89 1 reflecting vocational rehabilitation services provided each 2 handicapped individual during the preceding fiscal year and 3 shall specifically distinguish between rehabilitation closures 4 attributable to physical restoration, placement in competitive 5 employment, extended or terminal employment in a shel6 tered workshop or rehabilitation facility, employment as a 7 homemaker or unpaid family worker, and provision of sup8 plementary services. 9 10 11 TITLE VI-MISCELLANEOUS EFFECTIVE DATE SEC. 601. The effective date of this Act shall be July 1, 12 1972. Rules, regulations, guidelines, and other published in13 terpretations or orders may be issued by the Secretary at any 14 time after the date of enactment. 15 16 EFFECT ON EXISTING LAWS SEC. 602. Unexpended appropriations for carrying out 17 the Vocational Rehabilitation Act (29 U.S.C. 31-42b) may 18 be made available to carry out this Act, as directed by the 19 President. Approved State plans for vocational rehabilitation, 20 approved projects, contractual arrangements, and appoint21 ments to advisory groups authorized under the Vocational 22 Rehabilitation Act will be recognized under comparable pro23 visions of this Act so that there is no disruption of ongoing 24 activities for which there is continuing authority. 79-885 O 72 pt. 1 -- 7 1 90 REHABILITATION SERVICES ADMINISTRATION 2 SEC. 603. (a) There shall be in the Department of 3 Health, Education, and Welfare a Rehabilitation Services 4 Administration which shall be administered by a Commis5 sioner and shall be the principal agency in the Department 6 of Health, Education, and Welfare for carrying out and 7 administering programs and performing services related to 8 the rehabilitation of handicapped individuals as authorized 9 under this Act. Passed the House of Representatives March 20, 1972. Attest: Clerk. HAY 25 2 14 PM '72 Reference is made to your request for the views of this Department on H.R. 8395, "The Rehabilitation Act of 1972," as passed by the House. Section 406 of the bill would authorize the Secretary of Health, Education and Welfare to insure mortgage loans made to public and private borrowers for new multipurpose rehabilitation facilities. Under existing law, the interest income from most obligations issued by State and local public bodies is exempt from Federal income taxation. Since the bill would not alter the tax status of obligations issued by public bodies to finance rehabilitation facilities, the guarantee authority would result in Federal guarantees of tax-exempt obligations. The Treasury is strongly opposed to Federal guarantees of tax-exempt obligations. The Department's opposition to Federal guarantees of tax-exempt obligations is based on four fundamental problems raised by such guarantees: (1) the guarantee of tax-exempts is an inefficient subsidy since the Federal tax revenue loss exceeds the interest savings of the borrower from tax-exempt interest, (2) the guarantee of tax-exempts disproportionately benefits investors in high Federal income tax brackets, (3) such guaranteed obligations heighten the competition for the limited amount of funds available to State and local borrowers from high tax bracket investors and raise the cost of financing other local projects for which direct Federal credit aid is not provided, and (4) such guarantees conflict with Federal debt management policy by creating a class of securities (tax-exempt) which the Federal Government itself is prohibited from issuing by the Public Debt Act of 1941. Section 407 of the bill would authorize the Secretary of Health, Education and Welfare to make annual interest grants to public and private agencies to reduce the cost of borrowing for the construction of rehabilitation facilities. Such grants could be made over periods up to 40 years, in amounts equal to the difference between the average annual debt service on the amount borrowed and the debt service if the applicable interest rate were three percent. Thus, the interest rate payable by new borrowers would be fixed at 3 percent. 2 Experience with Federal credit programs indicates that fixed interest rates to borrowers produce perverse and unintended variations in interest rate subsidies as market rates vary, which result in inequities among borrowers using the program at different times and extraordinary demands for Federal loan and related grant funds at times of greatest inflationary pressures and overall budget tightness. Thus, the Department has consistently recommended that Federal lending agencies be permitted to vary the interest rate charged new borrowers from time to time at least as much as market rates and current Treasury borrowing costs vary. Since there would be no requirement under the proposal that the applicant demonstrate a need for the proposed subsidy, and no incentive for the applicant to seek out the lowest interest rate obtainable in the market because all interest in excess of the 3 percent payable by the borrower would be paid by the Federal Government, the proposal could lead to unnecessary dependence on Federal subsidies and excessive Federal costs. Public Law 91-296 added a new Part B to title VI of the Public Health Service Act under which the Secretary of Health, Education and Welfare is authorized to provide credit assistance at subsidy interest rates to public and private agencies for modernization and construction of medical facilities without resorting to guarantees of tax-exempt obligations and fixed interest rates to borrowers. Since rehabilitation facilities are specifically eligible for assistance under Part B of title VI, there is no apparent need for the proposals contained in sections 406 and 407 of H.R. 8395. In view of the foregoing, the Department is opposed to sections 406 and 407. The Department has been advised by the Office of Management and Budget that there is no objection from the standpoint of the Administration's program to the submission of this report to your Committee. The Ilonorable Harrison A. Williams, Jr., Chairman Washington, D.C. 20510 Sincerely yours General Counsel Reference is made to your request of March 24, 1972, for our report on H. R. 8395, 92d Congress, 2d Session, the proposed "Rehabilitation Act of 1972." If enacted, the bill would, inter alia, extend and revise the authorization of grants to States for vocational rehabilitation services, and authorize grants for services to persons with severe disabilities. We have no comment to offer with respect to the substantive provisions of the bill. However, the following matters are submitted for the committee's consideration. H.R. 8395 contains no provision authorizing the Secretary of Health, Education, and Welfare and the Comptroller General, their representatives, to have access, for the purpose of audit and examination, to the books and records of the recipients of the Federal grants to be authorized. Such authority is provided to Federal grantor agencies and to the Comptroller General with respect to grants-in-aid to States pursuant to section 202 of the Intergovernmental Cooperation Act of 1968, approved October 16, 1968, Pub. L. 90-577, 82 Stat. 1101, 42 U.S.C. 4212. We recommend that such authority be provided with respect to other recipients of funds under the proposed legislation. This could be accomplished by the following language: "Each recipient of a grant under this Act shall keep such "The Secretary and the Comptroller General of the United |