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The alternative proposals would eliminate much of the aid now received by LEAs with small percentages of federally connected children. For example, under the last five alternatives, because of the 3-percent absorption requirement, LEAs with less than 3-percent federally connected students would no longer receive aid. Under the last two alternatives, LEAS with up to 6-percent federally connected students would no longer receive aid because, after applying the 3-percent absorption requirement and counting the 37b) students at 50 percent, the resultant count for eligible students would be less than 3 percent. As a result, larger percentages of the remaining aid would be directed toward those LEAS with 25 percent or more federally connected children.

Chairman PERKINS. Mr. Stormer, as you know, the Education Amendments of 1974 substantially revised the impact aid program.

Could you give us your impression of the types of changes in allocations amongst school districts resulting from these amendments?

In particular, could you tell us whether the allocations to the suburban communities surrounding Washington have decreased under those amendments and have the allocations to the large cities of the country increased?

Mr. STORMER. Let me take the latter first.

The allocations to larger cities have generally increased due to payments for low-rent housing children. In 1976 there were greater payments made to the central cities where low-rent housing exists.

With respect to the payments that reflect the D.C. metropolitan area we have that data. I might

might illustrate with respect to the District of Columbia.

For 1976 they received payment under the 3 As, 3 Bs, and the hold harmless for a total of $5.2 million. For 1977 estimates indicate

a they will be entitled to $4.6 million for the children.

In 1976 for Prince Georges County, Maryland, the payment was $10.7 million. In 1977, $10.2 million.

Chairman PERKINS. How about Montgomery County? Mr. STORMER. For Montgomery County it was $6.2 million in 1976; in 1977 it is estimated to be $5.6 million.

Chairman PERKINS. In addition to the count of children under the impact aid laws, the main determinant of the amount of funds which a school district is to receive is the payment rate that the school district can use to determine its allocations. Could you please describe for us the payment rate under Public Law 874 and tell us how many school districts receiving impact aid have chosen each different type of payment rate or could you also tell us of any problems which you have encountered in administering that section of the law?

Mr. STORMER. Yes, Mr. Chairman. If I might, I will use data that I have before me. There were in 1975 1,632 applicant school districts in states using individually selected comparable districts to compute rates. Of the 1632 applicant districts, only 546 actually received a rate higher than either of the two minimums which are one-half the national and one-half the state average per pupil cost. There are approximately 1800 districts in states using group rates, but only half of these or 938 actually receive a rate which is higher than either of the two minimums, half the national or half of the state average per pupil cost.

There are 2,083 school districts receiving half the national average per pupil cost and 698 receiving one-half the state average per pupil cost.

The Office of Education receives data from local educational agencies as submitted to the National Center for Educational Statistics, and they are the ones which compute the national average for the second preceding year, the second year preceding the year of the application as well as state averages. In other states

Chairman PERKINS. I am going to ask you to stand aside for the time being. I think we have a full committee quorum. We have several questions for both of you gentlemen.

We are going to discuss another matter.

(Whereupon, at 10:20 a.m., the subcommittee adjourned and the full committee proceeded to other business.)

(The subcommittee resumed at 11:20 a.m,. at which time the following occurred.)

Chairman PERKINS. Mr. Stormer, am I correct in understanding this chart to mean that every one of these school districts has lost money since 1974 as a result of the changes made in the law that year and am I also correct in understanding that Montgomery County has been cut back from $6.2 million to about $3.5 million?

Mr. STORMER. Mr. Chairman, I would like to correct this chart. Decreases did occur in the amount of money received by the metropolitan Washington school districts. I would like to supply for the record at a later time more accurate figures. The figures on this sheet do not represent a decision which was made a month or so ago that HH-C payments in 1977 and 1978 would be made to the metropolitan area school districts at 90 percent of the preceding year. If we may, we will supply you a corrected table.

[The information referred to follows:]

[blocks in formation]

Arlington County

296,547.96 355,641.10

2,026,884 941,355.55 860,705.39 Subtotal 2,220,419 1,237,903.51 1,216,346.49 HHC

643,907.12 583,618.53 HHD

250,901.91 209,860.31 Total

2,220,419 2,132,712.54 2,009,825.33 1) Application estimates; subject to change by Final Report data. 2/ Estimates based on the same level of funding as provided by the 1977


373,400 861,000 1,234,400

428,000 200,600 1,863,000

Chairman PERKINS. As you have described in your testimony, the 1974 Education Amendments have made your task more difficult than before in administering the impact aid laws. Could you tell us how many additional staff positions your division has received since 1974? Could you also tell us or estimate how many staff positions you would need to do the best possible job?

Mr. STORMER. Mr. Chairman, our staff ceiling at the present time is 62 positions, which represents an increase of 15 positions over 1975. The additional positions were provided to us by the second supplemental in 1976. Against that ceiling of 62 positions, we have 52 persons on board. In addition to this, in the 1977 supplemental we received 17 additional positions, 11 of which represented positions to support the regional program officers and six positions which would come to headquartrs bringing our total ceiling to 68. . At this point in time we have not been allocated the additional six positions for headquarters.

We believe--
Chairman PERKINS. Just hold it for a moment.

Bring everybody back in here.

(Whereupon, at 11:25 a.m., the subcommittee adjourned and the full committee proceeded to other business.) (The subcommittee resumed at 11:30 a.m., at which time the following occurred.)

Chairman PERKINS. Mr. Martin, the first task which the GAO was asked to undertake was to determine the degree to which fraud or administrative laxity existed in the program. Did you in fact find any fraud in the program and to what degree did you find overpayments or underpayments in the program?

Mr. MARTIN. Mr. Chairman, we did not find any evidence of fraud during our review. We did find some overpayments but those were as a result of errors in calculation and determinations of eligibility, not as a result of fraud or abuse.

Mr. QUIE. In the GAO report they mention one local education agency in its instructions to teachers reminded them of the eligibility standards saying if a parent works for Coca Cola Bottling Company and his route is through the Marine base or the survey date, he qualifies. That is not fraud?

Mr. MARTIN. We did not interpret that as being fraud. Our interpretation of that was the regulations and instructions by OE were not clear as to what "worked on federal property” meant and that was the interpretation of the teachers of that. We have recommended that that regulation be clarified so that in the future working on Federal property will mean actually employed on a fulltime basis or at least on some significant basis on federal property.

Mr. Quie. May I ask what has been done to clear up what seems to be an unclear regulation?

Mr. STORMER. A follow-up was done to find there were no children claimed of that particular driver. There has been a problem of what has been “employed on” versus “working on” Federal property. At one point in time it was the interpretation of the program that if an employee of a private concern, such as a Coke distributor, was operating out of a distribution station which was located on Federal property that his children would be eligible to be counted as federally connected.

A similar kind of situation would be a branch bank which would be located on a military installation, whereby the employees of that bank would be employed there every day of the week. Of course, their main operation would be where their headquarters would be off the base, but they would be employed on the base and therefore their children would be considered federally connected.

Mr. QUIE. It doesn't make any difference who paid them then? Mr. STORMER. No, it did not make any difference at that point who paid them.

If I might further the illustration, employees of the Office of Education, are housed in FOB-6, are housed in the Donohue Building, or housed in the Reporters Building here in the District of Columbia. Those parents who are employees of the Office of Education who are housed in FOB-6, 400 Maryland Avenue--and let's make the assumption they reside within the District of Columbia and attend school within the District of Columbia, their children would be eligible to be counted federally connected. However, the

parents who were-taking the same assumption of residence and schooling-were located in the Donohue and Reporters Buildings would not be considered to be eligible to be counted under the program because they are housed in commercial buildings which are occupied temporarily by the Office of Education and taxes are paid on those commercial buidings.

Mr. QUIE. If they are located and do any work, it doesn't make any difference who they are paid by; it is just the location?

Mr. STORMER. The location of the property on which they are employed and working.

Mr. QUIE. In other words, if a person lives off, we will say, a national park, and is not working for the Federal government, but for a concession located in the national park then their children would be considered impact children if they were located there on the day of the survey?

Mr. STORMER. If they were employed on the Federal park property constantly.

A further illustration of that might be that there are lumbermen who are employed on Federal property a substantial portion of their time cutting timber, although they are privately employed. They are working on federal property and if they were there during the count date, they would be considered-their children would be considered federally connected, assuming they were working a substantial portion of their time on that Federal property.

Mr. QUIE. That doesn't seem proper to me. Do you have the regulations written now taking care of the Coke driver and so forth?

Mr. STORMER. We have not revised regualtions in their most recent form, which would take care of the definition employed on.

Mr. QUIE. You have not?
Mr. QUIE. When are you going to do it?

Mr. STORMER. We have instructed our program officers in their reviews to tighten up on the identification of this. We would propose that we will have regulations modifying an interpretation of employed-on and working-on within the year.

Mr. QUIE. Within the year? You are talking about 12 months from now or within this calendar year?

Mr. STORMER. Within this calendar year, hopefully.
Mr. QUIE. Why does it take so long to do that?

Mr. STORMER. Principally it has been a matter of manpower and time, not only with this regulation, but with other regulations applying to the program. Our equalization regulations, our regulations relative to low-rent housing children, with respect to handicapped children, all of which are ones which require debate, discussion and time in order to come out with a result which we believe would be equitable in terms of the statute.

Mr. QUIE. Would you submit a copy of that to this committee before the end of this calendar year?


[Note: Testimony on page 62 indicates that this "insert” is not expected until “before the end of this calendar year”.]

Chairman PERKINS. Mr. Martin, another task which we asked you to undertake was to analyze the net economic burden caused by the

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