid when needed. There is little doubt but that the National Government by imposing an exorbitant tax burden has made the financing of education more difficult.

If States, communities, and institutions are unable to meet their educational responsibilities and the National Government has the necessary means at its disposal, then it appears proper that it render assistance.

The crucial question to be decided concerns the most appropriate and effective method in which such aid can be given.

To deal with specific shortcomings in our educational system, the President formulated 24 programs which are incorporated in S. 580. His major plan of aiding institutions of higher learning appears in title II, part (A), "Higher Education Facilities."


This type of program has been used for some years very successfully to finance dormitories and dining halls which are self-financing facilities. That means the bonds which are issued are serviced by the revenues from fees and constitute no drain on the revenues of the institutions. When it comes to academic facilities, however, we face an entirely different situation. In fact, bonds have been used very little by colleges and universities to finance academic facilities. Private institutions have shied away from using bonds because the payment of the principal and the interest would restrict future income which is to be reserved for operating purposes and for salaries.

Therefore, they have not used bonds, and public institutions, State universities, and colleges, have not used them either.

In the first place, because of State constitutional or statutory restrictions they can borrow only with the approval of the State government or of the voters, and if they do obtain that approval, then they usually can sell bonds at a lower rate of interest than the Federal Government because of the tax exemption feature.

In other words, what the institutions need is not a market for their bonds but some way of improving their revenue situation.

On the whole, the institutions of higher learning have been suppliers of funds in the money market more than borrowers because they have

endowment funds which now considerably exceed $5 billion and are increasing each year at the rate of $300 to $400 million.

Therefore, the loan proposal, while it appears attractive, and while arit seems to parallel the college housing plan, would be of very little aid to most institutions and it would be of practically no aid to those -ni who need more revenue.

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Actually, the loans available to private institutions under title III of the National Defense Education Act have not been used, and about percent of them lapse each year. Therefore, I submit that the loan hproposal would not solve the problem which institutions of higher amming are facing.



Now, as you know, it has been proposed that to fill the gap between the needs and the resources, grants should be provided for constructon in higher education. These grants have run into difficulty.

In the first place, I want to say that the main problem in higher iation is not so much construction of facilities as operational costs, picularly faculty salaries. Funds for construction are on the whole tewhat easier to obtain than funds for operations.

Now, there have been several rather serious objections to grants in higher education which would either include or exclude private institrons. They resulted in a deadlock that was mentioned a few minago by Senator Moss and a week ago on the floor of the Senate Senator Ribicoff. The reason is that many of the private institus are church related and some feel that tax funds should not go todenominational institutions.

If this were simply a question of constitutionality, then it could be to the U.S. Supreme Court to decide. But on the whole, that tion apparently satisfies neither side of the conflict because the ngs are rather strong on one side that the granting of tax funds tly to church-connected colleges would constitute a breach in the alled wall of separation between church and state. On the other ad it has been traditional for the Federal Government, in any pros in higher education, not to distinguish between private or public tions for more than 100 years. Private institutions feel that it d be discriminatory to aid one type of higher education and not her. A third point is that the balance in higher education has ed more and more to public institutions, for the simple reason ruitions in higher education in the public institutions average $185 a year, and in private institutions $731. More and more ts find it impossible to finance the education of children in priTolleges and universities.

The salary schedules which I listed in my written testimony are erably higher in the public than in the private colleges. If this continued and if tax funds were made available for public instibut no aid provided for private institutions, it is evident that reight would shift more and more to public universities and coland many of the private colleges would simply have to to go out iness. Eventually the diversity of our educational system and fredom of higher education would diminish.

A second line of objections to grants to private institutions has been voiced which comes largely, not from higher education, but from public school groups. The reason for this is quite apparent from the enrollment trends.

Since 1940, the enrollment in public schools has increased 55 percent, and in the nonpublic schools, three times as much, 152 percent. This shift took place although class sizes in most nonpublic schools are considerably larger than in public schools, and although the space provided per pupil is 50 to 100 percent larger in the public schools, and although the parents who send their children to private schools have to bear a very heavy burden of tuition or other contributions.

Therefore, if a precedent were established, these groups feel, of providing aid to private higher education, it might be regarded as setting a precedent also for the schools, and if the economic penalty of parents sending their children to private schools were reduced, the shift to private schools might increase even more, and the relative standing of public schools in terms of enrollment might decline.

There is also a third line of objections to grants in higher education, both to public and private; namely, that they would lead to Federal control and to greater centralization of government.


What I am basically driving at is that for many years the grant and loan approaches have been suggested and tried. And the net effect has been a complete deadlock. There is no sign at this time that we are any closer to a solution along the line of grants or loans than we have been in the past. Therefore, it seems appropriate to seek other means by which we can find a method by which higher edu cation can be aided. One method has been suggested by quite a fewtax credits. In the last Congress, there were more than 100 bills proposing certain tax concessions, and in the 88th Congress there are more than 120 bills proposing tax concessions for educational expenses.

I am not aware that there is any other subject on which there are as many legislative proposals pending as tax concessions for educational expenditures, which shows that there is a great deal of favorable sentiment on both sides of the aisle.

I would suggest that tax concessions of this type should aim not so much at providing relief for the students and their families as in enabling the institutions to raise their tuitions and fees without a proportionate increase in the burden upon those who pay them, that is. the students and their families, the reason being that the average family income at the present time exceeds $8,000 a year, is increasing rapidly, and the main need in the next few years, I believe, will rather be in the institutions.

The advantage of a tax-credit approach is that it would completely eliminate the church and state issue because there would be no con nection between the Government and the institution. The relationship would only be between the Internal Revenue Service and the individual taxpayer. It would also eliminate the objection of Federal control, because it would leave completely undisturbed the existing relationships in higher education.

Now, there are several ways that have been suggested. It seems to me that while the institutions are reluctant to commit themselves

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