Dr. Jenkins said the county was providing school facilities for 6,000 children in federally impacted areas. Federal installations occupy about 17,000 acres of land in Anne Arundel County, valued, together with improvements, at about $300 million. Yet the county derives no tax revenues from these installations or the houses thereon.

The $500,000 which the Government contributed toward education in these areas last year was small compared with the wealth removed from the county's taxbooks. If this sum is reduced, the county will be hard put to it to provide federally connected children with high-standard educational facilities.

We are not blind believers in Federal aid or handouts. Indeed, there is no such thing as a Federal handout, because you pay for it in one way or anotherthrough direct taxes, hidden taxes, or inflation.

But, in the case of Federal aid to education in federally impacted areas, we think it only fair for the Government to make a substantial contribution, since it has removed so much land and housing from the local taxbooks.

Looking at the figures on school enrollment, it would seem the Government should increase its aid instead of cutting it back. We hope our representatives in Congress will heed Governor Tawes and Dr. Jenkins and fight strenuously against the proposed reduction.

Mr. LANKFORD. I do not think there is any need for me to restate my position. I am sure you and the gentleman from New Jersey are well aware of how I stand on this matter.

I would like to address my remarks very briefly to what Mr. Frelinghuysen has said about industry.

The Federal Government is the industry in southern Maryland. I am not speaking of any specific county, because my entire district is an impacted area. The Federal Government is the industry in southern Maryland. We get no revenue from it as you would from an ordinary commercial plant, you see. That is what makes the difference. You may get off into whether there should be a payment in lieu of taxes, or whatever you want to call it. I do not really care what you call it, but the school situation is brought on by the industry of southern Maryland, which is the Federal Government.

I feel that they, just as any other industry, have a duty to support the educational facilities of the area.

Mr. FRELINGHUYSEN. The only trouble with that, Mr. Lankford, if I might cut in, is this: If the Federal Government is the industry, we could abandon the rationale of 815 and 874 altogether, that there must be an impact in order to qualify for the Federal funds. If you are arguing that there should be something in lieu of taxes, we might come out with quite a different amount. It might be considerably more for your congressional district than we presently are able to give you.

I am not saying there is not an obligation, but I am still saying it is necessary for us to define just what that obligation is in order to be equitable.

Mr. LANKFORD. I think we are playing around with this word "impact." I do not think the impact has to be sudden. The impact could be called pressure rather than impact, which is there, brought on by the Federal Government. The Federal Government in many instances will stymie industrial growth because they take the choice land, as you and I are both well aware. This will prevent growth.

Take Prince Georges County. As Mr. Mathias or Dr. Schmidt said, some 50,000 acres of land in Prince Georges County have been taken by the Federal Government.

Mr. FRELINGHUYSEN. I wish we had more time to discuss this. I can understand the argument if there is valuable land which has been preempted by the Federal Government, it reduces the tax base and

perhaps creates an obligation apart from whether there are any childred connected with the ownership of land at all.

What worries me is, if there were no growth that could be attributed to the Federal Government but if there were a substantial number of Federal employees living in an area whose children go to public schools, why that in itself creates an obligation on the part of the Federal Government. If Federal employees had some kind of disquilification, if they did not pay as many taxes locally as people who are employed by industry, I could understand it. But this thing of keeping industry out because of the Federal Government is not really correct. Mr. LANKFORD. As the gentlemen know, the taxes on residences do not pay the way for school children. You know that as well as I do.

Mr. FRELINGHUYSEN. My State of New Jersey has no sales or income tax.

Mr. LANKFORD. You have a great deal of industry.

Mr. FRELINGHUYSEN. We depend pretty much on property tax.
Mr. LANKFORD. You have industry.

Mr. FRELINGHUYSEN. Plus industry.

Mr. LANKFORD. I do not have children living in factories.

Mr. FRELINGHUYSEN. Again, I do not think you can fairly say that the Federal Government owes us something because we are unable to attract industry.

Mr. LANKFORD. If the Federal Government is a factor in keeping industry away, it does.

Mr. FRELINGHUYSEN. I do not see how you can fairly say, except in unusual cases, that growth brought about by the Federal Government's activities is keeping industry away. High tax rates, of course, go a long

Mr. LANKFORD. Do you not call the Federal Government industry, though? It is an industry. It is the only industry we have in some of our rural counties.

Mr. FRELINGHUYSEN. Again, this is a problem we cannot explore at length. I wish we could.

Mr. BAILEY. The Chair would suggest that in many instances they preempt the best industrial sites for their Government facilities.

Mr. LANKFORD. A perfect example of it is in Charles County, on the river, where they have Indianhead. We are very happy to have Indianhead.

Mr. FRELINGHUYSEN. That might create a very different kind of obligation if we were taking the prime taxable land. We could argue that that created an obligation in itself, apart from what children were involved in the acquisition or retention of land. That would be a different problem than we are wrestling with today.

Mr. LANKFORD. This could go on for a long time.

Mr. FRELINGHUYSEN. Of course.

Mr. LANKFORD. I just want to say that it is my sincere and deep feeling that the Federal Government has an obligation because of the children who are there. They are there because of the Federal Government.

I would also like to say that I apologize for not being here when the hearing started. I had an appointment with our Governor. As I left, I told him where I was coming, and he asked me please to reiterate his interest in this matter. His feelings and opinions are very much the same.

Also, I should like to say that Mr. King, the superintendent of schools in St. Marys County, is here, more to lend moral support than anything else.

I thank you, gentlemen.

Mr. BAILEY. Thank you, Congressman.

Have we any insertions for the record?

Mr. McCORD. Mr. Chairman, we have a statement submitted by Mr. H. William Hammond, of Stratford, Conn.

Mr. BAILEY. Is Mr. Hammond present?

Mr. McCORD. Yes, he is.

Mr. BAILEY. Will you come up briefly.

Mr. HAMMOND. I request that the statement be included as part of the record.

Mr. BAILEY. We shall do that, and regret very much the time limitation prevents our hearing your statement.

Mr. HAMMOND. I appreciate your courtesy.

(Mr. Hammond's prepared statement follows:)

STATEMENT BY H. WILLIAM HAMMOND, STRATFORD, CONN., PUBLIC SCHOOLS

I appreciate this opportunity to testify on H.R. 7140 which contains certain administration proposals for the amendment of Public Laws 815 and 874, 81st Congress.

Last year the Department of Health, Education, and Welfare sponsored a bill designed to drastically reduce the programs provided for in Public Laws 815 and 874. The blueprint was quite different but its goal was the same as is that of H.R. 7140; the ultimate destruction of a sound program of financing educational services for children whose presence in a school district is caused by Federal activity.

After extensive hearings in both the Senate and the House of Representatives the Congress renewed both programs essentially intact until 1961. That this renewal was passed by an overwhelming majority brought confidence to many school districts. After the long uncertainty of the winter and spring of 1958, these districts felt that here, at last, was congressional assurance that they could count on the continuance of the programs until the end of the 1960-61 fiscal year. It seems most unfortunate to us that we should again be thrown into uncertainty. Time and again, the Congress has indicated that it recognizes its responsibility to these school districts and has adequately met it.

Comment follows on certain specific provisions of the bill and what it will mean to the State of Connecticut.

1. REDUCTION OF RATES OF PAYMENT ON ACCOUNT OF CHILDREN OF PARENTS EMPLOYED FEDERAL PROPERTY

Under Public Law 874 as it stands, payments on account of children whose parents are employed on Federal property but live on private property are based on 50 percent of the per capita cost of current school operations from local sources in the respective States or comparable school districts within them for the second fiscal year previous. Under Public Law 815 as it stands, payments toward construction projects on account of increases in children whose parents are employed on Federal property are based on 50 percent of the average per pupil cost of constructing minimum school facilities in the respective States for the base year.

Under H.R. 7140 the figure would be reduced in each case to 25 percent, except for the school districts in which the properties are actually located, where it would be 40 percent. This major proposed change is based on recent Census Bureau statistics indicating that industrial and commercial property accounts for somewhat less than 50 percent of the local real estate tax base throughout the country, as against a corresponding major portion for residential property. We are not sure of the validity of the immediate conclusion drawn from these statistics; that existing provisions for payments of 50 percent of the base figure on pupils connected by either residence or parents' employment alone on Federal property is wrong, especially since there were several qualifications to the statis

tics themselves acknowledged in the Department statements. At any rate, much more analysis is needed, and could be made before 1961.

The official Department statements to the subcommittee appear to assume that Public Laws 815 and 874 were based entirely on a lieu-of-tax concept in terms of loss of revenue which the local municipality could secure from taxation if a given property were not federally owned. Hence, a point given great weight in the Secretary's statement to the effect that school districts which provide education for children of parents employed on Federal property outside their borders suffer no direct loss in revenue, and have a weak case for financial assistance under these laws, the 25 percent being proposed held forth as generous. Although a leading watchword at the time these laws were passed was "The Government is trying to be a good taxpayer." A reading of section I of Declaration of Policy, Public Law 874, seems to confirm a point which we would make in rebuttal, that the laws were not intended merely to replace lost revenue (mentioned in that section as only one of four situations calling for Federal assistance) but to assume a responsibility for offsetting the lack of normal sources of revenue (taxes from residences and places of employment) to meet costs of schooling caused by Federal activity.

It seems to us significant in this whole issue that no payments are made under either law unless the federally connected children represent a significant proportion of all children (874) or of the increases in membership (815), as defined in the percentages set up in the laws.

Tables attached show what the reduction in Public Law 874 payments on account of children of parents employed on Federal property would have meant to Connecticut if it had been in effect during the past year. Because of a point made in the next section of this statement, the threatened reductions may be somewhat more for many of the towns.

2. RESTRICTION OF THE DEFINITION OF FEDERAL PROPERTY

Another significant change proposed in H.R. 7140 is the removal from the definition of Federal property under Public Laws 874 and 815 any such property leased to private owners, whose leasehold is subject to taxation on its full value in the State where it is located. A 1953 amendment to the original laws permitted such property to be considered Federal property for the purposes of the acts, but on the grant for the municipality in which the property was located the taxpayment would be appropriately credited. The neighboring municipalities, however, receive no benefit whatsoever from the taxes paid, and are just as much affected by the impact of federally connected children as though no taxes were paid to the municipality in which the property is located. The proposed reversion to the original restriction on the definition of Federal property may be very significant to many Connecticut towns, specifically those near enough to the following plants to be affected by them: Electric Boat Division, General Dynamics Corp., Groton; Canel, Middletown; naval industrial reserve aircraft plants in Southington and Bloomfield; and Air Force Plant No. 43 (Avco), Stratford. I believe that the bill introduced in the last General Assembly authorizing Connecticut towns to tax the leaseholds on these federally owned plants fell by the wayside in the closing hours of the 1959 session. However, the table of expected reductions in 874 payments appended to the Commissioner of Education's statement to the subcommittee indicated for Connecticut towns a total drop from an approximate current total of $1,438,471 to $566,758, or 60.6 percent; accordingly, more than the formula change from 50 percent to 40 and 25 percent must have been figured in. The logical inference is that the further factor was the proposed elimination from eligibility of children of employees at the plants named above. If the Connecticut bill had passed, and H.R. 7140 were to become law, no children of parents employed at the listed plants would count in any town; only for those towns in which they are located would this be compensated for by taxpayments.

Even though the Connecticut bill did not pass, would these children be ineligible anyway, if H.R. 7140 should become law, because under Supreme Court decisions private leaseholds on Federal property may be taxed? The Commissioner's statement to the subcommittee referred to the elimination from the definition of "property outleased by the Federal Government which is subject to taxation on its full value by a State or local instrumentality thereof." The answer is important in the consideration of this bill.

3. ELIMINATION OF CATEGORIES RELATED TO FEDERAL CONTRACTS

Lastly, there is the proposal in H.R. 7140 to eliminate grants based on "sudden and substantial increases" in children due to Federal activity in an area. For us in Connecticut these have been most important under Public Law 815. A few towns have been able to qualify for school construction grants by showing increases over 2-year periods of children whose parents are employed at plants expanding because of Federal contracts, equal to 10 percent of the town's entire membership in the base year, and by demonstrating further to the satisfaction of the U.S. Office of Education that the construction of the needed facilities would constitute an undue burden on taxing and borrowing capacity. Obviously, it has not been easy to qualify under these criteria, and for the towns which have secured the grants they have been a much needed addition to their resources for meeting the problems of housing rapidly increasing numbers of children. The purpose of grants in this category has been to keep local municipalities from getting swamped by their increases of children before their lagging increases in tax resources catch up. It is said in support of eliminating this basis for Federal grants that the federally caused need has gone by, and that increases now are only incident to the general trend toward suburbanization felt by all. However, with the criteria for qualifying so exacting, why is it not best to leave the provision in the laws for those communities whose circumstances they still fit, with the Federal Government continuing to recognize its part in creating the problem wherever this is the case?

The enactment of Public Laws 874 and 815 in 1950 was a great forward step in the assumption of Federal responsibility to help in the solution of local problems created or aggravated by the Federal Government. To abandon any of the programs established under them seems to us a backward step, at least in the absence of any other program of Federal assistance for public education.

EFFECT OF PROVISIONS OF H.R. 7140 ON PAYMENTS TO CONNECTICUT TOWNS UNDER PUBLIC LAW 874

The attached table is an attempt to show how payments to Connecticut towns would have been affected during 1958-59 if H.R. 7140 had been in effect. Working from available data, we have been as accurate as possible.

If the bill becomes law, you can see about how it will alter your grant in 1959-60. The results we have shown portray the effect of H.R. 7140 only. They do not show losses due to decreases in enrollment or, in the case of a few towns, the loss of PHA housing projects.

Column 1 shows for each town listed its 1958-59 tentative entitlement as certified by the U.S. Office of Education or, if such certificate could not be found, an estimate of its entitlement.

Column 2 shows the approximate amount by which, according to our computations, this entitlement would have been reduced if payment on the ADA of children whose parents are employed on Federal property had been cut from 50 to 40 percent of the contribution rate in the cases of those towns in which such properties are located, and from 50 to 25 percent of the rate in the cases of towns in which they are not located-i.e., according to the percentage reductions set up in the new bill.

Column 3 shows the further approximate amount by which, according to our computations, the entitlement would have been reduced if the ADA of children whose parents are employed on Federal industrial properties leased to private corporations for operation were excluded from the count altogether. In many cases this would eliminate the remainder of the grant because the number of children otherwise connected would be less than 3 percent of all children. (Properties involved are Electric Boat, Groton, partially; Canel, Middletown; NIRA, Southington and Bloomfield; AVCO, Stratford.)

We do not know that the Department's estimates of reductions excluded children related by their parents' employment to these properties, but we do know that the Department's estimate of total reductions in the cost of the program for 1959-60 in Connecticut was from an original figure of $1,438,471 to $566,758, or 60.6 percent, which mathematically must have involved much more than the effect of the proposed change in the applicable percentage of the contribution rate for children of parents employed on Federal property. The only apparent explanation is that the Department's estimates counted on the elimination of the above-mentioned properties from eligibility, under the provision in H.R.