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China Lake Elementary School District, the Indian Welis Valley School District, the Rand Elementary School District, and a portion of the Kern Union High School District.

The total district is now more than 3,000 square miles in size and is located in the Mojave Desert east of the Sierra Mountain Range in Kern, San Bernardino, and Inyo Counties in California.

This area is isolated from all cities of any size by at least 90 miles. The cost of living and school costs are exceedingly high. One of our highest costs is transportation.

In this area the assessed value of property per pupil is among the lowest in the State of California, so P.L. 874 money is the lifeblood of this school district.

In October 1974 we accounted for 2,300 "A" category students and 2,700 "B" category students out of a total ADA of approximately 6.500 students. Sierra Sands Unified School District is 77% impacted with federally connected students, making this district a "slave" of the Naval Weapons Center at China Lake, California. This school district exists only because the Naval Weapons Center exists.

While the enrollment is 77% federally-connected children, the income is only 22% federal money. The people of this area have taxed themselves to the limit. The local tax rate for this school district exceeds $6.00 per $100 of assessed value of the privately-owned property. The total assessed value of the school district is $34 million, while the estimated assessed value of the governmentowned property in the area is over $500 million. If this school district would lose the P.L. 874 income, the $6.00 tax rate would have to be increased to $11.89 per $100 of assessed value to make up the loss in federal funds. Under the present system of financing in California it takes a vote of the people to increase the. revenue limit. While the taxpayers in this area have carried the federal impact up to this point, I am sure they would not vote to nearly double the already excessive tax rate.

Thank you for this opportunity to appear before your committee.

Mr. Ford. You have developed, Mr. Eldred, quite an extensive set of figures here on the impact on individual school districts across the country that you have selected out by categories of States.

Have you been in contact with the local administrators of all the school districts that are listed here?

Mr. ELDRED. Yes. They have filled our worksheets themselves. I have more copies for committee use. They are as they came in, no special order, no special selection. And they are still coming in.

It would be my intention to enter these figures.

Mr. Ford. I would ask you to add a couple of columns of your figures here and give us also the additional returns that are generated by your survey.

When we get a place like Huntsville City in Alabama that has $355,000, what does that represent as a percentage of their operating budget? What does that loss represent?

And what happens to the same school districts if you apply the 5percent absorption that the administration is proposing?

Mr. ELDRED. We will be pleased to enter those figures, sir, and it would not be difficult for us.

Mr. Ford. I presume you could probably get them from what you already have. You heard the Commissioner this morning. He still has some of his people here.

I would be glad to offer on behalf of the committee our assistance in arranging for you and a representative group of people from the impact aid districts to sit down with their experts and see if you can't come to an agreement on the criteria to determine to the degree that is possible, before the guidelines are finalized, what the impact consequently on the school districts will be on July 1 if all these formula changes kick in.

I am not trying to be in any way scornful of the Office over there. But I am disappointed that this record now shows that, although we passed this legislation some time ago, there has been little evidence of any effort on the part of the Office of Education to gather the data necessary for us to make a determination.

The Commissioner obviously shares the concern of this committee that we couldn't get down here until a point when we are just about out of time and then determine that change is dictated by the prospect of disaster for individual school districts.

So if we could get your people together to pool resources, since the Commissioner has offered that kind of cooperation, I wonder if you could provide some people who could stay for a few days or come back in a week or two, however it is best and most convenient to get this job done.

Mr. ELDRED. We shall indeed, sir. We welcome the opportunity to assist in any way we can.

Mr. Forp. We will determine who the appropriate person is to pick the Commissioner's team and to work with them and our staff. Both majority and minority, I am sure, will participate also.

Really I guess we are suffering from a dearth of information at the moment. That, unfortunately, is the way in which we legislated or I should say in which they were changing the formula.

You mention on page 3, Mr. Eldred, of your statement the possibility of State's refusing to educate the Federal child. This is not the first time this possibility has arisen.

As a matter of fact we have about $60 million or $66 million in impact aid that goes back to the Defense Department for running schools on military establishments because of a determination that a local school district was unable or unwilling to undertake the education of children.

Would you know how many States there are that are aware of the options of educating a military child at the local level ?

Mr. ELDRED. I know one, definitely. Nebraska has this option. I believe there are two others. But I would not have the ability to name them. I will doublecheck and supply that to you, if I may.

Mr. FORD. Staff has asked the Defense Department to give us an inventory of places where they have installed schools. That should show us who made the determination not to educate those children in that extension of the public school system.

I take it from the way your statement is phrased here that you believe there is a possibility that this would be one of the reactions of the more heavily impacted States.

Mr. Eldred. Yes, sir. One gentleman in particular as I recall 2 years ago did just such a thing. When it appeared that the appropriations were not going to be sufficient enough he actually went to the extent of mailing out letters to the parents of some of the children, that if they were to remain in his school he would have to charge the parents tuition.

I am sure, in the gentleman's defense, he did not do this lightly. He must have done it with a very heavy heart.

Mr. FORD. I suppose that would be an easy way to solve the problem since the law specifically makes provision to absorb that expense.

You also draw attention to the uniform and nonuniform distinction of the Department of Defense. It has been the policy of the Congress to continue in urging a reduction in uniformed positions for several years.

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Your figures indicate that they aren't reducing payroll very much, just taking the uniform off them and putting them back in civilian clothes.

Is there any way to determine how many of aid children become nonuniform through this process and still reside and still work on the military property?

Mr. ELDRED. This is a determinable figure as each district must count and identify as to the relationship.

It might not necessarily hold throughout the country. But most of the districts should be able to produce this information immediately.

Mr. FORD. Just some examples, if you might have them.

Mr. ELDRED. Yes, sir. I can provide those very easily in a day or two from some of the statistics in my own office.

Mr. FORD. You are both from California. Perhaps you have talked with the superintendents. Has your State consulted with you with respect to the potential of using equalizing provisions of this act ?

Mr. ELDRED. No; our State did not consult with us directly on this issue. We knew that the State of California was invited to participate in a meeting back here and that they were encouraged along with other State departments to bring representatives of local education agencies. This was not done.

As a rule of thumb I do understand that at the beginning there were some representatives from the State of Utah of local education agencies and from California. Our Don White back here in Washington did attend.

We were present at impact aid by direct invitation from the Commissioner. But that was the extent of the involvement of local education agencies to the best of my knowledge.

Dr. Fish. There is a slight addition to that. I was invited through the State after we called the State and asked the State to invite me.

Mr. Ford. You were here and heard our discussion with the Commissioner and his people about their definition of “local expenditure." Presumably that is going to have to be resolved one way or another rather soon.

IIe suggested that might be part of the guidelines that might be available for publication by April, the 1st of April, unless they can more much faster than they presently anticipate.

We would hope that you would be able to advise the committee of what input, if any, you have been invited to have in determining what the definition should be as set by the Commission and then advising us whether you have given that input, so that we can bear that in mind when the staff sends that proposal to us for examination.

Mr. ELDRED. We will be pleased to keep the committee posted.

Mr. Forn. I hope that before this chart is submitted finally for the record that you check some of the mathematics because some of them don't add up.

For example, you show Alabama in the 1975 and 1976 years. The figures in the plus or minus column do not jibe.

Mr. ELDRED. We have a typographical error there. I shall check immediately in my box before leaving the room.

Mr. Cross. I just checked it.

Dr. Fish. That is not 1975 and 1976.

Mr. ELDRED. The one column on the left should just be fiscal year 1974. The column on the right is fiscal year 1975.

Mr. Cross. I do have some questions for both of you I would like to submit later.

Mr. ELDRED. By all means.

Mr. Ford. Without objection the questions and your answers will be submitted at this point in the record. [Questions and answers referred to follow :) QUESTIONS SUBMITTED BY CHRISTOPHER CROSS, MINORITY LEGISLATIVE

ASSOCIATE

Question. 1. You also say that the provision designed by OE is complicated. In light of your view that the exception should not be widely used and in light of the complexities of school financial provisions across the country, is it not understandable that determination of eligibility for the exception provision can be anything but simple?

Answer. Determining whether the exception needs to be complicated in its application depends upon the definition of equalization. In my testimony the definition that is used is very simple in that equalization means an equal amount of resources for each student's education with a necessary corollary that a community be allowed to raise taxes to provide education of equal quality on an equal basis with any other community. For this to be effective allowance has to be made for those areas of clearly identifiable variation in the need of students such as handicapped, educationally disadvantaged, or other specific problems requiring special programs. The problem with the concept paper proposal was that it looked at plans rather than results. For the law the significant fact is the actual dollar amount that school district will receive per student should be equalized. How the state reaches the point of equalization is not significant. The state should be able to explain how and why variation from the equalized amount per student occurs.

Question. 2. What tests would you suggest for determining eligibility under (5) (d) (3)?

Answer. The answer to this question is given in the previous answer with the added requirement that the test for determining eligibility by a state to receive the exception would be proof that the actual result of its plan would be the dollar amount per student. The variations would have been explained in terms of meeting a categorical need that has been met on a statewide basis or that a district has varied from the basic amount through a conscientious decision to increase taxes. Again the increase would have been equalized in that the same burden would provide the same benefit per student.

Question. 3. You say that it is possible that a state which has been adjudged to have an unequal school finance program could qualify for the exception. Could you give me an example of such an instance?

Answer. The testimony refers to the concept paper wording which has subsequently been changed. However, one of the alternatives presented in that concept paper would have allowed the State of California to claim that the current school finance program which is known as S.B. 90 was equalized. In fact, the courts have ruled that this specific system does not meet the state ('onstitution's requirements for equality of public education.

Question. 4. On page 3 of your testimony, you say that the broad interpretation possible in OE's December 31 paper is not consistent with Congressional intent. ('an you cite for me what part of the paper is not consistent and why?

Answer. As I interpret Congressional intent as stated in the report of both committee and the final wording of the law, Congress intended that the exception was to be narrowly interpreted for those states which had come into equalization. The concept paper provided essentially four different routes for a state to comply with the mandate by looking at the plan rather than the result. More specifically, the alternative that was finally presented provided for this range of over 30% variation by including the provision for 5% at the top and 5% at the bottom and then a range for the remainder of the districts at 20%. Such a range of variation is, in my opinion, inconsistent with Congressional intent, despite the testimony that only three states would currently comply.

Question. 5. On page 4 you also make the point about the distinction between general impact aid funds and those funds attributed to handicapped or public housing students. It is an interesting point. By this would you mean to exclude any funds derived from the presence of those students even though the state may be providing a fully equalized expenditure per child in the district in question?

Answer. The distinction between general and categorical funding is very important in the guidelines for impact aid. The provisions of the law that require specific utilization of funds derived from counting handicapped and public housing students limits the use of these funds in the general district support. At this point the proposed guidelines have not been published; however, the guidelines by their very existence will mean that the funds can only be used in certain ways. In the case of the handicapped students, these funds are only derived for students who are in approved programs, which means that the district must provide an additional service beyond the regular program for which general aid is provided and supported. Likewise, the restriction that public housing funds be used on low income students carries with it the burden to operate and maintain programs with expenditures above and beyond the general standard for regular students in the district. The San Diego City Schools, and many other urban systems, operate such programs because of the rigidity of ESEA Title I guidelines. It has been necessary to "fill in gaps" with district funds to maintain consistency and continuity in services provided for disadvantaged students. Our assumption is that these are the kinds of programs that the public housing money was meant to support. Very few state programs are equalized in this manner and the criteria of equalization are not those criteria which identify public housing students.

Question. 6. On page 4 of your statement, you note that in your view a state should be in full compliance with a court mandate to qualify. Would you exclude from these tests states which have taken action without the pressure of a court case?

Answer. Obviously, the state change has initiated an equalization program without a court mandate should be helpful to prove that it has truly equalized in accordance with the tests that have been previously identified. Unfortunately, very few states have really attempted to achieve this level of quality. The maintenance of a narrow interpretation will encourage state to move toward equilization.

Question. 7. On page 4 of your statement you talk in point 2 about excluding a state that provides for an unequalized limit on revenue. Could you explain further what you mean by way of example?

Answer. California, under the current law, provides that after the estab-, lishment of a revenue limit, this school district can only increase revenue by a vote of the people. San Diego's revenue limit was established at $910 per student and San Francisco's revenue limit was established at $1,420.

In other words, the beginning point had not been equalized. Under the California law, equalization will eventually be achieved, but it will take many years.

Question. 8. Your text also suggests a fully equalized per pupil amount in which rich districts would be required to forfeit extra funds. To my knowledge, Maine is the only state that has designed a program along those lines. Don't you think that is an overly strict test?

Answer. Forfeiting monies derived from a power equalizing formula which at first glance does seem unfair, however the real unfairness is the uneveness of the property tax distribution. At first examination it would appear that rich districts are being robbed in accordance with a “Robin Hood mentality." However, rich school districts are part of a larger economic unit. The example used in California is the case of Beverly Hills which is encircled by Los Angeles. The community could not exist as a separate entity without the economic, metropolitan market. For years, Beverly Hills has been a tax shelter and it could be said that it is not fair that the high value business and residential property does not pay a fair share toward the education of the children whose parents work and do business in Beverly Hill's banks, insurance companies, savings and loans, and stores.

Question. 9. Your statement indicates that no state should be eligible to qualify under (5) (d) (3) until it is in full compliance with court action. In

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