DEPARTMENTS OF LABOR AND HEALTH , EDUCATION

AND WELF ARE APPRO PRIATIONS FOR 1970

■ / / / £

government

Storage

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESE NTATIVE S

NI NE TY -FIR ST CONGRESS

SECOND SESSION

SUBCOMMITTEE ON DEPARTMENTS OF LABOR AND HEALTH,

EDUCATION, AND WEL FARE AND RELATED AGENCIES

DANIEL J. FLOOD, Pennsylvania, Chairman

WILLIAM H. NATCHER, Kentucky ROBERT H. MICHEL, Illinois

NEAL SMITH, Iowa GARNER E. SHRIVER, Kansas

W. R. HULL, Jr., Missouri CHARLOTTE T. REID, Illinois

BOB CASEY, T exas

' M. Moyer and Henry A. Neil, St af f A ssistants to t he Sub comm ittee

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PA RT 9

PR OP OS ED NEW BILL FOR 1970

Print ed for the use of t he Committee on Appropriations

'i .

I -

DEPAR TMENT S OF LABO R AND HEAL TH, EDUCATION,

AND WELF ARE APPR OPRIATIO NS FOR 1970

H E A R I N G S

BE FO RE A

SUBCOMMITTEE OF THE 

COMM ITTEE ON AP PR OP RIAT IONS 

HOU SE OF RE PR ES EN TA TIVE S

NINE TY -FIRST CON GRESS

SECOND SESSION

SUBCOMMITTEE ON DEPARTMENTS OF LABOR AND HEALTH, 

EDUCATION, AND WELFA RE AND RELATED AGENCIES

DANIEL J. FLOOD, Pennsylvania, Chairman

WILLIAM H. NATCHER, Kentucky ROBERT H. MICHEL, Illinois

NEAL SMITH, Iowa GARNER E. SHRIVER, Kansas

W. R. HULL, Jr., Missouri CHARLOTTE T. REID, Illinois

BOB CASEY, Texas

Robert M. Moyer and Henry A. Neil, S ta ff A ss is ta nts to th e S ubco m m itte e

PA RT 9

PR OP OS ED NE W BILL FOR 1970

Printed for the use of the Committee on Appropriations

40-366

U.S. GOVERNMENT PRINTING OFFICE

WA SHING TO N : 1970
COMM ITT EE ON AP PR OPR IA TI ONS 

GEORGE H. MAHON, Texas, Cha irm an

M IC H A E L J. K IR W AN , Ohio 

JA M IE L. W H IT TE N , M iss iss ip pi 

G E O R G E W. AN DR EW S, Al ab am a 

JO H N J. ROONEY, Ne w Yor k 

R O B E R T L . F . SIK E S , Flo ri da 

O TT O E. PASSM AN , Lou is ia na 

JO E L. E V IN S, Te nn essee 

E D W A R D P . BO LA ND, M as sa ch us et ts 

W IL L IA M H. N ATC H ER, K en tu ck y 

D A N IE L J. FLO OD, Pen nsy lv an ia 

TO M S T E E D , Ok lah om a 

G E O R G E E. S H IP L E Y , Illinoi s 

JO H N M. S LA C K , W est V ir gi nia 

JO H N J. F L Y N T , Ja., Ge or gia 

N E A L SM IT H , Io wa

R O B E R T N. GI AI MO, Co nn ec ticu t 

J U L IA B U T L E R H AN SE N, W as hi ng to n 

JO S E P H P. AD DABBO, New Yor k 

JO H N J. M cF A L L , Cal if or nia 

W . R. H U LL, J r., Miss ou ri

J E F F E R Y CO II ELAN , C ali fo rn ia 

E D W A R D J. PA T T E N , Ne w Je rs ey 

C L A R E N C E D. LO NG . M ar yl an d 

JO HN O. M AR SH , Jr., V ir gi nia 

S ID N E Y R. Y A T E S, Illinoi s 

BO B C A S E Y , Te xa s

D A V ID PR YO R , Ark an sa s 

F R A N K E . E V A N S, Co lor ad o 

D A V ID R. O BEY, Wisc on sin

P aul M. W il so n ,

F R A N K T. BO W , Oh io 

CH A R LE S R. JO N AS, Nor th Car ol in a 

E LFO R D A . CE D E R B E R G , M ichiga n 

JO HN J . RH ODES, A ri zo na 

W IL LIA M E. M IN SH A LL, Ohio 

R O B E R T H. M IC H E L, Il li n ois 

SIL V IO O. CONTE , M as sa ch us et ts 

ODI N LA N G EN , M inne so ta 

BEN R E IF E L , So ut h Dak ot a 

G LEN N R . D A V IS , W isco ns in 

H OW AR D W. RO BIS ON , Ne w Yor k 

G AR N ER E . SH R IV E R , K an sa s 

JO SE PH M. M cD AD E, P ennsy lv an ia 

M A R K A N D R EW S, Nor th Dak ot a 

LO U IS C. W YM AN, Ne w Ham ps hire 

B U R T L . T A LC O T T , C ali fo rn ia 

CH A R LO T T E T. R E ID , Il linois 

DO N ALD W . R IE G L E , J r., M ichiga n 

W E N D E L L W Y A T T , Or egon 

JA C K E D W A R D S, Ala ba m a

Clerk and Sta ff Director
DEPARTMENTS OF LABOR AND HEALTH, EDUCATION,

AND WELFARE APPRO PRIATIONS, FISCAL YEAR

1970

T uesday, F ebruary 3, 1970.

PROPOSED NEW BILL FO R 1970 

W IT NESS ES

JA M E S F. K ELLY , A SSIS T A N T SE C R E T A R Y , COM PTRO LLER 

JA M E S B. C A R D W ELL, D E P U T Y A SSIS T A N T S E C R E T A R Y , BUD GE T 

G ER A LD M. C H E R R Y , D IR EC TO R , D IV IS IO N OF SC HO OL ASS IS TAN CE 

IN FE D E R A L L Y A F F E C T E D A R E A S, O FF IC E OF EDU CATIO N 

JO E C. K E E N , BU DGET O FF IC E R , O FFIC E OF ED U C A TIO N 

F R E D E R IC K F. PFL U G E R , BUD GET E X A M IN E R , O F F IC E OF T H E 

SE C R E T A R Y

MRS . ED N A K. CAVE, PR O G R A M A N A LY ST , O F F IC E OF ED UCATIO N

Mr. Flood. We have with us Mr. Kelly, the Assistant Secretary of 

IIE W, Mr. Cardwell, tlie Departm ental Budget Officer, and supporting witnesses.

This meeting was called at the request of the subcommittee. We 

were in session yesterday morning discussing a proposed new Labor 

and Health, Education, and Welfare appropriation bill for fiscal year 

1970. The subcommittee, Mr. Kelly, has been in almost continuous 

session since the bill was vetoed, to determine what course of action 

we should take. You can imagine, it is a rath er difficult situation.

During the course of our meetings, we discussed the so-called impacted-aid phase of the bill at considerable length. Language was proposed in connection with funds tha t the committee tho ught should be 

recommended to the House. In view of the language necessarily being 

rath er technical, we felt we should have you people come here for the 

purpose of discussing it.

We now have a new factor to consider in connection with getting 

out a La bor-HEW bill.

The President, yesterday afternoon, did what he said he would do in 

the veto message. He sent to the Speaker a letter in which he set forth 

his recommendations for adjustments in the areas of difference between 

his budget and the vetoed bill.

Now, of course, we have heard informal figures in this regard for 

several days from the minority side of this committee, but now we 

have a formal communication to which I feel we must give consideration.

This meeting today was called prim arily to discuss what language 

would be most appropriate to place in the bill in connection with the 

allocation of funds for aid to schools in federally impacted areas but, 

in view of this latest development, I think we should take first things 

first an d certainly the more important of the two is the consideration 

(1)
of the formal message from the President. We will ask the principal 

witness to make a brief statement concerning the message and then we 

will pass the matter to the members for questioning on tha t subject 

before we proceed to the other matter.

PR ES IDEN T'S MESSAGE

We will place the President’s letter and the attachm ents (H. Doc. 

91-218) in the record at this point.

(The letter and attachments follow:)

. The White House,

Washington, D.C., February 2,1970.

Hon. J ohn W. McCormack,

Speak er of the House of Representatives,

Washington, D.G.

Dear Mr. Speaker: In my J anu ary 27 message vetoing the Labor-HEW-OEO 

appro priatio ns bill, I assured the Congress tha t “If the veto is sustained, I will 

immediately seek appropriations which will assu re the fun ds necessary to provide 

for the need of the Nation in education and hea lth.”

Now th at the veto has been sustained, I am sending to you proposed revisions of 

my original 1970 appropriation request for the Department of Health, Education, 

and Welfare, on which I hope we can agree promptly. For all other agencies and 

programs covered by H.R. 13111 as enacted by the Congress, I find acceptable, 

and would approve, the amounts the Congress provided in the vetoed bill.

My proposal would increase HEW appropriations for fiscal 1970 by $449,097,000 

over the 1970 budget proposals I made in April 1969, with outlays between now 

and June 30 rising above the April estimate by $210,675,000. I would add the 

following amounts to selected pro gram s:

$238 million for federally impacted areas.

$70 million for basic vocational education grants.

$40 million to provide additional gran ts to States for support of supplementary school programs.

$25 million to assist in improvement of educational services to the disadvantaged through title I.

$24.8 million for public lib rary services, train ing of teachers and research 

and training of the handicapped.

$29.7 million to intensify health research in high priority fields and to 

strengthen medical schools and other institution s train ing persons for delivery of health services.

$10 million to accelerate the acquisition of rubella vaccine.

$7 million for intensification of air pollution control and research efforts.

$4.3 million to expand support for alcoholism treatment and rehabilitation 

projects and further strengthe ning of the food and drug program.

These and other changes are summarized in the attac hed table. With respect 

to the impacted area program and the Office of Economic Opportunity, the necessary changes in appropriations language are included. Secretary Finch and 

Director Rumsfeld will provide any additional information needed by the 

Congress.

The attachm ent includes the recommendations contained in my veto message 

on the impacted area school aid program. Until we reach agreement on basic 

reform of this program, I propose a temporary solution which would provide 

a great er degree of equity in the allocation of funds and avoid undue hardsh ip 

for any school district. My proposal provides full funding for children whose 

parents live and work on Federa l installations, partial funding for children 

whose parents do not live on Federa l installations , and a “no ha rdship clause” 

guaranteeing tha t as a resul t of these changes no school distr ict will have a 

budget less than 95 percent of what it ha d in 1969.

I also request tha t the Congress restore funds for two priority education programs which were reduced from my original budget:

$10 million for projects to prevent school dropouts.

$9.5 million to initia te needed experimentation and evaluation to improve 

school performance.

Both are designed to find new ways to deal with problems where the old ways 

have been found to be inadequate.
3

Fo r the Office of Economic Opp ortun ity (O EO ), I requ est the Congress to resto re the provision which would per mit the Executiv e to allocate fun ds withou t 

specific ear ma rking as between the various authorized program s.

The amount availab le for OEO programs is not at issue. Ra the r the issue is 

the effective use of resources. To impose rigid earm ark ing covering the full fiscal 

ye ar with less tha n 5 mon ths remainin g will dis rup t many OEO progra ms. We 

would be forced to incre ase some prog rams well beyond planned spending levels 

and to make dama ging red uctio ns in others.

The proposals I tra ns mit today provide a basis for resolving the differences 

betwee n the executive bran ch and the Congress on the 1970 app rop riat ion s for 

HEW and OEO. They offer a tem pora ry solution to the im pacted are a aid problem 

and propose app propria tion s for other high pri ori ty prog rams in amo unts which 

I believe can be effectively used in the rem aining mon ths of the curre nt fiscal 

year .

These proposals will enable us to carry out the purpo ses of the Fed eral Governm ent in the fields of educ ation and health on a basi s which does not contri bu t undul y—as did the bill original ly enac ted by Congress—to inflationa ry 

pressures which today a re of serious concern to th e e nti re N ation.

I urge the Congress to ac t favo rably and prom ptly on these proposals in 

ord er th at we may complete action on the 1970 budg et and turn our atte ntio n 

to the 1971 budget which is bein g tra nsm itted today.

Sincerely,

Richard Nixon.

SUMMARY— INCREASES PROPOSED OVER THE 1970 BUDGET, AS REVISED APR. 15, 1970 

[In thousands of dollars]

HEALTH

Food and drug control.............................................................

Air pollution control................................................................

Mental hea lth:

Alcoholism treatm ent (included in community 

assistance for narcotic addiction and alcoholism) .

Comprehensive health planning and services (increase for rub ella vaccine purchase ) * _ ..................

NIH research:

National Cancer I nstitu te 1................... .........................

National Heart In st itute *..............................................

National Institute of Dental Research 1.............. .........

National Institute of Child Health and Human Development*......................................................... .............

National Eye Institu te * . . ..............................................

NIH health manpower:

Health m an po wer ........................................................-

ins titu tional support...............................................

EDUCATION

Elementary and secondary education:

Supplem entary centers and se rv ices .......... ...............

Title l- A ............................................................................

School assistance in fed era lly affected areas___________

Education professions development: Teacher training___

Vocational education: Basic gran ts______________ ____

Libraries and community services: Public lib rary services.

Education for the handicapped................................ .............

SPECIAL INST ITUTION S

Gallaudet College*........... .......................................................

Total increases over budget proposed

1970 budget, 

as revised

Apr. 15,1970

H.R. 13111 as 

enacted by 

the Congress

Current appropriation 

request

Increase proposed over 

revised budget

72,007 72,352 72,352 345

95, 800 108,800 102,800 7,000

8, 000 12, 000 12,000 4,000

214, 033 224,033 224,033 10,000

180, 725 190,362 190,362 9,637

160, 513 171,256 171,256 10, 743

29, 289 30,644 30,644 1,355

75, 852 76,949 76,949 1,097

23.685 24, 342 24,342 657

218,021 234,470 224,220 6,199

(128,859) (135, 058) (135,058) (6,1 99 )

116,393 164,876 156,393 40, 000

215,186 386,161 240,186 25, 000

202,167 600,167 440,167 238,000

95, 000 107,500 103,750 8,750

230, 336 352,836 300, 336 70, 000

17,500 35,000 27, 500 10,000

85,850 100, 000 91,850 6,000

5,124 5,438 5,438 314

449,097

* Not included in attachm ent of changes; appropria tion proposed in H.R. 13111 is acceptable.
4

INCREASES OVER H.R. 13111 AS ENACTED BY THE CONGRESS

(In thousands of dollars]

1970 budget, 

as revised

Apr. 15, 1970

H.R. 13111 as 

enacted by 

the Congress

Current

appropriation

request

Increased 

proposed, 

HR. 13111 

as enacted

Elementary and secondary education: Dropout preventio n______ .

Research and training: Experimental schools____ __ 24, 000 5,000 15,000 10,000

115,000 85, 750 95,250 9, 500

Total restoration proposed__________ 19, 500

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

1970 budget 

(as revised)

Apr. 15, 1969; H.R. 13111 Current

App ropriation title H. Doc. 91-113, as enacted by appropriation

May 5, 1969 Congress request

Consumer Protection and Environmental Health Service:

Ai r pollutio n control........................................ . .................. .........

Limitation on amount to carry out sec. 104 of the Clean 

Air A c t........................... ............. ..................................

Health Services and Mental Health Ad ministration:

Mental he alth.................................................. ........... ........... .......

Grants pursuant to pts. A, C, and D of the Community 

Mental Health Centers Act......... ......................................

Hospital construction.................................................... .................

Grants or loans for hospitals and related facilitie s pursuant to sec. 601(b) of the Public Health Service A ct. .

Grants or loans for hospitals and related facilities pursuant to sec. 601(a) of the Public Service Ac t..............

District of Columbia medical f ac ilitie s................. ......................

National Institutes of Health:

National Ins titute of Ar thritis and Metabolic Diseases.............

National Ins titute of Neurological Diseases and Stroke ______

National Ins titute of Allergy and Infectious Diseases...............

National Ins titute of General Medical Sciences............ .............

General research and services......................................................

Health manpower..... .......................................................................

Dental hea lth................................... ............................................

Construction of health, educational, research, and library

facilities......... ............... . ......... . ................................................

Delete the lim itation for dental fac ilities.

Buildings and f ac ilities........... . . . . . . . . . . . . . . . . . . . . . . . . . .

Office of Education:

Elementary and secondary education ..........................................

School library resources, textbooks, and other instructional material under tit le II of the Elementary and 

Secondary Education Act of 1965, as amended................

Supplementary educational centers and services under 

title III of the Elementary and Secondary Education 

Act of 1965, as am ended..................................................

Grants to States for equipment and minor remodeling 

and State adm inistrative services under tit le III —A of 

the National Defense Education Act of 1958, as 

amended............................. ................................................

Limitation on amount for grants to States for testing, 

guidance, and counseling under tit le V of the National 

Defense Education Act of 1958, as am ended.................

Limitation on amount for dropou t prevention programs 

under sec. 807 of the Elementary and Secondary 

Education A ct of 1965, as am ended.................................

Limitation on amount for bilingual education programs 

under title VII of the Elementary and Secondary Education Act of 1965, as amended..................................

$95,808,000 

0

> 357,904,000

(42, 500, 000) 

153,923,000 

(50 ,00 0,0 00)

(100, 000, 000) 

0

137,668,000 

101,256,000 

102,389,000 

154,288,000 

69,698,000 

218,021,000

10,887,000 

126,100,000 

1,000,000 

189,393,000

0

(116,393,000)

0

0

(24,00 0,0 00)

(10,000,000)

$108, 800,000 

(45,000,000)

2 360,302,000

(47, 509, 000) 

258, 323,000

(163, 500,000)

(90,900,000)

10,000,000

146,334,000 

106,978,000 

103,694,500 

164,644,000 

76,658,000 

234 470,000

11,722,000 

149,050,000 

1,900,000 

330,876,000

(50,000,000)

(164,876, 000)

(30,000,000)

(17,000,000)

(5, 000, 000)

(25,000,000)

$102,800,000 

(30, 000,000)

2 354, 002, 000

(41,200, 000) 

153, 923,000 

(50, 000,000)

(10 0,000,000) 

0

137,668,000 

101,256,000 

102,389,000 

154,288,000 

69,698,000 

224,220,000

10,887,000 

126,100,000 

1,000,000 

220,393, 000

0

(156, 393,000)

0

0

(15,0 00 ,000 )

(10,000,000)

See footnotes at end of tabla
5

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE—Continued

1970 budget

(as revised) 

Apr. 15, 1969; H.R. 13111 Current

H. Doc. 91-113, as enacted by appropriation

Appropria tion title May 5,1969 Congress request

Title l- A ................................... .......................................................

Instruc tional equipment.................................................................

School assistance in federally affected areas_______________

Substitute the following for the tex t under this head in the 

enacted bi ll: ‘‘For carrying out title I of the act of 

Sept. 30, 1950, as amended (20 U.S.C., ch. 13), and 

the act of Sept. 23, 1950, as amended (20 U.S.C., 

ch. 19), $440,167,000, of which $425,000,000 shall be 

for the maintenance and operation of schools as authorized by said tit le I of the act of Sept. 30, 1950, as 

amended, and $15,167,000 which shall remain available 

un til expended, shall be fo r providing school facilities 

as authorized by said act of Sept. 23,19 50: Provided, 

Tha t this appropriation shall not be available to pay 

local educational agencies pursu ant to the provisions 

of any oth ersection of said ti tle I un tilfu ll payment has 

been made of the amounts to which such agencies are 

entitled pursuant to sec. 3(a) of said title and the 

amounts payable under sec. 6 of said title: Provided 

further, That the amount to be paid to an agency pursuant to said t itle (except sec. 7) for the current fiscal 

year shall not be less, by more than 5 percentum of the 

current expenditures for free public education made by 

such agency for the fiscal year 1969, than the amount 

of its entitlement under said tit le (excep t sec. 7) for 

the fiscal year 1969.”

Education professions develop me nt......................... .................

Subpt. 2 of pt. B................ ..................... - ................. - .........

Higher education........... ......... . ........................... - ......... .............

Grants for construction of other academic facilitie s under

title I of the Higher Education Facilities Act of 1963-----

Federal capital contributio ns to student loan fu nd s. .........

Vocational education......... .................... ............... - -------------------

Grants to States under pt. B of the Vocational Education Act of 19 63, ..----------------------------------------- - - - - - -

Grants to States under sec. 102(b) and other act iv itie s...

Work-study programs under pt. H.................. . ...................

State advisory councils under sec. 104(b)......... .............

Consumer and homemaking education programs under

pt. F . . . „ ..........................................................................-

Research, not under lim ita tio n.............................. . .............

Libraries and community services------- --------------------------------

Grants for public libr ary services under title I of the

Library Services and Construction Ac t....... .....................

Grants for public libr ary construction under title II of the

Library Services and Construction Ac t.............................

Transfer to the Librarian of Congress under pt. C of 

title II of the Library Services and Construction A c t.. . 

Educational broadcasting fa cilitie s under pt. IV of tit le I II 

(except sec. 396) of the Communications Act of 1934.. 

Other, not under lim ita tio n........................ . .......................

Education for the han dicapp ed.....................................................

Research and training________ _______ _____ ________ _

Add the f ollow ing at the end of the paragraph under this 

head: “ Provided furth er, That $9,500,000 shall remain available under said Cooperative Research Act 

throug h June 30,1971, fo r e xpe rimental schools.”

$215,185,700

0

202,167,000

$386,160,700 

48,740,000

600,167,000

$240,185,700

0

440 ,167,000

95,000,000

(15,000, 000) 

788,080,000

107, 500,000 

(18,25 0,0 00) 

871,874,000

103,750, 000 

(15,000,000) 

771,774, 000

0

(155, 000,000) 

279,216,000

(33,00 0,0 00)

(222,100, 000)

488,716,000

0

(155, 000,000) 

347,216,000

(230,336, 000)

0

0

(1,6 80, 000)

(35 2,8 36,00 0)

(40, 000,000) 

(10, 000, 000) 

(2, 800, 000)

(300,336, 000) 

0

0

(1,6 80, 000)

(15,000, 000)

0

107,709, 000

(20, 000, 000) 

(32, 880, 000) 

148, 881, 000

(15, 000,000) 

0

117,709, 000

(17,500, 000) (35, 000, 000) (27, 500, 000)

0 (9,185 ,000 ) 0

(4, 500,000) (6,737 ,000 ) (4, 500,000)

(4, 000, 000) 

(81, 709, 000)

85, 850, 000 

115, 000, 000

(5, 083,000) 

(92.876, 000) 

100,000, 000

85,750,000

(4, 000, 000)

(81,709, 000)

91,850,000

95, 250, 000

1

 Includes $8,000,000 for com munity assistance for narcotic addiction and alcoholism .

2

 Includes $12,000,000 for community assistance for narcotic addiction and alcoholism.
6

E conomic Oppor tu nity P rogram

Substitute the following for the text of the penultimate proviso under this head 

in the enacted bill: “Provided further, That those provisions of the Economic Opportunity Amendments of 1967 and 1969 that set mandatory funding levels 

shall not be effective during the fiscal year ending June 30,1970.”

DIFFER EN CE IN ATTIT UDE TOWARD INC REA SE IN 197 0 VERSUS INCREA SE 

FOR 1971

Mr. F lood. I ha ve n't hacl much time to exa mine the lette r or the 

tab les in detail, bu t here is one point I wou ld like to hav e exp lain ed. 

W ha t reasonable expla natio n is there for the Pr esiden t sayin g in one 

message th at , to go ove r th e 1970 budget by mo re th an $209 million 

wou ld be unduly inf lat ion ary , hu t on the very same day he sends to 

th e Congress a budget fo r 1971 and th at is $2.8 billion over h is bud get 

fo r 1970. Th at is ove r 13 tim es the increase th at he w ill settle for for 

1970 and well over twice the increase t ha t he vetoed 8 day s ago.

Mr. Kelly. I do not recognize the $209 mi llion figure. Th e oth er 

figu res I do recognize. Th e veto m essage refe rred t o an ap prop riation 

bill th at was $1,262 m illion in excess of the Pr es id en t’s re com menda ­

tion. The 1971 bud get is in fact $2.8 b illion in excess o f the reco mmenda tio ns fo r 1970. T he $209 mi llion I stil l do no t recognize. Pe rh ap s I 

can discuss the sit uatio n general ly and then it ma y fall into place.

Fir st , Mr. Ch air ma n, T would like, with yo ur permissio n, to ad ­

dre ss myself to the Pr es id en t’s com mu nicatio n of yesterda y. I think 

it was a sincere and conscie ntio us atte m pt by the Pr es id en t to lay 

before th e Congress a new’ 1970 bu dg et f or t he Dep artm en t of Hea lth , 

Ed uc ation, and Welfare .

Mr. F lood. The $209 million figure is the n et increase over the 1970 

bu dg et t hat would be in the 1970 bill if these la te st r eco mm end atio ns 

of the Presiden t were to be ado pte d. It includes the ap prop riations 

to La bo r and the relate d agencie s as well as H E W an d it takes into 

conside ration the re ductions below the bu dg et as well as the increases.

Mr. Kelly. I have not ana lyz ed the bil l in those term s. I believe 

th at the Presiden t, as he ind ica ted in his v eto message, has placed before the C ongress a plan th at he considered would be a n acc eptable accom modation between the legisla tive branch an d th e executive bra nch, 

th at wou ld assure th at the Am erican people w’ere pro vid ed wi th ap ­

pr op riat e health, edu cation, an d we lfare services, and th at would 

ass ure t ha t no school be closed or seriously disadv an tage d as a res ult 

of his recommendation.

If I mi ght, I wou ld like to review th e summ ary figures fo r you. 

T hat mi gh t lie helpful.

Th e President recommended to the Congress fo r th e De pa rtm ent 

of Hea lth , Ed ucati on , and Welf are, fo r the fiscal ye ar 1970, $16,474 

millio n con tained in this, the Lab or -H EW ap pr op riat io n bill. The 

Congress mad e gro ss increases in the amount of $1,414 million . They 

ma de gro ss decreases in th e am ount of $152 m illion fo r a net increase 

of $1,262 million.

Mr. F lood. T his include s the so-called Joe lso n am endm ent ?

Mr. K elly. Yes, it does.

Th e Presiden t now lays b efore you a p rop osa l to accept $132 m illion 

of th e gross d ecrea ses o f $152 m illion pro posed by t he Congress an d he
asks only for resto ratio n of $19.5 m illion for tw o item s: On e w ould r estore some of the fund s fo r experim ental schools and the othe r would 

restore funds fo r the dr op ou t preventio n prog ram. He then says 

th at of the $1,414 mi llio n in gro ss increases, he would recommend 

th at t he Congress autho riz e increases over his o rig inal bu dg et o nly to 

the e xte nt of $449 million . So he is now p rop osing to the Con gress tha t 

they adopt an ap prop riation bill which would inc lud e fo r H E W $16,- 

791 millio n which is $327 millio n above his original recommenda tion s, 

bu t $945 millio n below the rec om menda tion s th at the Con gress made 

in th e vetoed bill.

Yo ur second question was, how can you relat e the Pr es id en t's decision t o veto the bill whe n it involve s $1,262 m illion a nd then come before the Con gress an d make a recom mendatio n fo r ap prop ria tio ns 

whi ch increase H EW 's b udget by $2,800 million.

Mr. F lood. Th irt ee n tim es mo re th an t he n et increase he will accept 

fo r 1970 and ov er twice th e increase he vetoed ju st 8 days ago.

COMPOSITION OF 197 1 INCREASE RECOMMENDED

Mr. K elly. The $2,800 m illion is made up of $2,100 million which is 

associated wi th prog ram s wh ich we conside r to be rel ati ve ly unc ontro lla ble . Tha t is, th at they co nstitute public policy decisions alr eady 

embodied in sta tute, in which w e estimate the requ ireme nts. T his w ould 

include public assistan ce, me dicaid, the ad min istra tiv e costs and social services related to public ass istance; th e expand ed voc atio nal 

reha bilitation prog ram and the n such prog rams as retir ed pay of the 

military, so t ha t only $700 m illion of the prog ram is in dis creti on ary 

pro gra ms . I n fact, the $2,100 million would be la rg er by a bout $290 m illion were it not fo r leg islative an d ap pr op riat io n lan gu age pro posals 

conta ine d in the 1971 budget. Medicaid, un de r ex ist ing law, wou ld 

cost $235 millio n more th an the Pr es iden t is recommending. In order 

to con str ain th at p ro gram h e is pro po sin g leg islati on which will place 

co ns tra ints on th e Fe de ral pa rti cipa tio n in St ate program s.

In con nection with th e social servic es an d ad ministra tiv e costs of 

publi c assista nce an d me dic aid , he has incorporated lan guage in his 

recom me ndation to the A pp ro pr iatio ns C ommittee to lim it each St ate 

to not mo re th an 110 per cent of wh at they are plan ni ng to spend in 

1970. T ha t would el im ina te unconstra ine d incr eases in th is a rea of the 

prog ram.

Th e increas es in those are as over whi ch there is discre tion ad d up 

to $700 million, but I sho uld po int out th at $600 millio n of th at is 

asso ciated w ith th e pa rtia l first- ye ar cost of car ry in g out th e new fam ­

ily assistanc e program , now pen ding before th e W ays a nd Means Com ­

mittee . I th in k hearings hav e sta rted today. In or de r to provide for the 

ab ility to lau nch th at pr og ram whi ch is est im ate d to cost $4,440 

mi llio n more th an the cu rren t ou tla ys for the first fu ll year of op eration, he has provide d fo r $600 mi llion as the in iti al ap prop riation to 

lau nch it. Th ere fore, un de r ex ist ing leg islation in the controllabl e 

are as, the 1971 b ud get includes a n et increa se of $100 m illion. Th at net 

increase is made u p o f a whole series of ad ju stm en ts; areas which go u p 

and are as which go dow n, but I th in k th at in every sense of the word 

the 1971 bu dg et is designed to exercise the same kin d of fiscal con40- 366— 70—pt. 9----- 2
8

stra in t pro posed in the ve to m essage. I think th at it is also notew orthy 

th at the pre pondera nce of t he adjus tm en ts related to this $449 m illion 

in 1970 have been con sidered in the l ig ht of his 1971 budget .

Le t me just add th at it is clear th at if the Con gress were to adopt 

the $449 million, th at a couple of lim ited adjustm en ts in the 1971 

bu dg et would be in ord er so t hat you do n ot ha ve “on again , off ag ain” 

ty pe of finan cing. Bu t by an d lar ge they are consistent with the 1971 

budget.

BACKGROUND OF PRES IDEN T'S PROPO SAL FOR 19 7 0

Mr. F lood. I s this the De pa rtm en t's pro posal ? Di d th is come from 

the Bu rea u of the Bu dget or t he W hit e Hou se? Or was it worked out 

th ro ug h general discussion amo ng all thr ee?

M r. Kelly. It is a Pr es iden tia l pro posal to the Congres s but it is 

th e res ult o f a substa nti al am ount of d iscussion th at occ urred between 

the Secre tary, the Bu reau of the Bu dget, an d key Presiden tia l 

adv isers. A com pletely unanimous and agree d-upon postu re has been 

laid before the ( 'ongress.

Mr. F lood. You are talk in g about com promise figures. W ha t kin d 

of ya rdstick or guideline s did you use in com ing to t his comprom ise?

Mr. Kelly. Th ere are several un de rly ing consideration s th at relate 

to the item s that make up the $449 millio n.

Th ere are two items in which the ad minist ratio n has been desirou s 

of estab lishin g to a new level which the y feel would have long-term 

value. One is experim ental edu cation and the othe r is prevention of 

dro pouts. They felt we ha d no t mad e a good eno ugh case before the 

Con gress and the Presiden t wa nte d to reemphasize the importance 

he att ached to it.

A fter we ha d finished the dev elopment of the 1971 budget, we 

reviewed again the 1970 budget and con gressio nal action and tried 

to iden tif y those are as in which it wou ld be pr ud en t to accept pa rt 

of the increase in 1970. The se would be are as where th ere are increases 

pro posed fo r 1971, and by acc epting the 1970 increases in whole or 

in pa rt, we wou ld me rely be acceler ati ng the date on which our 

pro posal s are going to go into effect.

Mr. F lood. D id you hav e a ceiling? W ha t kind of ceiling did you, 

or anyone, pla ce on th is tota l th at you could include in final recommendatio ns to the Cong ress ?

Mr. Kelly. 1 th in k the proposal th at is before you was deve loped 

on a “case by case’’ basis. I t c ert ainly was revi ewe d in ter ms of w hat 

its aggre gate costs a re and w hat its impac t w ould be on the inflation ary 

effects of bu dg etary increases, but it was not arrrived at with a pr edetermined total and the n wo rki ng it up bit by bit.

INC REASE FOR ME NT AL HEA LT H

Mr. F lood. S ho uldn 't the increase for me nta l healt h be $2.4 million 

instea d of $4 million ? We had a net cut of $1.6 millio n in other 

act ivities un de r th is ap pr op riation and an increase of $4 millio n fo r 

an alcoholism program . Th e Pr esiden t did no t ask fo r the resto rat ion 

of t hat cu t bu t will agree to the increase fo r the alcoholism pro gra m.

Mr. Cardwell . Th at is corre ct. Th e House a dded th e $4 m illion a nd 

in the P resid en t's c urrent alt erna tiv e proposa l he would acce pt the $4
9

million. In other words, lie would accept the $4 million added by the 

House which does not take him back to his original budget proposal.

The conference action, however, on this particu lar appropriation 

in the aggregate had some offsets in it and he is accepting the reduction but is going along with this pa rticular increase of $4 million.

Mr. Kelly. $4 million for alcoholism is in his proposal but the 

increase proposed for the construction of community mental health 

centers is not recommended by the President. The effect of these two 

actions produce the total figure he has recommended.

Mr. Flood. I admit this is a detail and maybe I shouldn't have 

asked you about it, but this still is not clear.

Mr. Kelly. Let me put it in the form of a table.

Mr. F lood. Yes.

(The information follows:)

PROPOSED PRESIDENTIAL ALTERNATIVE FOR MENTAL HEALTH PROGRAMS

[In thousands of dollars]

Fiscal - 

year 

1969

Fiscal year 1970

Johnson

budget

Nixon

budget

House

allowance

Senate

allowance

Conference

agreement

Proposed

alternative

Mental health ap pr op ria tio n. .. . $338,171 $367,129 $357,904 $360,302 $385,000 $360,302 $354,002

1. Alcoholism community assistance gr an ts.__________ - ( - ............ ) (4 ,0 00)( ............ -) (4,000 ) (8,0 00 ) (4,000 ) (4,000 )

2. Mental health center con- __ ______

struction grants........ ............. . (15,000) (30,50 0) (29,200) (30,500) (36,20 0) (35,500) (29,200)

Note: The conference agreement contained increases over the Nixon budget of $4,000,000 for the alcoholism com ­

munity assistance program and $6,300,000 for mental health center construction grants, offset by a reduction from the 

budget of $7,902,000 in other NIMH programs. The President is now proposing to accept the $4,000,000 for alcoholism 

grants and the $7,902,000 in reductions, while returning to his budget request tor mental health center construction.

INCREASE FOR SUPPLEME NTARY CENTERS AND SERVICES

Mr. F lood. There is one figure here that surprises me. The recommendation of an increase of $40 million over the budget for supplementary centers and services under the Elementary and Secondary 

Education Act. When the revised budget came up in April this appeared to be low man on the totem pole. It was very low down on the 

list of priorities. Now all of a sudden—I suppose under this “realinement of priorities'* rule, it appears to be very, very high. What happened in the interim ?

Mr. Kelly. Mr. Chairman, first let me say the President is quite 

interested in getting the Congress to consolidate a group of programs 

that affect elementary and secondary education and that group of 

programs include the supplementary centers, the library resources, the 

guidance, counseling, and testing, and the equipment and minor remodeling, into one area. When the budget was submitted to the Congress for 1970, although it shows $116 million for supplementary 

centers and zero on the other items, it was the recommendation of 

the administration that these programs be merged and consolidated 

into a single account; then each State could select the items that 

were most important to them in that State.

The final conference action has these as separate items at a considerably higher level in the aggregate than in the President's budget. 

The increase over the President's budget here is $194 million and the
10

pro pos al was to accept $40 million of t hat $194 millio n increase. Th is 

wou ld be consistent with the 1971 budget. Th e degree of con solidation 

of these pro gra ms is depen den t upo n the enactm ent of sub stantive 

legislation. Nonetheless, it wou ld be available to the State s for use in 

supp lem entar v cen ters -----

Mr. F lood. Wha t h appened in th e int eri m ?

Mr. Cardwell. The Ho use, in its amend me nts to the E lemen tary and 

Secon dar y Ed uc ati on Ac t as passed by the House, actua lly pro vides 

for this consolidation. Th e ad minist ratio n testified in su pp ort of th at 

pa rtic ul ar pro viso and ind ica ted th at sho uld t he p rov iso be en acted it 

would prop ose a budget that would ins ure at lea st 50 perce nt of the 

1969 level fo r all these pro gra ms. Tha t pa rtic ul ar pro vision in the 

House version of the amend ments to the El em en tary and Sec ondary 

Ed uc ation Act act ually prescribes and autho riz es som eth ing equal to 

50 pe rcen t o f th e 1969 figure.

Mr. Kelly. In th e 1971 bud get.

Mr. Fi .oon. You talk about the decision to consolidate these variou s 

elements but there is no recommended lan guage. Nob ody asked f or any 

lan gu age to be incl ude d in the bill to do this.

Mr. K elly. Let me say we wou ld be very pleased if the Con gress 

would adopt the lan guage which the Ho use did ad op t in connection 

with th is bill whi ch merge d the items. Th e Senate did no t an d the 

conference bill does not. We trie d to minim ize the lan guage we are 

send ing up.

We have, in conn ectio n wi th the substan tiv e leg islation, proposed 

a con solidation in both the House a nd the S enate a nd th e 1971 budget 

is pro posed on the ass um pti on th is consolida tion will occ ur; it is su ppo rte d at th is level and it seemed unrea sonable to tell you th at these 

fund s were not desirable in 1970 and then recommend the m in 1971. 

Th e reas on for t he re com menda tion was n ot to su pp or t sup plem en tary 

com mu nity centers at the h ighe r level but to su pp ort the cons olid atio n 

of the four pro gra ms at a high er level at th e elec tion of the State , 

so we have come liefore y ou with a figure consistent wi th w hat is in the 

1971 bud get.

POSSIBILITY OF FU RT HE R COM PRO MISE

Mr. F lood. I hav e one more que stio n to ask yo u: I wonde r if you 

can tell us howT str on gly does the Pr es id en t feel about thes e figures? 

In othe r words, if th is subcom mittee came up with some kind of a 

comprom ise to reduce th e increases ove r th e Pr es id en t’s bu dg et by 

ap prox im ate ly on e-third —and th is is wha t th e figures seve ral members have been s uggesting wo uld to ta l—i nst ead of app roximate ly twoth irds that the P re side nt now recommends------

Mr. K elly. In terms of reduction?

Mr. F lood. D o you th in k h e wou ld veto the bill? You see, fra nk ly, 

I don't th in k we would hav e the votes in the Ho use to pas s a bill 

with fund s as low as he recom mends. Thi s is a st ra ig ht vote now. It 

would not take two- third s like it does to o verride a veto.

Mr. Kelly. I th in k anybody who wou ld presum e to spe ak fo r the 

Presiden t would be pre sump tuo us an d as presum ptu ous as I am, I 

wo uld n't do tha t.

I t hink i t is v ery c lea r t hat th e $1,262 millio n was too much. I t hink 

the message w as ve ry c lea r th at the Pr esiden t recognized th at th e execu-
11

tive and the legislative branch have to reach accommodation, tha t no 

one can take their position and solidify on that position. I think that 

the-----

Mr. Flood. This whole business is the ar t of compromise.

Mr. Kelly. I think a serious effort was made by the President to 

put before you a realistic plan.

I think tha t in going above this plan tha t one of the principal 

elements of consideration is whether or not the President could see 

his way clear to supporting tha t increase in 1971. Th at is, if it was 

a one-time increase, like building a building—if you could do that 

and not repeat it, that would be one thing. When you say to local 

school districts and State health and welfare departments t hat in the 

remaining 5 months of 1970 we are going to spend at a higher level 

but then in 1971 we are not going to propose continuation at that 

level, you would be creating an administrative-management relationship in these im portant programs which seems to me untenable.

Mr. Flood. But you don’t have the votes. You are a very practical 

guy. This is a straight vote.

MAND AT OR Y R E Q U IR EM EN T TO SP EN D CERTAIN APP ROPR IA TIO NS

Mr. Kelly Mr. Chairman, 1 really believe the reason why we have 

reached the point tha t we have now reached on this bill is that 

the nature of the legislation and the nature of the Appropriatio n Act 

to carry it out imposes on the President a unique responsibility to spend 

money; that, by and large, the tradition of-----

Mr. F lood. He doesn’t have to according to many students of the 

Constitution.

Mr. Kelly. Oh, yes. The tradition of this Government is th at the 

executive can’t make the congress pass laws, and the legislature can't 

make the executive spend money, but in HEW we have an exception 

to the rule. Many of the formula gran t programs administered by the 

Department of Health, Education, and Welfare have been interpreted 

to require tha t the amount appropriated be distributed among the 

recipients.

Both to our general counsel and the Department of Justice, we 

posed a most significant question, which was if a recipient went into 

court and sued the Government for the money when the Secretary 

didn’t make it available would the States win. The attorney said yes 

they would.

Mr. Flood. They would win ?

Mr. Kelly. Yes, sir. Either in the court of claims or probably in 

a Federal court.

Mr. F lood. You are speaking of a proceeding under the formula?

Mr. Kelly. Tha t is correct.

If the Congress were to give to the President the same discretion

which he has with respect to almost all other appropriated funds_ _

tha t is, in working out the total Federal operating and expenditure 

plan—he would have discretion to determine how much of it he was 

going to spend. With th at language, I do not think you would encounter the problem. With out t ha t language, I think you impose a responsibility to spend money which may be inconsistent with 1971 ’s plan 

and which may contribute to inflation. The President may be required 

to carry out programs so late in the year tha t it would be unwise to
12

try ancl launch those programs and carry them out in such a short 

span of time.

LANGUAGE TO REMOVE MANDATO RY SP EN DI NG REQU IRE ME NTS

Mr. Cardwell. In his veto message, the President, in talking about 

possible solutions, indicated that arrangements similar to those carried 

in the 1968 Revenue and Expenditure Control Act would be acceptable 

as a solution to this dilemma. lie actually prescribed tha t in his veto 

message as one solution he would find acceptable.

Mr. F lood. Mr. Michel.

Mr. Michel. Mr. Kelly, I am sure you are aware tha t the talk up 

here after the veto took the form tha t maybe the simplest method of 

getting this matter resolved would be a reenactment of the old bill 

changing no figures but simply adding language changes giving the 

President the discretionary authority to spend as he sees fit.

Would that route be acceptable to the administration ?

Mr. K elly. Mr. Michel, I think it has many attractions. It is probably the fastest way to dispose of the problem. If the Congress were 

to decide on th at course of action as well as the one we are going to 

discuss on Federal impact—you need both of these things—I think 

it is clear the President has* laid before the Congress the course of 

action he would follow. He has identified th e funds he would spend 

and the ones he wouldn’t. W ith tha t piece of language, the only thing 

in his plan tha t you would not achieve is the reinstatement of funds 

for the experimental schools and dropout prevention. Elsewhere he 

would limit expenditures in accord with his letter of yesterday. Tha t 

would be the fatest way to do it. I would think it would be a highly 

commendable solution.

PRI ORITIES AMO NG RECOMM ENDED AM OUNTS

Mr. Michel. If our committee were disposed to use the figures as 

carried in the President’s letter as a possible benchmark or a point of 

departure I can envision some members feeling strongly about some 

and not so strongly about others. Would you have any idea which of 

these figures the President feels strongly on, or about, or would you be 

free to say ?

Mr. Kelly. I think as a matter of fact the President would be very 

pleased if you had enacted his original budget, Mr. Michel. I think 

his veto message makes it very clear that he does not want to take 

an action which would impair ongoing educational programs. If 

schools and public officials had been led to believe that Federal funds 

were going to be forthcoming and the result of th eir not being forthcoming was to impair ongoing educational programs, by the closure 

of schools—tha t he would be opposed to that. He wants to work out 

some plan to prevent that. Other than that, I think that the recommendations before you are a very strong attempt to find an accommodation on this bill and do it in a manner which will not cause “late 

in the year,” unwise expenditures; will not cause peaking of expenditures because you don't plan to continue them in the ensuing year and 

will not cause an unwarranted inflationary effect on our economy.

Mr. Miciiel. With the hope of doing this in a very orderly fashion, 

may I go through these specific line items ?
13

HOSPITAL CONSTRUCTION GRANTS

Take the first one: In health programs we see first hospital construction grants. The vetoed bill had $104 million increase here and 

the President's new recommendation shows nothing.

Mr. Kelly. That is correct.

Mr. Michel. W hat can you give us as an argum ent for eliminating 

tha t entire increase ?

Mr. Kelly. Well, the plan that the administration proposed, Mr. 

Michel, is tha t the gra nt approach to the construction of health facilities be constrained to ambulatory7

 facilities, rehabilitation facilities, 

and the kinds of facilities which do not have a reasonable method of 

collection of fees covering depreciation and the ability to repay loans. 

We haven't really learned how to do this in the ambulatory care 

facilities so the President’s recommendation to you is to increase the 

proportion of funds that you put into this area and to decrease the 

use of grants for the purpose of building hospitals and nursing homes.

With respect to loans, it is recommended we only use direct Federal 

loans in connection with the construction of public facilities. The 

administration recommends against the use of loan guarantees and 

interest subsidies for public facilities because they are tax-exempt 

facilities and you don’t want one taxing jurisdiction u nderw riting the 

tax exemption of another.

Now, in lieu of that, the administration proposes two pieces of 

legislation, one of which is now nearing enactment and tha t is that 

the Congress authorize the use of loan guarantees and interest subsidies to construct hospitals, nursing homes, continued treatm ent facilities, and to modernize existing ones. This is considered to be a wise 

plan because when Hill-Burto n was originally designed it was designed 

in recognition of the fact tha t most hospitals charged fees that did not 

attem pt to recover the cost of the physical plant and tha t most hospitals 

were built with gift-typ e funds and that there was an extreme shortage 

of beds, an absence of beds in many rural areas of the country.

Today 92 percent of the hospital bed needs have been met but the 

problem of modernization of the plan t and keeping it modern is a 

very acute one.

The formula b uilt into the medicare and medicaid programs reimburses the provider for plant depreciation—tha t is, the used up value 

of his plant. Well, the concept is, if you make it possible for him to 

borrow money a t reasonable interest rates, then he can keep his p lant 

modernized. The reimbursement formula, which is quickly being 

adopted by the insurance industry as a whole, will make it possible to 

repay those loans. I f you don't do that, in effect you are paying for it 

twice. So it seems to us to be a wise course of action tha t you restrict 

gran ts to ambulatory and related-type facilities, th at you restrict loans 

to public-type facilities and tha t you use the interest subsidy and loan 

guarantee for building and modernizing inpatient care facilities. This 

is a major change and is consistent with what is being proposed to you 

in the 1971 budget,

Mr. Michel. If this committee or the Congress, eventually, were to 

restore some of tha t increase tha t was originally voted, would any of 

it be spent in the remainder of the fiscal year ?
14

Mr. Kelly. Well, the way that particular program operates, the 

Department allocates the funds to the States. The States identify, in 

order of priority pursuant to requirements tha t are built into the law 

relating to unmet needs, the projects which will be supported. We 

agree to the projects and then they proceed to employ architects to 

design them. The actual obligation of the funds would not occur until 

the second fiscal year. Disbursements will not occur until much later. 

Most of the disbursements would occur in fiscal year 1972 and thereafter, but under the interpretation we have with respect to formula 

grants, we would not have any discretion. We would lie required to 

allocate the funds among the States.

OTH ER H E A L T H PROG RA MS

Mr. Miciiel. Let me skip the next item of NI H because the President proposes roughly half of the increase which was carried in the 

vetoed bill.

I think the th ird item there is a construction item. It is quite obvious 

why there was none submitted in the President’s letter because of the 

cutback in construction.

In health manpower training, the President would appear to be 

going along with about a third of the increase that was voted by the 

Congress.

In the area of air pollution control, a little over half.

He allows the full increase for rubella vaccination.

Mr. Cardwell. This is on the assumption t ha t we could actually accelerate the program. T hat is the reason the Senate funds were added. 

Our ability to do so would depend upon the capacity of the drug 

industry to speed up manufacture of the vaccine.

Mr. Michel. The actual a ppropriation of the money doesn't necessarily guarantee we would have it.

Mr. Cardwell. I t permits us to maximize our effort, however.

Air. Kelly. There is one other area related to th at too that we have 

to consider and that is that Congress put the funds into the formula 

grant category and tha t particu lar formula grant provides tha t 15 

percent of the funds in the formula grant must be used for mental 

health so you are also increasing funds for mental health by the 

provision of these funds.

Mr. Cardwell. The President's budget, as it now stands, is adequate 

to fund the plan we originally presented to this committee. It is moving 

along at an acceptable rate. There has been some misunderstanding 

and confusion in some States as to whether it is moving fast enough, 

but we feel it is going along on targ et as of this date.

DI ST RI CT OF CO LU M BI A M ED IC AL FA C IL IT IE S

Mr. Michel. For the next item the President recommends nothing 

and the vetoed bill called for $10 million for District of Columbia 

medical facilities. Do you have any comment there?

Mr. Kelly. This relates to several things. One, the original appropriation, you will recall, was included by Congress in a 1969 supplemental appro priation rath er than in the 1970 appro priation, as requested by the President. This additional $10 million would nearly 

double the President’s original recommendation. Secondly, because
15

of the problems associated with construction, we have followed a fairly

consistent pattern of minimizing the amount of funds going into construction.

EDUCATION PROGRAMS

Mr. Michel. Let's move to the education programs. First, the impacted aid area. I t shows the President coming up with a proposal of 

$238 million over his budget which is, of course, considerably less than 

what the vetoed bill carried.

Mr. Cardwell. Do you want to hold that for the next go-around 

since we were going to go into tha t as a separate pa rt of this hearing ?

Mr. Michel. Fine.

VOCATIONAL EDUCATION

We will go to the next item of vocational education. The President 

would appear to want a $70 million increase. That would be limited to 

gran ts to the State s; would it not ?

Mr. Cardwell. Basic grants.

Mr. Michel. And the vetoed bill carried another $89 million for 

other parts of the program and still another $50.5 million for basic 

grants.

Mr. Kelly. Tha t is correct. Again I think th is is related to the issue 

that if school superintendents and State administrators have been led 

to believe tha t they were going to get greater resources than the President recommended because of the action on this appropriation bill, 

the President does not want to take an action which now sets back 

the course of education because people proceeded on tha t course no 

matter how unwisely.

From the time the President’s recommendations first came before the 

Congress to carry out the 1968 amendments to the Vocational Education Act, there has been a controversy arising from the assertion by 

some vocational school superintendents tha t the redirection of 40 percent of the funds to the lower income and handicapped children would 

cause an adverse impact on ongoing programs: vocational education, 

home economics, the agricultural and mechanical arts. And they 

have been endeavoring to persuade the Congress to put in funds, first, 

to offset that adversity and then to put in increased funds to stimulate 

and carry out new aspects of the vocational education program.

The increase proposed in the President’s recommendations is to 

restore those funds which at least some school administrators relied 

upon as available to them. It seemed to be a very high priority item 

with a lot of the Members of Congress we talked to.

Mr. Cardwell. This is the same level recommended by this subcommittee.

Mr. Michel. That is true.

Now, the additional amount that the vetoed bill carried for other 

programs, that $89 million, if there were to be p art of tha t restored 

in any new bill, would there be discretionary authority as to where 

tha t would be spent ?

Mr. Kelly. It would depend where it was restored. There are some 

discretionary parts and other parts which are formula.

40 -366 —70—pt. 9------3
16

Ther e are two elements of consideration we would urge upon you. 

One is a recognition that funds should not be added in 1970 for which 

there is not a pretty strong assurance they are going to he continued 

in 1971. Otherwise, you are just building up pressures to put money 

in 1971, and we have tried to stay consistent with th e President’s 1971 

budget. Now, we were not able to in all cases. In a couple of cases, we 

believe if you adopt the recommendations before you, i t is likely the 

President would send up changes in the 1971 budget. It is an important 

consideration.

Mr. Michel. That is very important. As a matter of fact, we probably ought to be looking at the newly submitted 1971 figures probably in making our adjustments.

Mr. Kelly. As I told the chairman, that is one of the important 

elements of consideration that went into the selection of the $449 

million, how it tied into the recommendations in 1971, tha t the two 

budgets would be consistent.

Mr. Cardwell. This is one case where his alternative proposal for 

1970 would take him over the 1971 budget.

Mr. Kelly. The other consideration I would urge upon you, Mr. 

Michel, is that, at this late date in the fiscal year, and particularly 

this late in the school year, to try to launch new initiatives in fiscal 

year 1970 does not seem wise. Any funds over and above the $70 million would be directed toward new initiatives and toward giving new 

direction and added emphasis to programs of vocational education.

It would seem to me that, you cannot wisely launch such programs 

and have the funds obligated in this fiscal year. I would think this 

could not come before the summer. I don't see how you can have a 

second semester program at th is stage.

T H E 197 0 IN CR EA SE S CO MPA RE D W IT H 1 9 7 1 BU DG ET

Mr. Michel. For the record to be complete, we ought to have this 

sheet updated to reflect increases for programs that do not show up 

in the 1971 budget, and also to indicate the extent to which these 

increases for 1970 would result in a peaking in 1970 over what could 

be supported in 1971 under next year’s budget for those programs 

where funds are included in t ha t budget.

Mr. K elly. I will be glad to do it.

(The information follows:)
17

COMPARISON OF PRESIDENT’S BUDGET ESTIMATES FOR 1970 AND 1971 WITH AMOUNTS IN LABOR-HEW APPROPRIATIONS BILL(H.R. 13111), AS VETOED

[In millio ns of dollars)

Programs increased over budget

1969

level

1970

estimate

1970 

conference bill

Increase, 

1970 

vetoed 

bill over 

budget

President’s

recommendation

1971

Presiden t's

budget

Change 

from 1970 

budget

A. Health programs:

(1 ) Hospital construction

grants.............................. 258.4 153.9 258.3 +104.4 .

+ 2 3 .5

50.0 -1 0 3 .9

(2 ) Medical research (N IH ), 1,100.1 1, 064. 9 1,121.4 +56. 5 1,099.3 +34.4

(3 ) Construction of health 

educational research 

and library fa c ilit ie s .. . 93.2 127.1 151.0 + 2 3 .9 _ 126.1 - 1 .0

(4 ) Health manpower tra ining________ ________ 182.4 228.9 246.2 +1 7 .3 + 6 .2 253.2 +24.3

(5 ) Air pollution control____ 88.7 95.8 108.8 + 1 3 .0 + 7 .0 106.0 +10 .2

(6 ) Rubella vaccination_____ 9.6 16.0 26.0 + 1 0 .0 + 1 0 .0 16.0

(7 ) District of Columbia

medical fa cilitie s.......... 15.0 0 10.0 + 1 0 .0 .

+ 2 .4 346.7 -1 1 .2 (8 ) Mental he a lth ., ............ .. 336.1 357.9 360.3 + 2 .4

(9 ) Food and drug contr ol.... 68.9 72.0 72.4 + . 4 + . 3 89. 5 +17 . 5

Subtotal, health............. 2,152. 4 2,116. 5 2,354.4 +237.9 +4 9 .4 2,086. 8 -2 9 .7

B. Education programs:

(10 ) Impacted area aid............. 520.9 202.2 600.2 +3 98 . 0 +2 38 . 0 425.0 +222.8

(11) Vocational education____ 248.2 279.2 488.7 +209.5 + 7 0 .0 304. 5 + 25 .3

(12) Educationally deprived

children (t itle 1, ESEA) 1,123.1 1,2 26.0 1,397. 0 +171.0 +2 5 .0 1,300.0 +74 .0

(13 ) Equipment and minor remodeling (title III, 

NDEA)_________ ____ 78.7 0 78.7 +7 8 .7 .

141.9 -2 0 .0 (14 ) NDEA stud ent loans_____ 193.4 161.9 229.0 +67.1

(15 ) School libr ary resources 

(title II, ESEA)............ 50.0 0 50.0 + 5 0 .0

(16) Supplementary centers 

and services ( title II I, 

ESEA)______________ 164.9 116.4 164.9 +4 8 .5 + 4 0 .0 116.4

- 6 .7 (17 ) Library programs_______ 143.1 107.7 148.9 +4 1 .2 + 1 0 .0 101.0

(18) Construction of college

fac ilities _____________ 106.7 65.9 98.9 + 3 3 .0 . 32.1 -3 3 .8

(19 ) Guidance, counseling, 

and testing (title V, 

N D EA ).......... . .............. 17.0 0 17.0 + 1 7 .0

(20 ) Bilingual education

(t itle V II, ESEA)__........ 7.5 10.0 25.0 +1 5 .0 10.0

(21 ) Education for the handicapped________ _____ 78.9 85.9 100.0 + 14 .1 + 6 .0 95.0 + 9 .1

(22) Education professions

development.................. 171.9 95.0 107.5 + 12 .5 + 8 .8 105.3 +10.3

Subtotal, ed uc ation.. 2,9 04.3 2,350.2 3, 505. 8 +1,1 55.6 +3 97 . 8 2,631.2 +2 81.0

C. Other increases over budget:

(23) Mental re ta rd atio n........... 32.6 33.6 37.0 + 3 .4

+ .3

32.8 - 0 .8

(24) Gallaudet College_______ 3.7 5.1 5.4 + .3 7.2 + 2 .1

Subtotal, o th e r............ 36.3 38.7 42.4 + 3 .7 + .3 40.0 + 1 .3

Total, increases over 

bu dg et........................ 5,093. 0 4, 505.4 5,902.6 +1,3 97.2 +4 47 . 5 4,758. 0 +252.6

T IT L E I — ES EA

Mr. Michel. We run into a tough one again on educationally 

deprived children, title I, ES EA , where the vetoed bill had $171 million and the President proposes $25 million here.

Mr. Kelly. This is a good illustration of the point I have been 

making. The President did recommend to you a $103 million increase 

in 1970, and he has recommended a further $74 million increase in 

1971. The approach taken here is, with a third of the year left,
18

we could launch early the initiatives contemplated in 1971. I f you put 

more than $25 million in, then you would require more than the $74 

million increase to continue it in 1971. So we selected a figure which 

said “Well, if you took one-third of the 1971 increase, you could then 

Start the 1971 increase at an earlier date.” I f you took very much more 

than that, then the 1971 budget would become inadequate to support 

a continuation of it.

EQUIPMENT AND MINOR REMODELING

Mr. Michel. And I think you pretty well answered the chairman 

with respect to equipment and minor remodeling. I think it was quite 

evident from what you said, however, that language would definitely 

be necessary to consolidate the activity.

Air. Kelly. Highly desirable and tha t is the language which was 

in the original House bill. However, if you were to go the “discretionary language route” rather than changing all the figures, then you 

could not achieve that.

STUDENT LOAN PROGRAM

Mr. Michel. On the student loan item here, the President's new 

submission has none of the increase that was in the vetoed bill which 

was $67 million. Members are getting a lot of flack from around the 

country. Have you anything optimistic to say ?

Mr. Kelly. Let me just say that I certainly can understand the concern of Members of Congress. I am not unaware of the amount of 

correspondence that has been generated on this issue in each of the 

last 2 years.

The administration has adopted a basic policy of maximizing the 

use of insured student loans with subsidized interest for students 

who come from families with adjusted incomes of less than $15,000. 

The direct loan program, the national defense education program 

administered by the schools, is used (1) for the student unable to 

obtain funds from the private market and (2) for those students 

who are of low income.

Therefore, we are endeavoring to restrict the use of the student 

loan program to students from families with income under $10,000, 

who have been unable to obtain loans on the private market.

Now, at the time you were considering the bill we were administering a guaranteed student loan program which (1) was relatively new; 

and (2) had fixed interest rates built into the legislation. Meanwhile 

the Nation was experiencing the largest rise in interest rates that has 

occurred in this century.

Tha t program was drying up. The Congress did amend the legislation to give the Commissioner of Education authority to subsidize 

the interest rate. The student still borrowed at 7 percent but the Fed ­

eral Government could make it a more attractive package to the lending institutions.

We are now going to a 3 percent subsidy. I think that for the most 

recent quarter, we paid a 2.5 percent subsidy.

There are strong indications that this has opened up the student loan 

market. There are parts of the country not doing as well as other parts
19

of the country in this. I think there are very strong indicators that this 

has become a major form of student assistance.

Mr. Flood. Not for the poor students ?

Mr. Kelly. F or the poorer students what happened was that about 

25 percent of the NDE A student loans were g oing to students from 

much higher income families. If you restrict it to the families of low 

income you push the others out to the private market and make the 

NDEA student loans go furth er. AVe contemplate this year there 

will be 900,000 students tha t will borrow unde r the guaranteed student loan program in the fiscal year 1971 there will be 1,100,000 students. That is a large proportion of those which are undertak ing higher 

education, and the 1971 budget does not contemplate an increase in 

the national defense student loan program because of this policy. 

As a matter of fact, at first reading it would appear to recommend 

a $20 million decrease. This is because the universities now estimate 

tha t their collections in 1971 will be $20 million highe r than the ir collections in 1970. Since these funds are reusable we have the same 

amount of student loan funds available in 1970 and 1971.

Again, using the premise tha t I laid out for the $449 million, this 

is a case where an increase in 1970 would be inconsistent with the 

recommendations in 1971 and for tha t reason they were not made and 

not made because they were not considered to be necessary.

Mr. Michel. Wha t is the total number of students today ?

Mr. Kelly. About 6 million.

Mr. Michel. I am sure tha t Mr. Smith probably has further questions on that particular point.

SCHOOL LIBRAR Y RESOURCES

You have nothing here in the school library resources, title 2 of 

ESE A. Wh at do we use for an argument there ?

Mr. Kelly. This is one we would consolidate with the supplementary centers. Therefore, the funds would be available a t the discretion 

of the State for supplementary centers, library resources, student 

counseling.

Mr. Cardwell. This is construction? This $10 million in the service 

portion in the President’s budget-----

Mr. Kelly. Th at is community libraries.

Mr. Miciiel. Construction is down further. This is strictly resources.

Mr. Kelly. Yes, sir.

Mr. Michel. Title 2 of ESE A, isn't tha t the one all the parochial 

schools are interested in ?

Mr. Kelly. That is the one tha t is consolidated with supplementary centers in the way we propose it. The $40 million tha t we propose for supplementary centers was for supplementary centers, 

library resources, guidance counseling and testing, and minor remodeling. That brought us to 50 percent of the level tha t we were spending in 1969 which is the minimum requirement in the proposed extension legislation.

Mr. Michel. Actually in that whole area you are talking about, 

what has the President got in here by way of increase over his original 

budget request?
20

Mr. K elly. $40 million for the four items combined. I t is all shown 

under one item.

Mr. Michel. Actually that is $40 million, but what is the comparable 

figure tha t our vetoed bill had for all these items?

Mr. Kelly. The alternative is $156.4 million which is $154.2 less than 

the vetoed bill.

Mr. Michel. 156?

Mr. Kelly. Yes, sir.

Mr. Michel. That includes this guidance and counseling and testing, does it not ?

Mr. Kelly. Yes, sir.

B IL IN G U A L ED UCA TI ON

Mr. Michel. For bilingual education there was a budget request for 

1970 with a slight increase. That was really increased from 10 up to 

25. Where are you going to be able to use all tha t ?

Mr. Kelly. The only way the funds could be used at all, Mr. Michel, 

is to tie them up in contracts or grants for expenditure at a later time. 

You cannot launch bilingual programs of that magnitude in this 

fiscal year.

Mr. Michel. That is the reason for your not having anything in 

there ?

Mr. Kelly. That is right.

Mr. Michel. What does the 1971 budget show on that item ?

Mr. Kelly. The same amount; in 1970, continutaion of the $10 

million.

Mr. Michel. How long does it take to get a bilingual education program cranked up ?

Mr. Kelly. Well, I think it took a considerable amount of effort to 

put together a program of $7.5 million in 1969, the first year of the 

program. I don't want to argue t hat it can’t be expanded in 1971.

Mr. Michel. I think that just about concludes my questions.

Mr. Flood. Mr. Natcher?

Mr. Natcher. Thank you, Mr. Chairman. I have no questions at 

this point.

Mr. F lood. Mr. Shriver?

CONST RUCTI ON OF COLLEGE FA C IL IT IE S

Mr. Shriver. I think you went over the matter of construction of 

college facilities. Again, what was the reason for it?

Mr. Kelly. We have moved the whole program of college facilities 

from a direct grant and a direct loan program to an interest subsidy 

program. That is a program which this year, as I recall, will be at about 

a $435 million program level. That corresponds with the highest level 

we achieved when we were supporting construction grants and direct 

loans. The current policy is to use the private financing route as the 

technique in achieving that.

Mr. Shriver. That is all I had.

Mr. F lood. Mr. Smith?

Mr. Smith. Thank you, Mr. Chairman.
21

VOCATIONAL EDU CAT ION

Getting back to vocational education again, the vetoed bill put in 

approximately $120 million for basic grants and $89 million for the 

new programs over the budget.

Mr. Kelly. That is right.

Mr. S mith. If the Congress were, in a new bill, to provide for more 

than the $70 million additional, how would you say tha t should be 

divided ? AVhat would the effects be ? Could it be used so as to provide 

the purposes of the 1968 amendments to give new direction to vocational education?

Mr. Kelly. The President’s budget, as i t now stands, includes the 

formula grant to States at the same level as in 1969. The additional 

$70 million would be used to supp ort the same programs that existed 

in 1969 and allow 40 percent for the redirection in new areas.

]\Ir. Smith. There would be nothing additional for the new emphasis ?

Mr. Kelly. No; the Presiden t’s budget includes $30 million for 

the new areas of the Vocational Education Act. You would be increasing it still furth er. You would be picking a figure going above it. I 

would be very glad to tr y and identify for you tha t in the event funds 

were appropriated in excess of the $70 million, the areas which offered 

the greatest potential of etfective utilization, but we would not recommend it to you. We would thin k that the actions th at you are talk ­

ing about would be better taken with respect to 1971. If I had my 

druthers, as you know, I would rather have appropriated in 1970 the 

funds tha t you are going to spend in 1971 in order tha t the communities can have advanced planning.

One of the problems that we are sitting with right now is that we 

are acting on the funds for this fiscal year when the communities 

should be working with in whatever funds are actually going to be used 

this fiscal year.

Mr. Smith. For example, if we did appropriate—pulling a figure 

out of the air—$30 million more for basic grants than you recommend, 

would the additional have to be distributed for basic grants ?

Mr. Kelly. Yes, sir.

Mr. Smith. Would t ha t additional money help to promote the purposes of the act ? Wh at would happen to it ?

Mr. Kelly. I think some of it would. I think some of it would probably go into summer programs tha t would be financed this year. I 

would be fearful tha t some of it would go for the substitution of funds 

tha t the community was going to spend anyhow. This is an overmatched program, and I th ink tha t some of the funds would go into 

the purchase of equipment.

I thin k that some of the equipment which would be purchased 

would be needed, useful equipment that would serve future educational 

programs, and I think that some of it m ight be hastily purchased and 

not be the highest prio rity requirements of the program, purchased 

because the funds were available and they didn’t want to lose them.

Mr. Smith. Have the schools geared up to use the money for the new 

programs that were included in those amendments ?

Mr. Kelly. I think, Mr. Smith, that what we have done this year 

in the handling of this program is create confusion in the minds of the
22

program administrators as to whether or not they should launch a 

program before the appropriation was passed.

I thin k tha t we have had an unfortunate situation in which our 

communications with the communities that carried on these programs 

did not, provide adequate signals for them to know exactly what to do.

Mr. Smttii. To be a little more specific, as to the $84 million added 

in the. vetoed hill for the new programs, other than homemaking which 

had been in operation for a previous year, would that money, if it 

were included in a new bill, be used to promote the purposes of the 

1968 amendments and are you ready to use it?

Air. Cardwell. The difference between the Presiden t’s current proposal and the conference action really falls in three places: $10 million in work-study, $40 million in programs for students with special 

needs, and $32.9 million worth of research activity.

In the case of cooperative education; innovation—one of the new 

provisions; curriculum development; and planning and evaluation, 

the President’s alternative proposal submitted yesterday and the conference action will be exactly the same.

Air. Kelly. I am certain tha t some good programs would be 

mounted. I am certain some of the funds would be allocated to States 

and communities but would be returned unused. Some of these would 

just lapse their funds.

Mr. Smith. Do you have any idea how much that would be?

Mr. Kelly. No, sir. I don’t thin k anybody could make more than a 

wild guess. I don’t think you could make an informed guess.

Mr. Smith. Due to the lateness in the fiscal year, would this be a 

substantial portion ?

Mr. Kelly. I would certainly think so, yes, sir.

BREAKDOWN OF $40 M IL LI ON FOR GRE EN AM EN DM EN T GROUP

Mr. Smith. As to title 3 ND EA for equipment, you included that, 

I assume, as part of the Green amendment combination lumped together under supplementary centers.

Mr. Kelly. Yes, sir.

Mr. S mith. You did not break down th at $40 million.

Mr. Kelly. Th at is correct.

Mr. Smith. If you were given complete discretion would the $40 

million all be used for one of the four programs and distributed?

Mr. Kelly. I think we would use it all for supplementary centers, 

if it all had to be in one program.

If we did not have language which gave us a consolidated capacity 

and we had to then put i t in one or the other, we would put it in supplementary centers.

Mr. Smith. If you were given the discretion ?

Mr. Kelly. The discretion would then move to the State. If you 

gave us the consolidated proposal and funded it, we would then allocate the funds to the State and they would have the discretion to 

use it for any one of those four purposes.

Is th at your understanding ?

Mr. Cardwell. Exactly.

Mr. Smith. To p ut the question a little differently, where could the 

$40 million, in the opinion of the Department, best be spent in these 

four programs if you were to separate the programs ?
23

Mr. Kelley. Supplementary educational centers.

Mr. Smith. All of it?

Mr. Kelly. Yes, sir, but our preference would be to allow the State 

to make that decision.

Mr. Cardwell. Let us give you a breakdown tha t the Office of Education might agree to, in answer to your question.

Mr. Smith. When this subcommittee put the four into one lump sum 

and presented it to the House in the vetoed bill, the House divided it. 

'fhe Green amendment combining the program options has not become 

law. It is still in the authorization legislation tha t is pending in the 

Senate.

Suppose this is to be divided in the new b ill; what would be the 

best way?

Mr. Kelly. Let’s do what Air. Cardwell suggested; give you an 

analysis of it. The admin istration realizes that NDEA, title 3 is a 

very popular program in the Congress. It does get divided into all 

school districts. If only limited funds are going to be made available 

for aid to education it is the belief of the administration that those 

funds will serve better the needs of education i f they are allocated for 

use by the States as they see fit, rather than for a categorical purpose. 

If there must be categorical purposes, then they should be directed to 

the handicapped and the deprived and not simply available to all 

students as NDEA title 3 is.

(The information follows:)

PROPOSED ADMINISTRATION DISTRIBUTION OF ADDITIONAL $40,000,000 FOR ELEMENTARY AND SECONDARY 

EDUCATION PROGRAMS SCHEDULED FOR CONSOLIDATION

[In thousands of dollars]

Programs to be consolidated 1969

1970

revised

budget

House

action

Confer- AdminisSenate

action

ence

agreement

tration

alternative

Increase

over

budget

Supplementary educational centers 

(ESEA III) _____ ____ ______ ______ 164,876 116,393 164,876 164,876 164,876 146, 843 30,450

Library resources (ESEA II ) ________ . 50,000 . 50, 000 50, 000 50, 000 3,475 3, 475

Guidance, counseling, and testing (NDEA

V ) . . . . . . . . . . . . . . . . . . 17,000 . 17,000 17, 000 17, 000 4, 075 4,075

Equipment and minor remodeling (NDEA

H I ) - - - - - - - . . . . . . . . . . . . . 78,740 . 78, 740 i 78, 740 2

 78,740 2,000 2,000

T ota l................................................. 310,616 116,393 310,616 310,616 310,616 156,393 40, 00 0

1

 Included in ‘ ‘Instructional equip men t," a new appropriation recommended by the Senate Appropriations Committee.

2

 Of this total, $30,000,000 was included under the "Elem entary and secondary” appropriation and $48,740,000 under 

he new “ Instruc tional equipm en t" app ropriation.

Note: Under the adm inistration’s proposed alternative, $40,000,000 would be added to the $116,400,000 requested in 

the 1970 budget for supplementary educational centers. To avoid undue hardship on existing State adm inistrative activitie s 

in the programs to be eliminated, the adm inistration requested and obtained authority in the 1970 continuing resolution 

to continue these activities at last year's rate. The plan is to use approximately $10,000,000 of the $40,000,000 increase 

for this Durpose. This distrib ution would result whether or not special consolidating language is included in the H.E.W. 

app ropriation bill.

Mr. Smith. W hat is the maximum amount you think could be used 

effectively for title 3 NDEA ?

Air. Kelly. I think the nature of equipment purchasing does not 

suffer from the same problems of how much you can launch in one 

period of time. I think tha t if we were to notify the States at an 

early enough date they could file purchase orders and the funds could 

be obi igated before the end of the fiscal year.
24

“black lung” PROGRAM

Mr. Smith. Some members ask when we are going to fund the “black 

lung” program. I understand there are a lot of applications being 

filed.

Mr. Kelly. There are 72,000 applications received to date.

The Congress appropriated $10 million at the time they acted on 

this, included in the supplemental appropriations. The President’s 

budget for 1971 predicts a request for an additional $10 million for 

this fiscal year and $160 million for next fiscal year.

Mr. Smith. If the supplemental is not enacted until June, will there 

be some tha t have to wait to get their money ?

Mr. Kelly. Yes, sir. The $10 million supplemental is not enough. 

At the time we put together the estimates we did n’t have 72,000 applications. We are now try ing to test their eligibility but we hope to 

come up to you with a plan in the first supplemental tha t the President will submit soon.

Mr. Smith. In order not to keep them waiting, why don’t you ask 

tha t we put some money in there fo r that ?

Mr. Kelly. There is another saying that says only the President 

can ask.

Mr. Smith. I assume this bill will be enacted 2 or 3 months before 

the supplemental, maybe.

That is all I have.

Mr. F lood. Mrs. Reid.

COMMENTS BY MRS. REID

Mrs. Reid. Thank you, Mr. Chairman.

I have no questions but, Mr. Kelly, I want to commend you for your 

presentation this afternoon.

Mr. Kelly. Thank you.

Mrs. Reid. I feel this is a reasonable compromise, taking into consideration not only budgetary limitations but the needs of the many 

worthwhile programs included in this legislation. I would hope that 

our subcommittee could adhere closely to the figures you have 

presented.

Mr. Kelly. Thank you.

Mr. F lood. Mr. Hull ?

Mr. Hull. I have no questions.

Mr. F lood. Mr. Casey 2

Mr. Casey. My questions have already been asked. Thank you, Mr. 

Chairman.

Aid to Schools in F ederally I mpacted Areas

Mr. F lood. All right. Let us go back to the original purpose of the 

meeting. I have no specific questions on Public Law 874, as such. 

However, I am quite interested to hear your comments and the various 

proposals, your reasons for thinking that the Department’s proposal is 

superior to the proposal of o ur friend Mr. Smith. And I would like to 

know, all of us would like to know, ju st what classes of schools would 

be adversely affected and to what extent under each of these proposals.
25

1 think the best way m igh t l>e for you to a ddres s yo urself to the whole 

backg rou nd of th is problem in a gener al ana lysis.

Mr. K elly. All rig ht. 1 think t his would he lp the rec ord consid erably.

Mr. F lood. An y detai ls to be rai sed by the m emb ers.

Mr. Kelly. We do n't claim ou r pro posal s are su pe rio r to Mr. 

Sm ith 's. They are senior among equals, Mr. Ch airm an .

Th e Secre tary has asked me to rep res ent him here tod ay concern ­

ing the Pr es id en t’s alternative pro posal fo r fu nd in g impac ted area 

aid fo r fiscal y ear 1970.

We are here tod ay

Fir st , to describe the Pr es id en t's cu rre nt recom mendation for 

wh at he believes to be a pr op er ap pr op riation level fo r imp acte d 

are a aid for fiscal ye ar 1970.

Ne xt, to expla in, as f ull y as possible, th e de tai ls of the proposal, 

what would be req uir ed to pu t it into effect, how it would work, 

an d its implications for school distric ts arou nd the cou ntry. 

Bec ause this is a com plicat ed sub ject, with yo ur permissio n, it 

might l)e helpful if I star ted out by rev iew ing th e chr ono logy of 

eve nts thu s fa r—what has happened thus fa r concern ing the 1970 ap ­

pr op riatio n for impac ted are a aid—the Pr es id en t's origi na l bud get, 

request, House action, Senate action, conference action , and. finally, 

ou r cu rren t alternative pro posal.

BACKGROU ND AND NA TU RE OF THE PROGRAM

Be fore doing, so, howe ver, it migh t pro ve he lpful if we reviewed, in 

broad ter ms at leas t, the na tu re of the pr og ram, wha t is meant by 

such term s as “ A ” child ren , “B ” child ren , and others th at inv ari ably 

come up in any disc ussion of th is subject.

Fir st , th e prog ram, which beg an in 1951, ha s two basic pa rts—

1. G ra nts fo r opera tio ns a nd ma intenance a utho riz ed b y Public 

Law 874.

2. Gra nts for constructio n a uth orize d u nd er Pu bl ic La w 815.

All of th e con troversy cen ters arou nd the Pu bl ic La w 874 portion

of the prog ram. I t is by fa r the most im po rtan t—b oth in the size of 

the pr og ram and in ter ms of wha t it means to individu al school districts.

All pro posal s fo r ap pr op riations —be the y made by the House, the 

Senate, or th e executive branch—ha ve prov ide d------

Mr. F lood. H av e you discussed th is with the Se cretary recently, a 

m at te r of da ys ?

Mr. K elly. Yes, sir.

Mr. F lood. Hou rs?

Mr. K elly. Yes, sir.

Al l pro posal s fo r ap pr op riatio ns —be the y ma de b y the House, the 

Senate, or the executive branch —ha ve pro vid ed the same amoun t for 

constru ction assistance un de r Pu bl ic Law 815: $15 millio n—the same 

am ount ap pr op riated fo r 1969. I t is the pr inci pa l prog ram—P ublic 

La w 874—where all the contr overs y is c ente red. Th us, I would like to 

focus my rem ark s an d explan ati on s pr im arily on th at pro gra m.

Und er Pu blic L aw 874, the re are three general cate gories of imp act 

fo r which Fe de ral assista nce is ma de in the form of gr an ts t o school 

distr ict s, as follow s:
26

Grants for so-called “A” children. Section 3(a ) of title I of 

the act defines this class as being children whose parents both work 

and live on Federal property. Because they live on Federal property, they are less likely to contribute to tha t p art of the tax base 

tha t finances most of the cost of operating a school system. Everybody who has studied this program seems to agree th at these children create the most significant impact on local schools. “A” children account for about 25 percent of the program.

Next are grants for the so-called “B” children—section 3(b) 

of title I of the act. These children are from families whose parents work on Federal property, but live in the local community 

and thus pay, either directly or indirectly, local real property or 

other taxes. “B” children account for about 70 percent of the 

program.

There is also a category of payments to Federal agencies or 

the ir agents for educational services provided children to whom 

local public agencies are not available. This is known as the category of payments to federally operated schools. Under the law 

section 6 of title I—these payments are the first to be made from 

any amount appropriated at 100 percent of entitlement. They 

account for about 5 percent of the total program.

One other important feature of the basic law that deserves special 

attention before we proceed is th at—except for the payments to Federal agencies at 100 percent of entitlement—whenever the remainder 

of the appropriation for any year is insufficient to pay full entitlement to the “A” and “B” categories, such remainder is prorated 

equally among them without regard to any difference or variation in 

their impact on the local school system.

CHRONOLOGY OF TH E 1 9 7 0 BUD GET

At this point, Mr. Chairman, permit me to review the chronology 

thus far of the 1970 budget for this program.

Here are what seem to me to be the key figures:

1. A total of $521 million was appropria ted for fiscal year 1969— 

$506 million for maintenance and operations under Public Law 874 

and $15 million for construction under Public Law 815. The amount 

for Public Law 874 represented 90 percent of full entitlement for 

fiscal year 1969—full entitlement being $561 million.

2. In his budget request submitted last April, the President proposed th at $202 million be appropriated for t his program for 1970— 

$187 million for Public Law 874 and $15 million for construction. 

His recommendation, however, contained a very important proviso; 

tha t is, tha t the $187 million for operation and maintenance under 

Public Law 874 should be made available to pay entitlements for 

“A” children and for federally operated schools only. He proposed 

specific appropriation language which would achieve this objective. 

The President made this proposal because of his belief tha t the socalled “A” children represented the most significant impact and 

because of his concern that assistance for the so-called “B ” children 

had, through the years, produced inequities and windfalls to school 

districts that could well afford to pay their own way.

Mr. F lood. Have any funds been allocated at all to the “B” group 

as of this hour ?
27

Mr. Kelly. Well, we have obligated $72 million so far this fiscal 

year and we do not have the right to distinguish between “A” and “B ” 

until the appropriation is enacted into law.

3. His proposal for an appropriation of $187 million would, when 

combined with the appropriation language, provide full entitlement 

for all “A” children. Full entitlement for all categories of aid under 

the program would equal $651 million in 1970, with $187 million going 

to the “A” children and federally operated schools and the remainder, 

$464 million, going to the “B ” children category.

4. This subcommittee reported out a bill approving the President's 

request of $187 million, together with the appropriation language 

tha t he recommended. This action was sustained by the full Committee on Appropriations, but, as you know, it did not last very long once 

the bill got to the floor of the House.

5. Ju st to review the bidding further , the House passed an amount 

of $585 million for Public Law 874—representing the same percentage of entitlement for 1970 as had been appropriated for 1969—90 

percent. The Senate, however, raised the amount for 1970 to nearly 

full entitlement—$645 million. Both houses held to the $15 million 

recommended by the President for Public Law 815 construction.

6. Conference action, however, settled on th e House amount of $585 

million—90 percent of full entitlement.

president’s proposal

Now tha t we have covered the chronology of congressional action 

thus far, let me describe as best I can the P resident’s alternative proposal for fiscal year 1970.

First, let me make as clear as I can that the Secretary and the President appreciate the fact tha t an appropriation of $187 million—the 

Presiden t’s original request—would not be fair and would not be 

viable without changing the existing a uthority to authorize full payment for the “A” children. As I said before, under existing authority, 

any appro priation under full entitlement calls for a pro rata distribution of th at appropriation among all school districts.

An appropriation of $187 million without any clarifying language 

would give the districts 25 percent for both “A” and “B” children.

The President is aware, as I believe everybody involved should be 

aware, tha t under a pro rata distribution, an amount as low as $187 

million would pose an undesirable burden on small school districts 

suffering significant impact from so-called “A” children. As the President said in his veto message, he definitely wants to avoid any situation 

that would cause a school to close or cause students to go without any 

part of this year’s schooling. It is for this reason that he is proposing 

an alternative budget at a higher level than tha t which he originally 

recommended.

Specifically, the President is proposing a total 1970 appropriation 

for impacted area aid in the amount of $440 million, of which $425 

million is for Public Law 874. He is requesting further that such an 

appropriation include authorization, through the use of appropriation 

language, tha t would provide payment of full entitlement for “A” 

children and prorate distribution of th e remainder for “B” payments. 

According to our estimates, this would result in—
28

1. $187 million being paid for full 1970 entitlement to about 

1,550 school districts in all 50 States for “A” children.

2. Next, it would provide about 50 percent of the 1970 entitlement for all other school districts—specifically, school districts 

with impact from so-called “B” children. This would require about 

$•230 million.

3. The President’s plan would, of course, provide $15 million 

for construction under Public Law 815.

4. Finally, and most important, the President also proposes 

special language in the form of a “no hardship clause.”

In his veto message, the President said, and I quote, “I favor a 

specific ‘no hardship clause’ which will guarantee tha t no school distri ct will, as a result of these changes in the impacted school aid program, have a school budget less than 95 percent of what it had in 

1969.”

To carry out this commitment on the part of the President, we have 

prepared appropriation language which, in addition to incorporating 

the authority to make full payment for “A” children, is designed to 

insure that the amount which any school district would be paid for 

fiscal year 1970 for impacted area aid would not be reduced by more 

than 5 percent of the prio r year’s total school budget. Under this 

proposal, the total school budget is intended to mean the total budget 

financed from all sources, State, local, and Federal, including Federal 

impacted area aid.

Another way of describing the language would be to say that, if 

calculating the amount to which a schol distric t would be paid under 

the appropriation language that we have proposed for 1970 would result in a reduction below 1969 greater th an 5 perecnt of the 1969 total 

budget, the 1970 impacted area aid payment would be increased accordingly, provided, however, tha t such increase would not result in 

a payment in excess of full entitlement for 1970.

I wish to make very clear that we are not talk ing about guaranteeing 

tha t every school district entitled to impacted area aid in 1970 will 

have a total school budget equal to 95 percent of the prior year’s total 

school budget. The reason we can’t make this guarantee is that many 

school districts may have reduced their budgets bv cutting back on 

funds from non-Federal sources. We are not pledging ourselves to 

make up that difference—only a difference caused by any reduction in 

impacted area aid payments.

In summary, we are guaranteeing, however, that a school district’s 

budget cannot be cut in 1970 by more than 5 percent—as a result of 

any reduction in its 1970 impacted area aid.

Tha t summarizes our objectives and our specific proposal for appropriation amounts and appropriation language.

We will be glad to answer any questions.

Mr. Chairman, I might introduce to you Mr. Cherry, who is the 

head of this Federal impact program.

Mr. Flood. O rdinarily we proceed by recognizing Mr. Michel, but 

I just talked to Mr. Michel and because Mr. Smitn has been doing 

the major part of the work on th is very difficult problem we agreed 

we would yield at this time to Mr. Smith.

Mr. Smith. Thank you, Mr. Chairman.
29

SCHOOL DIST RICT S RECEIVIN G MORE PER CH ILD THAN TH EI R COSTS

First of all, if we were to apply a $145 million reduction in impact 

aid below the amount in the vetoed bill, how can the reduction be 

applied to and make it as fa ir as possible? One idea is not incompatible with your proposal; in fact, I think we could have both. That 

idea is tha t those school districts which receive the money should 

not receive more than they spend on the children that we are paying 

them for.

What can you tell us about that? How many would be affected and 

what would be the problems ?

Air. Kelly. Let me first say that there is a problem associated with 

it, Mr. Smith. It is sort of a difficult one. On the one hand, you 

object to the fact tha t the Federal Government pays more money 

to a school district than it is spending on its nonfederally connected 

children. On the other hand, the Gederal Government does not like 

to be a party to the financing of an educational program that adversely 

affects the federally connected families; that is, a poor educational 

program. In other words, to the extent that the community does not 

put up the funds to operate a school program tha t comes up to the 

average, the Federal Government tends to make up this difference.

Mr. Flood. You mean poor insofar as dollars are concerned?

Mr. Kelly. That is correct.

So, for this reason, most of the educational level tha t applies to 

title I of the Elementary and Secondary Education Act—and it applies to Federal impact—it authorizes the Federal Government and, 

in this case, the school district, to use one-half the average cost on a 

State basis or a national basis or a comparable school district basis, 

whichever is the greater.

This is a public policy decision to try and raise the level of education in those places where it was lower than half the State average 

and half the national average.

It does result in what appears to be unjust enrichment. We do have 

an estimate associated with that.

Mr. Smith. What is th at ?

Mr. Kelly. About $65 million by eliminating half of the national 

average and about $165 million eliminating half of the national and 

State average.

Mr. Smith. Some of the members tha t I have talked to say tha t it 

has just the opposite effect of what you are talk ing about. In other 

words, if they were to spend some more money, there is some more 

available; but more is paid to them whether they spend it on the 

children we pay for or not ?

Mr. Kelly. I think th at is correct.

Mr. Flood. Suppose it is; where are we? Then this unjust enrichment is not serving any purpose from the standpoint of enhancing 

educational opportunity as well as not being fair.

Mr. Kelly. It is not necessarily serving that. It may be serving or 

it may not be serving them. The availability of the funds may well be 

encouraging the district. As you say, there is no requirement that the 

encouragement work. They are going to get the funds whether they 

enrich their school system or not.

Mr. Smith. As I mentioned, it would in no case hurt any school distric t that wants to improve its program tha t happens to be in this
30

category; if they improve their program, they can get more money?

Mr. Kelly. The way the law is written now, that is not. quite true 

because your language might do it. The law was written with a fear 

that the use of the district’s own budget may be disadvantaged for 

two reasons: One, they have not got enough money to put together 

a budget: or two, it is too much encouragement to use their budget 

in these funds. They were first required to use a comparable school 

district as their target. Then this was later broadened th at they could 

use the State average or the national average.

They cannot use their own school district in computing their rate 

of entitlement but must use the comparable district basis.

Mr. Smith. I f we were to include this language along with the language tha t the Department mentioned, that would mean tha t $65 

million of the windfall money would therefore be available to increase 

the percentage category B recipients would receive?

Mr. Kelly. Tha t is correct.

That portion of the $165 million appropriated tha t was computed 

against entitlement. It was, roughly speaking, 25 percent of entitlement. You would only get $106 million of it against the figure of $425 

million.

Mr. Smith. That would bring them from 50 percent up to what 

percentage?

Mr. Kelly. I guess about 66. If you add $65 million, tha t comes 

close to two-thirds.

Mr. Smith. Tha t brings category B up to 66 other than those who 

lose some of the windfall ?

Mr. Kelly. I f our $106 million estimate is right. Most of our efforts 

were carefully prepared, but in one like this it is difficult to lay your 

hands on reliable data.

EQUITABL E FU ND IN G LEVEL FOR CATEGORY A

Mr. Smith. I have been one tha t thought category A should probably be at 100 percent but a number of members have said 90 percent 

is enough for category A. They say tha t afte r all, they collect sales 

taxes and other taxes directly or indirectly from people who live on 

but spend money off base. Ninety percent is all they had in the vetoed 

bill and it is all they had last year. Some say we should not go over 90 

percent in a new bill. We could do that by sticking 90 percent in the 

proper place in your language ?

Mr. Kelly. No question about it.

Mr. Smith. As I understand it, that would make a difference of 

about $18 million ?

Mr. Kelly. $15,500,000. A p art of th at $187 million is for federally 

operated schools; $155 million is the A share of local schools. It would 

be $15,500,000.

Mr. Smith. The two items together would give 80.7 percent more 

money for category B generally ?

Mr. K elly. Yes, sir.

Mr. Smith. Tha t would bring category B up to wliat?

Mr. Kelly. Around 70 percent.

Mr. Cardwell. If you extend the no-hardship clause, some would be 

raised higher than that.
31

Mr. Smith. Assuming that you stay with the no-hardship clause. 

Mr. Kelly. That clause has now been computed to cost $8 million. 

If you made the adjustment downward from 100 percent to 90 percent 

on A children, the cost of the hardship clause would go up. I don't 

thin k it would be a very large sum but my guess would be $12 million 

or $15 million.

EFFECT OF A CO MB INA TIO N OF LANGU AGE PROPOSALS

Mr. Smith. In summary, what we woidd have if we were to take 

the Department's language as to the transition except make it 90 percent instead of 100 percent on the category A, and add to it language 

tha t would eliminate the windfall caused by using national or State 

averages where they exceed actual cost so th at von take the windfall 

away.

Mr. Kelly. As I said, you would not take that away.

Mr. Smith. Except for those transitions ?

Mr. Kelly. You would use it, but say that if this produces a higher 

level of cost than you are supporting for non-Federal children, you 

cannot get it ?

Mr. Cardwell. We ought to make one point here. T his arrangement 

would probably hurt most the small, southern school districts tha t 

have very low per capita education budgets.

Mr. F lood. W hat do you mean by “this ” ?

Mr. Cardwell. We are actually paying, because of the national 

average, southern school districts-----

Mr. F lood. You said “this” ?

Mr. Cardwell. This was under consideration by Mr. Smith.

Mr. Smith. They couldn’t be hurt more tha n 5 percent in your 

transitional clause in the total budget ?

Mr. Kelly. That is right, if the “hard ship” clause also pertains to 

reductions based on local rather than State-national rates.

Mr. Smith. We would be leaving them with most of the windfall 

where it hurts to make a transition. In the big school system district 

it wouldn't make much difference.

It seems to me th at tha t kind of a total package might be a much 

more palatable way of gettin g over the hurdle that we are going to 

have.

Mr. Kelly. I would think t ha t there would be a considerable support for your position, Mr. Smith. I think the problem tha t we have 

had so far is the number of Members of Congress that have said, 

“You have to settle th is on a basis that is simpler. This proposal that 

you have got up here on A and B is too complicated.”

When you add to the other two provisions you get a little more 

complicated. We have been able in our proposal to do a pretty good 

cost estimating by district, and then merge that by congressional 

district and by State so that we now do have the figures tha t no matter 

how complicated it is, we actually can tal k about what the figures are 

under each of the proposals. Th at tends to simplify it.

Mr. Smith. It would be more total changes if we did not change 

the 90 percent for category A in the vetoed bill to 100 percent in this 

new bill. But only changed the $65 million windfall and put it with the 

transitional language ?
32

Mr. Kelly. Right. I think they are understandable. On th e alte rnative proposals that you are making, I think there is a real search 

for an accommodation between the executive and the legislative Federal impact that gets rid of some of the inequities of this law and 

stops its escalating cost.

SIT UA TIO N REGARDING NE W LEGISLATIO N

Mr. Smith. The authorization for 1971 is still over in the Senate, 

and from what you have said, it probably is going to be vetoed if it 

remains in its present form as passed by the House unless somebody 

in the White House takes a different attitude than what has been 

mentioned in the statements the last few days. If there is a change 

coming anyway in 1971, we better start getting some kind of a tran sition started.

Mr. Kelly. The President’s budget for 1971 has no funds to carry 

out the basic legislation but, rather, the President is recommending 

new legislation and will then recommend funding for it.

OBLIGATIONS TO DATE

Mr. Smith. Somebody is going to ask how you obligated $72 million for 1970.

Mr. Cardwell. It was obligated essentially on the concept we were 

paying only for A children on a part-year basis. We would hold final 

payments until final congressional action.

Mr. Smith. For A children ?

Mr. Kelly. Yes, sir.

Mr. Smith. That is all.

Mr. Flood. Mr. Michel.

COST OF SAVING CLAUSE

Mr. Michel. How do you arrive at th at $8 million or adjusted to $15 

million figure as the probable cost of the saving clause? I t seems to me 

that th at is a very small figure.

Mr. Kelly. Let me just say there were in 1969 over 4,300 districts 

tha t get the payment; last year they got $505 million.

Mr. Smith. Forty-five-----

Mr. Kelly. 4,344; 202 of those districts got more than 25 percent of 

their total budget from this source of revenue. Seven hundred and 

thirteen school districts got more than 10 percent of their total budget 

from this source. Since the most we would do is pay 50 percent of R, 

no school district could lose more than half.

If only 713 districts got more than 10 percent of their support from 

this source, then the only ones that you have to concern yourself with 

are these 713. Go down the list and see how much they get cut. Many 

have submitted to us th eir applications for 1970 and in th at application they show their estimate of total payments for the operation and 

maintenance of a public education program in that school district for 

1969, number of children they have, and so forth.

These are not yet verified figures but they are the school district’s 

own figures. We took those 1969 figures and calculated what 5 percent 

of their total budget was. Then we calculated how much was the least
33

we would pay them in 1970 under this provision and full entitlement. 

If it caused us to hit above the 5-percent level, we calculated how much 

it would take to get back. I t is a fairly refined estimate we have here.

Mr. Cardwell. It would change considerably if we changed the rates 

as now proposed.

Mr. Kelly. I f you went to 90 percent for A ’s, and recalculate what 

it takes, it would still be within the 713.

Mr. Smith. It would also be reduced as you increased the category 

B and-----

Mr. K elly. Yes, sir. I t would have to be recalculated. I don't know 

what it would be. I don’t thin k i t would get above $12 million.

ESTIMATED FUTURE COSTS

Mr. Michel. I f we don’t reform this program along the lines you 

described, what would our costs be with comparable conditions in 

1971,1972; do you have any prediction on that ?

Mr. Kelly. I thought tha t I had a 1971 figure there. The full 

entitlement cost would be $725 million. When you think that you 

went from $560 million, as the law authorized in 1969, going up to 

$650 million, in 1970, that is a $90 million increase, and going up to 

1971 to $725 million, which is a $75 million increase. The program is 

escalating at a rapid rate.

The Senate is now debating an issue as to whether or not they include into Federal impact the children of parents tha t reside in public 

housing. This would enlarge costs substantially.

Mr. Michel. We might as well have at this point in the record 

any projections of increased costs you got on that.

Mr. Kelly. I will.

(The information follows:)

The estimated cost of adding low income public housing to the Public Law 

S74 entitlement would be $290 million in 3971. This would be in addition to 

the $725 million estimate for entitlemen t under present authorizations for 1971.

Mr. Kelly. I think it takes you over $1 billion.

Mr. Michel. What are the long-term projections under reform here ? 

It increases a little bit ?

proposals for changes in current law

Mr. Kelly. Many considerations affect the development of the legistive proposal which the President will be sending to the Congress 

within the next few weeks. You remember th at a couple of years ago 

we had a report made by Stan ford Research for the purpose of tryin g 

to identify what is the economic impact of putting military installations in, and so forth. We endeavored to try some legislative proposals 

on that.

The Congress didn't think that we had adequate data and they 

directed a new study. That study has just been completed by the Battelle Institute. It identifies some of the inequities and comes up with 

various kinds of alternative suggestions. Those are now being considered and put into this package. One of them, there are several considerations, is that any district has to absorb whatever its threshold is. 

If it takes 3 percent of the students to become eligible for aid, then a 

district that has only 2.9 has to absorb it. A district tha t has 3.1 should
34

only get paid for the 0.1, not for the 3.1. That which it took to make 

yon eligible you don’t get paid for. On tha t which you exceeded eligibility, you do. That is one element.

Another one is the concept of full payment for the A children but 

a lesser payment for B in recognition tha t this study does not evidence 

that the employer through his real property activity actually supports 

locally 50 percent of the cost of education. It would be a lower figure 

there.

Third, you would move into the direction of treatin g what they call 

the B-outs. That is the children whose families work in one district 

and reside in another district. The district where they go to school 

would not get as heavy a benefit as where they went to school and 

worked in the same place.

Another very significant element of tha t consideration is to actually place an appropriation ceiling on the program, to recommend a 

level of appropriations for the program so that it is not an open-ended 

escalating program but a fixed one. Then you allocate tha t amount 

of money among the eligibles using these various formulas. The full 

detail of specifications for this legislation have not been finalized.

Those are four of the elements tha t are under consideration for this 

program.

Mr. Michf.l. Tha t is all I have on that point.

Mr. Flood. Mr. Hull?

Mr. Hull. No questions, Mr. Chairman.

Mr. Smith. Any consideration of dovetailing into title I ?

Mr. Kelly. No, sir.

Mr. Cardwell. Not at this time.

Mr. F lood. Mr. Shriver?

Mr. Shriver. Thank you.

EFFECT OF REDUCTIONS IN FEDERAL EMPLOYMENT

You are contemplating an escalation in the number of people living 

on the installations and working for the Government where indications are there is going to be some cutback in employment instead of 

rising at the rapid rate it has in the last few years. I think there 

would lie a leveling off in the number of people eligible for either one 

of these programs?

Mr. Kelly. I think that the extent to which the military closes installations, decreases its total requirements, it will have an impact. 

The military only account for about 40 percent of this. There has been 

a tendency toward a rising number of eligible school districts and 

a rising number of eligible children even with a pretty stabilized 

employment.

Mr. F lood. Would the gentleman yield ?

Secretary Laird has suggested, further than that, in the next 3 years 

there will be a cut of 1,200,000 in personnel, military and civilian, in 

defense.

Mr. Kelly. He includes in that figure those tha t are employed by 

contractors.

Mr. Flood. Tha t is right.

Mr. Kelly. Very few—some, but very few of the contractor-supported staff are supported under 874. They do not have as great an impact as Federal employees, nevertheless, I think that the point is
35

well taken. As you change the mix of total Federal staffing you should 

change the degree of Federal impact. The program has risen because 

younger families with preschool children, their children reach school 

age. There has been a tendency to liberalize the program and there has 

been a continuing escalation of the level ever since it was enacted 

in 1951.

Mr. Flood. A tendency ?

Mr. Kelly. On the consent calendar.

Mr. Cherry. The total cost has gone up by 15 percent a year, pretty 

straight average. H alf of t hat is based on the increase in the number 

of children and half in increased costs.

PROPOSED CHA NGES IN CU RRENT LAW

Mr. Shriver. Did the recent report give some guidelines on what 

should be done to reform the act ?

Mr. Kelly. It gave a number of things. I t gave a good bit of data.

Mr. Shriver. Does this method that you have come up with correspond with the recommendations ?

Mr. K elly. It does not represent the adoption of the recommendations in the Batelle report, but it represents a series of conclusions after 

reviewing both the data that they came up with and their recommendations. There are areas in which they would move tha t this legislation 

does not propose.

Mr. Cardwell. Are you talking about 1971 ?

Mr. Shriver. No.

Mr. Cardwell. 1970 ?

Mr. Shriver. Right.

Th at is all.

Mr. Flood. Mr. Casey ?

Mr. Casey. No questions.

Mr. F lood. Mrs. Reid?

RE LA TION SH IP BE TW EE N PU BL IC LAW 8 74 AND REVENU E SHAR ING 

PROPOSAL

Mrs. Reid. Tha nk you, Mr. Chairman.

Mr. Kelly, did I understand th at one of the conclusions of this comprehensive study is a possible plan to coordinate a phaseout of impacted aid with the President’s proposal for revenue sharing with 

the States in order to ease the eductional burden on the local taxpayers ?

Mr. Kelly. Not in title I of P.L. 874. In the whole issue of aid to 

education, how large should it be and how should it be allocated and 

distributed, yes, a serious consideration is that if you go to revenue 

sharing, a substantial amount of revenue sharing would go into the 

educational field. This is proven by the amount of State and local tax 

revenues that go into the educational field. These have to be treated 

as educational money, exclusively at the discretion of the State and 

locality, in addition to the Federal categorical programs.

We have not viewed 874 in this way, but we do think this is a strong 

consideration why you shouldn’t move to liberalize Federal impact, by 

including public housing because this is merely trying to find a cate-
36

gorical way at gettin g at aid to education. We have been trying to 

move toward a bloc grant and revenue-sharing method of getting tha t. 

Mrs. Reid. Thank you. That is all.

LAN GUAGE PROPOSAL REGARDING OEO

Mr. Michel. I am concerned with the other language the Secretary 

of Labor indicated a need for with respect to OEO and manpower 

training.

Mr. Keijy . I can only tell you that, since we don't have witnesses 

here, we can get you a statement, but in general the situation is tha t 

the adoption of the earmarking provision establishes minimums and 

maximums in the allocation of the OEO funds so that you have the 

disadvantage of earmarking funds into specific categories, particula rly 

late in the year.

It was made even more complex by being tied to an earlier estimate 

rather than a current estimate. It has the effect of requiring expenditures for certain programs above the level recommended and 

probably above, the level th at can be effectively used in the remainder 

of the year and then, in order to meet those minimums, tha t you have 

to decrease other programs.

A good examplex of this is tha t Follow Through, which HE W 

administers as a delegate agency of OEO, would go up by $14 million 

and H eadstart would go down by $10 million.

The President has proposed tha t in the final adoption—it says “the 

amount available for OEO is not at issue; rather the issue is the effective use of the resources. To impose rigid earmarking covering the full 

fiscal year with less than 5 months remaining will disrupt many OEO 

programs. We would be forced to increase some programs well beyond 

planned spending levels and to make damaging reductions in others.”

There was a piece of language tha t was available and if you would 

like I could insert at this point in the record the language tha t would 

correct that.

Mr. Michel Will you do that?

(The information follows:)

The following item was included in the Pre sidents proposed revisions to the vetoed 1970 bill:

Economic Opportunity P rogram

Sns titu te tlie following for the tex t of the pen ultimate proviso under this head 

in the enacted b ill:

“Provided further, T ha t those provisions of th e Economic Opportunity Amendments of 1907 and 1909 th at set mandato ry fund ing levels shall not be effective 

during the fiscal year ending June 30.1970.”

Mr. Flood. Thank you, gentlemen. I thin k this hearing will prove 

to be quite helpful to us in resolving this very difficult problem.
LIST OF WITNE SS ES

Page

Car dw ell, J. B_________________________________________________________ 1

Ca ve, Mr s. E. K _______________________________________________________ 1

Che rry, G. M___________________________________________________________ 1

Ke en, J. C_____________________________________________________________ 1

Ke lly . J. F _____________________________________________________________ 1

L’fluger, F. F __________________________________________________________ 1

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IN D E X

Page

Lab or-HEW app ropriation bill for 1970, proposed new______________ 1-36

Budgets for 1970 and 1971 compared with vetoed bill____________ 6,17

Compromise on increases, possibility of fu rthe r__________________ 10

Discretionary provision on spending by the Pre sid ent____________ 12

Economic Opportunity Pro gra m_______________________________ 6, 36

Educatio n program s:

Aid to schools in Fed erally impacted area s__________________ 24-36

Futur e costs_________________________________________ 33

Legislation, new___________________________________ 32, 33, 35

Pre sid ent’s proposal___________________________________ 27

Revenue sha ring proposal, relatio nship wi th_____________ 35

Bilingual education_______________________________________ 20

Construction of college faci lities____________________________ 20

Educationally deprived childre n_____________________________ 17

School library resources___________________________________ 19

Stu den t loan program_____________________________________ 18

Supp lementary centers and services, increase for___________ 9,18, 22

Vocational education______________________________________ 15, 21

Health programs_____________________________________________ 14

‘•Black Lung’’ program____________________________________ 24

District of Columbia medical fac ilitie s_______________________ 14

Hospital construction gran ts_______________________________ 13

Mental health increases____________________________________ 8

Increases in 1970 compared to 1971 budg et________________________ 6

Increases proposed for 1971____________________________________ 6, 7

Increase s proposed over 1970 budget_____________________________ 3

Increase s proposed over vetoed bill______________________________ 4

Mandatory requ irem ent to spend fun ds_________________________ 11

Pre sident’s Message (II. Doc. 91-218)______________________________ 2

Background of Presi dent’s proposals________________________ 8

Compromise, possibility of fu rth er__________________________ 10

Pri orities of Pre sident’s recom mendations_______________________ 12

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DEPART MEN TS OF LAB OR AND HEA LTH , EDU CAT ION , AND WELFARE APP ROP RIATIO NS FOR 197 0— Part 9