PUBLIC LAWS 815 AND 874, 81ST CONGRESS (ADMINISTRATION'S PROPOSAL FOR MODIFYING EXISTING LEGISLATION)

TUESDAY, JUNE 9, 1959

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GENERAL EDUCATION OF THE
COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C.

The subcommittee met at 10:15 a.m., pursuant to call, in caucus room, Old House Office Building, Hon. Cleveland M. Bailey (chairman of the subcommittee) presiding.

Present: Representatives Bailey, Thompson, Udall, Brademas, and Frelinghuysen.

Also present: Robert E. McCord, clerk of the subcommittee.

Mr. BAILEY. The committee will be in order.

The Subcommittee on General Education has been convened this morning to hear testimony relating to H.R. 7140, which represents the administration's proposal for modifying existing legislation commonly referred to as Public Laws 815 and 874.

Today, and tomorrow, if it is required, has been set aside for the purpose of hearing the Secretary of Health, Education, and Walfare, the Federal Commissioner of Education, and members of the staff on this proposal.

The Chair would like to announce at this time that due to the fact that the full Committee on Education and Labor will begin hearings in executive session on Thursday on labor legislation, individual school districts and State school officials that are interested in Public Laws 815 and 874 will be given an opportunity to be heard, but it will not be, I am sure, for a matter of 10 days or 2 weeks because the labor legislation is quite controversial.

Interested parties will be advised as to the dates that will be set for hearings for those in opposition to the proposed amendments contained in H.R. 7140.

As our first witness this morning, we will be glad to hear from the Secretary of Health, Education, and Welfare, and I think it would be well if you would introduce the members of your staff, particularly those of them who will be testifying or who will be called on during the course of the testimony for answers to various questions. In fact, I think it will be well to introduce your entire group, Mr. Secretary.

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STATEMENT OF ARTHUR S. FLEMMING, SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED BY ELLIOT L. RICHARDSON, ASSISTANT SECRETARY FOR LEGISLATION; L. G. DERTHICK, COMMISSIONER; RALL I. GRIGSBY, ASSISTANT COMMISSIONER AND DIRECTOR; AL LILLYWHITE, ASSISTANT DIRECTOR, DIVISION OF SCHOOL ASSISTANCE IN FEDERALLY AFFECTED AREAS; AND RALPH C. M. FLYNT, ASSISTANT COMMISSIONER FOR LEGISLATIVE SERVICES, OFFICE OF EDUCATION

Secretary FLEMMING. Mr. Chairman, I am accompanied by Assistant Secretary Richardson and, as you have indicated, by the Commissioner of Education.

I will ask him to introduce the members of his staff who may be participating in the discussion.

Mr. DERTHICK. Mr. Chairman, I introduce Dr. Rall Grigsby, who is Assistant Commissioner for School Assistance in the federally affected division, and Mr. Al Lillywhite, who is his assistant. We have Dr. Flynt, Assistant Commissioner for Legislative Services in the Office of Education.

Mr. BAILEY. Doctor, how about coming up to this chair here on the corner? Pardon me for interrupting.

Mr. DERTHICK. Mr. Harold, of school assistance in federally affected areas; is he here?

Mr. BAILEY. Now, Mr. Secretary, you may proceed with your testimony.

Secretary FLEMMING. Mr. Chairman and members of the committee, I appreciate very much this opportunity to testify on H.R. 7140, which, as you know, was introduced by Congressman Kearns and which, as you have indicated, embodies the administration's proposals for amendment of Public Laws 815 and 874.

I believe that the Federal Government should provide assistance to those school districts whose school revenues are impaired by reason of the tax-exempt status of Federal property.

I also believe that this assistance on the part of the Federal Government should be reasonably related to the school revenues actually lost by school districts by reason of the tax-exempt status of Federal property.

On the other hand, any program that provides for Federal assistance to school districts that are not losing school revenues by reason of the tax-exempt status of Federal property puts the Federal Government in a position of providing these school districts unfairly with preferential treatment. Likewise, any program that provides school districts with assistance that is in excess of the school revenues they actually lose by reason of the tax-exempt status of Federal property, also puts the Federal Government in a position of providing these school districts unfairly with preferential treatment.

There is no question in my mind but that the time has come for the Federal Government to give assistance to public elementary and secondary schools. I have expressed my own convictions as to what the nature of that assistance should be in supporting the administration's roposals for assisting school districts in the construction of class

rooms. Under this proposal all school districts would be given equal consideration for Federal aid.

I am unalterably opposed, however, to the Federal Government's singling out certain school districts for assistance on the ground that the operations of the Federal Government result in a loss of revenue when as a matter of fact they are not losing revenue because of the operations of the Federal Government. I am also unalterably opposed to giving certain school districts Federal aid which exceeds the losses they incur by reason of Federal operations within their districts.

When we give Federal aid to education in order to cover certain specific situations, let us restrict it strictly to those situations. Then let us pass the Frelinghuysen bill and thus put into effect a Federal-aid program which establishes standards that will result in all school districts being given fair and equal consideration.

It is in the light of these basic, fundamental considerations that we have proposed amendments to Public Laws 874 and 815.

In order to make clear our position on H.R. 7140, I would like to summarize the major situations under which assistance is now provided, the changes we are proposing, and our reasons for these proposals.

First is the situation where parents both live on and work on tax-exempt Federal property.

Under these circumstances, there is no question in my mind but that the school districts that assume responsibility for educating the children should, as provided in Public Law 874, receive for each child an amount equal to the per pupil expenditures which are financed out of local tax revenue.

Likewise, there is no question in my mind but that when additional classrooms need to be constructed for the additional children whose parents work and live on Federal property, the school districts in question should, as provided in Public Law 815, receive an amount equal to the number of such additional children times 95 percent of the average per pupil cost of school construction in the State.

H.R. 7140 would make no changes in existing laws with respect to this type of situation.

The second situation that I would like to discuss is where parents work on tax-exempt Federal property but live off the property.

If the parents live in the school district in which the Federal property is located, it is clear that that school district is entitled to assistance.

At the present time, however, under the provisions of Public Law 874, these school districts, as far as their current operating budgets are concerned, are being reimbursed for half the normal per pupil expenditures that are derived from local tax sources. Also, under the provisions of Public Law 815, if they qualify for Federal construction funds because of increased enrollment of students whose mothers or fathers are employed on Federal property, they receive half the construction costs of classrooms needed to accommodate the additional students. The payments, as you know, are based on average school construction costs prevailing in each State.

The 50-percent rate in these present laws is based on the broad assumption that half the local revenue for public school purposes is derived from taxes on residential property, and half from taxes on

commercial and industrial property. Federal property which constitutes a place of employment is figured for the purposes of these laws as commercial or industrial property from which a school district derives no tax benefit.

A report on property tax assessments published in December 1957 by the Bureau of the Census shows that for the country as a whole commercial and industrial property accounts for only 27.7 percent of the locally assessed real estate base. For no State does the locally assessed evaluation of all commercial and industrial property reach even 40 percent of the total local real estate assessment, the highest for any State being 37.1 percent and the lowest 9.3 percent.

It should be pointed out, however, that these percentages do not include property within local school districts that is assessed by State governments. Such property has not been included, because the only available figures on State assessments include no breakdown of commercial and industrial property, on the one hand, and residential property, on the other. Even if we assume, however, that all Stateassessed property is commercial and industrial, the amount of commercial and industrial property assessed by both local and State jurisdictions would be only 35 percent on a national average basis of the real property included in the local property tax base.

Also, the percentages do not include locally assessed personal property that may be used for commercial or industrial purposes. The reason, again, is that available data include no breakdown as between commercial-industrial and residential in the personal property field. Any attempt to attribute a percentage of locally assessed personal property to the commercial-industrial component of the local tax base would be pure guesswork.

Finally, we have not taken into consideration various other categories of the local property tax base, such as farm properties and vacant acreage. We have not done so, because there is no dependable basis for classifying these properties as commercial-industrial or as residential.

In the light of all the data available, it is clear that there is no sound basis for the assumption that has been indulged in up to now of a 50-50 split, on a national average basis, in local tax revenues as between residential property and commercial-industrial property.

We have proposed that the Federal payment toward the education of children whose mothers or fathers work on Federal property located in the district in which the children go to school be at a level of 40 percent of the local costs. We believe we have made a proposal that is reasonably consistent with the factual situation. We know that the 50-50 split provided for under present law was arrived at without the benefit of data comparable to those now available. Our proposal rests on a considered appraisal of the extensive information on sources of local tax revenue that has been provided through the Bureau of the Census study.

Now I would like to turn to the situation where the parents work on tax-exempt Federal property but live in a school district other than the district in which the property is located. Under the exist ing laws, these school districts receive the same amount of assistance as do the districts in which the Federal property is located. This, it ms to me, presents us with a completely indefensible situation.