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This means that most, if not all, of the money which might be contemplated for education out of general revenue sharing would come from the funds allocated to the state governments. While education would undoubtedly bave the highest priority on these funds in the states, the President's General Revenge Sharing proposal contemplates that only half of the funds to be available under that program would be subject to the authority of the state governments.

Second, it is only fair to say that prospects for early initiation of General Revenue Sharing are no good. The proposal has been pending in the Congress for a year without visible movement toward passage, and the States and local educational agencies which bear more than 90 percent of the costs of elementary and secondary education need help now.

I would like to suggest to this Committee that it amend S. 1669 to provide for a further category of assistance-an authorization of unrestricted funds for education to be administered under state authority and funded for the first fiscal year at the rate of $2 billion. I suggest this figure as a result of some very simple arithmetic. Secretary Richardson has noted that approximately 40 percent of state and local expenditures are for elementary and secondary education and he has suggested that this pattern may reasonably be expected to continue with funds made available under General Revenue Sharing. $2 billion is 40 percent of the $5 billion expected to be available in the first full year of General Revenue Sharing. These funds would be authorized for allocation to the states by formula, possibly the formula proposed for General Revenue Sharing, and would be available for any educational purposes in accordance with the State Plan required by S. 1669. An automatic payment of Federal revenues, as contemplated in the President's General Revenue Sharing proposal, of course, would be highly desirable. But under the circumstances, it would be better to proceed along the authorization and appropriation route now, than to wait for the ultimate.

In further support of this proposition, I would emphasize that, while the categories of assistance included in S. 1669 are valid, they do not provide any support for the general improvement of education, including the rapidly increasing costs of teacher salaries. As Governor of a state which has a number of school districts with a high incidence of children from low income families, I know from first-hand experience that what these districts need is general operating support and that such support would be of primary benefit to disadvantaged children. It is certainly desirable to have special programs for disadvantaged children, but in some cases this approach puts the cart before the horse when the schools are severely handicapped by very limited budgets for general operations.

The inclusion of a state-administered general aid program in this legislation would lend strong support to the movement toward state equalization in education. It would also greatly facilitate the development of cooperative programs among districts and, indeed, further school district consolidation where warranted. It would slow or halt the upward spiral of local property taxes which clearly are inadequate and inequitable.

The categorical assistance envisioned in S. 1669 reflects an effort to put together a workable program which is acceptable to the many interests which have affected Federal education legislation in the past. ECS is in accord with its purposes and philosophy. We would urge, however, that you carry this philosophy one step further and truly transform this legislation from a grant consolidation bill to a special revenue sharing bill for education.

Mr. Chairman, revenue sharing is not a matter of the states asking the Federal Government to solve their problems. The states and local education agencies bear more than 90 percent of the costs of elementary and secondary education ; however, they are dependent upon very inelastic sources of revenues. Where support for education is based largely upon real property taxes which are slow to increase, the result is a perpetual fiscal crisis for states and local education agencies. State income taxes are limited substantially by the revenue taken by the Federal Government which increases one and a half percent (112%) for every one percent increase in personal income. This means that the Federal Government gets more tax revenue without the painful necessity of increases in the tax rate. It also means that the tax siphons off from the taxpayer an increasing percentage of his ability to pay. The demand for revenue results from this major, built-in, deficiency in the Federal tax structure.

As has been noted, 40 percent of state and local budgets go for elementary and secondary education. This will rise in the years ahead as state govern ment answers greater program and fiscal responsibilities for education.

This statement is to urge the relief from the bind in which the states find themselves and to pledge that the states in turn will do their part to deliver good quality education. I hope that this Committee will receive these suggestions in the constructive spirit in which they are offered. If the Education Commission of the States can be of any help in your further deliberations on these matters, please let us know.

(Whereupon, the hearing was adjourned at 12:35 p.m.)

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