varieties of impact. There is less of an impact if the Federal activity is outside of the school district and so on.

You don't have any objection to our examining the problem, even though in your particular case there might be a serious financial problem arising out of any change in the formula.

Mr. SIKES. Of course you should examine the problem. That is part of your responsibility and I want you to be certain that I have no objection to this matter being fully explored. I think that is a proper thing to do. In the case of the Eglin Air Force Base in particular, there has been a change in assignment so that a great many personnel are being brought into the area who hold higher rank or higher paying jobs and most of them have larger families. They are replacing personnel of lower rank or lower paying jobs. The shift to missile activity is what is causing that. They are bringing in bigger families, so this actual impaction is increasing in the Eglin area particularly. I would like to point out that my State is making efforts to meet this problem.

We have depended in part upon tax revenues from real estate. The Federal Government owns a very substantial part of the real estate in these three counties. About half of the real estate in my home county is owned by the Federal Government.

Mr. FRELINGHUYSEN. Therefore, to a large extent that is your problem?

Mr. SIKES. Congress has explored several times the possibility of some payment by the Federal Government in lieu of taxes to areas where the Federal Government owns most of the property, but nothing has ever been done about the problem to work it out. My State doesn't depend entirely on tax revenues from real estate. That is one source of revenue, but it depends very substantially on other payments and it has bolstered from time to time its payments in an effort to keep up with the problems and responsibilities of providing an adequate educational system.

We are growing so very fast down there. We have doubled the population in the last 12 or 15 years in the State of Florida and a great many people come into the State who don't contribute as much as those who are residents. Many of the new people do not contribute and there are a lot of people who come in for a few months as tourists and they are not counted as residents of course; they add to our educational problem. However, just the normal rate of growth of the populace expanded our educational problem tremendously.

The taxes haven't gone up as fast as the growth in population has, so that we are just having a difficult time providing enough facilities to take care of the tremendous influx of schoolchildren.

Mr. FRELINGHUYSEN. Perhaps we should consider your last commentary a pleading that we have a Federal responsibility because of the total growth in your State.

Mr. SIKES. We are very pleased to have the growth. We will work out our problems as best we can, but in these impacted areas we simply couldn't provide the kind of schooling that we think the children of military or civil service personnel should have if we don't have money.

Mr. FRELINGHUYSEN. Thank you very much.

Mr. BAILEY. Any questions, Mr. Lafore?

LAFORE. No questions.

BAILEY. Thank you, Congressman.

SIKES. Thank you, Mr. Chairman.

ant to say again that this committee has rendered a very valuable e and we are grateful to you for the work you are doing.

BAILEY. I am sure I can express the appreciation of the come for your comments and commendations. Thank you very

- SIKES. Thank you.

BAILEY. We will next hear from another colleague, Mr. Wilson lifornia.

EMENT OF HON. ROBERT C. WILSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

. WILSON. Mr. Chairman and members of the committee, I have ness with me who has come 3,000 miles to testify as to the probof our school district in San Diego County. I represent the part of San Diego County.

e city of San Diego is the fastest growing major city in the enNation. Our population is increasing at a rate of 40,000 people ear, which makes a need for about 500 new classrooms each year. ave 14 naval and Marine Corps installations in my district, 4 airplants, and the Atlas missile plant. Fifty-two percent of the y is owned by the Federal Government and I can say that over ears Public Laws 815 and 874 have been in existence it has been plete lifesaver for our school system. We would have been in utaos if it had not been for Public Laws 815 and 874.

. BAILEY. May the Chair say to the gentleman from California one of the points at which we held hearings back about 10 years on this legislation was at San Diego. I was familiar with the ion then and I can conceive that it has changed materially since from what you say.

. WILSON. Based on entitlement alone, not the dollar figure, but pased on entitlement, we are entitled now to more funds under ic Laws 815 and 874 than individual States. There are only five s that actually get more entitlement than our one county alone. ere are 44 school districts in San Diego County, so the proposed ge in the law that would require residence in the school district d again create a real chaotic condition in San Diego County.

. BAILEY. Maybe you should have given some thought to creating ntywide board of education.

. WILSON. Some thought has been given to it, but there are 44 ely individualistic school districts, I can assure you.

ngressman Frelinghuysen mentioned the question of impact. Our ct is not in the nature of a sudden blow. It is in the nature of a nuing blow, rather than a tidal wave. It is a flood of new people ng into the area that are just actually creating such a problem we would be unable to care for it if it had not been for the aid r Public Laws 815 and 874.

e largest district in the county is the San Diego City School Sysand I have with me the superintendent of San Diego City, Ì1 h Daillard, who is very knowledgeable on the problems of o

local area, and I would like to have him testify and to answer any questions that might be in the minds of you and the members of the committee, Mr. Chairman.

Mr. BAILEY. Doctor, you may proceed with your presentation.

STATEMENT OF RALPH DAILLARD, SUPERINTENDENT, SAN DIEGO CITY SCHOOLS, SAN DIEGO, CALIF.

Mr. DAILLARD. Thank you.

I will skip the first couple of pages here, gentlemen. It sets forth some of the facts of rapidity of growth, the number of installations that are within or immediately contiguous to our school district, and of the extent of the defense industries there located. I will try to go through without reading all of it, but it is worth noting that there is very little eligibility established by these industries for funds under Public Law 874.

The astronautics plant, which produces the Atlas, the major U.S. weapon for international defense, returns a relatively small amount of taxes because all of the tools and tooling, inventory, work in process, and final product are property of the Federal Government, and, hence, are exempt from local property taxes. Because the land and buildings are owned by a private corporation, children of the employees are not eligible under Public Law 874.

This same situation is also true of other plants in which a substantial portion of the total value of the operation is tax exempt because the major product of the plant is defense connected.

We in California have been denied the right of taxing the possessory interest on this unsecured Federal property leased to a private firm. The San Diego school district alone is now in process of refunding to corporations engaged in defense work an amount in excess of $1 million for taxes collected on this possessory interest.

Mr. BAILEY. They come back and require the district to pay up this money?

Mr. DAILLARD. Yes. It was assessed. The taxes came back and we are now repaying them. Our negotiations were not with the members of those corporations. They were with the general counsel of the Department of Defense.

In other words, this refund is being made to the U.S. Government, not to the private properties included.

Mr. LILLYWHITE. Mr. Chairman, could I ask a question there?

Mr. BAILEY. You would be better off with an explanation rather than ask a question.

Mr. LILLYWHITE. It was my understanding that California law permitted a leasehold interest tax on the real property.

Mr. DAILLARD. On the real property, yes.

Mr. LILLYWHITE. That was my point.

This is not a refunding of a leasehold interest tax paid on the real property, but on the inventory and the goods in process; is that correct?

Mr. DAILLARD. That is right, which is the major value of those plants. The plants themselves and the land represent but a small value. When the "birds" that are flying down from Cape Canaveral take about $2 million a copy I understand. The inventory of the tools and tooling, the finished product, constitute a great deal more

the cost of the land on which the astronautics plant was built, h the city presented at a very low figure, or the building itself. r. LAFORE. This machinery and inventory tax is levied by the e, or by the schol district, or by the county, or what?

r. DAILLARD. It was levied by the county, levied by the school ict, on the possessory interest in that property.

r. LAFORE. Is it a common tax in California?

r. DAILLARD. It has been declared illegal.

r. LAFORE. Was it a common tax?

r. DAILLARD. It was common, yes.

r. LAFORE. Throughout many political subdivisions?

r. DAILLARD. That is right, and something in the neighborhood 5 million, between $4 and $5 million, now is being refunded in the Diego County area. Our share of it was about $14 million Our one jurisdiction.

r. LAFORE. You were declared illegal on Government inventory. still illegal on private inventory?

r. DAILLARD. On private inventory, yes, on personal not.

r. LILLYWHITE. I thought the reason for that was the Government s ownership as soon as they order it rather than after it is Huced.

r. DAILLARD. It covers property inventory tools and tooling. Most he tools and tooling being highly specialized are the property of eral agencies leased to the contractor.

r. LILLYWHITE. My understanding was a little bit different than leasehold interest tax.

r. LAFORE. Oh, it is.

r. DAILLARD. I fail to recognize the difference. There may be a erence, but I do not think there is a distinction, Mr. Lillywhite, use we are limited to a property tax and the tax base consists where a man lives, what he owns in personal property, where he ks, and what he works on. You analyze any tax base and you find those four elements.

ou start eliminating any of those and if you are to maintain nal services, you are merely piling more taxes back on the other. he largest element in these highly specialized plants are the things he works with and on, not where he works, so that we are getting smaller part of a normal property tax base. That is not an issue is particular thing.

r. LILLYWHITE. That was my only point. I am not questioning eriousness. It just is not dealt with in the amendments.

r. DAILLARD. What you are dealing with is bad enough.

r. Flemming's proposals would so revise the law to heighten furthis problem and to make ineligible any property on which any unt of Federal taxes could theoretically be collected regardless he burden that property may be creating on the school districts

e area.

he interpretation of that section is very difficult. I have gone over ith our lawyers and they are inclined to think that if there is a retical tax, we are out under California law, so this would elimiproperties that are there.

he significance of the defense-connected industries in San Diego be seen by the fact that during July of this year in our last repor

56,200 people, or 73 percent of all civilian employees working in manufacturing in San Diego were working in aircraft and missile plants which are primarily defense connected. Consistently over recent years about one-half of the labor force of the city and county of San Diego has been employed directly on military bases or in defense industries.

San Diego has become a significant and important scientific research

center.

A close relationship exists between San Diego's growth in population and its development as a military and defense industry center. Because the staffing of these organizations required young men and women of working age, the influx of population to San Diego has been composed of young people. At the present time approximately 80 percent of the population of the city is under 39 years of age and only 20 percent is 40 or older. This has meant rapidly increasing birth rates and abnormally rapid increases in school enrollments.

The growth in school enrollment, therefore, has even been more rapid than has the growth in city population. Total school enrollment in the San Diego city district has increased from 60,000 in 1950-51, the first year these laws were applicable, to over 110,000 during this year just closed. Our average daily attendance during this period has increased from just over 50,000 in 1950-51 to approximately 100,000 in the year just closed.

It may interest you to know that more than one-half of the schoolrooms now in use in the city of San Diego have been constructed since

1950.

The relationship between school enrollment and Federal activity is well shown by the fact that 24 to 43 percent of the eligible ADA, exclusive of junior college and adult classes, of this school district has been federally connected under the definitions of Public Laws 874 and 815, applying the definitions living on or working on.

Last year 24,000 of the 91,500 eligible children in average daily attendance were federally connected as defined by law. This is 10 percent of the total Federal connection in the State of California. It is more than 10 percent.

There were 444 districts of, I believe, Federal impact shown last year under the law, with 219,000 federally connected children. More than 10 percent of those are in the city of San Diego; incidentally, those 444 districts have more than half of the total school enrollment of the State of California.

In brief, gentlemen, I am speaking for a city school district which has been subject of abnormal growth and in which the major and primary stimulus of growth has been the result of actions taken by the Federal Government in the interest of protection of all of the people of the Nation. A portion of the excess costs which our school district must bear are properly assessed to all of the people of the Nation by the laws now under review. We believe this to be proper, necessary, and equitable, and that the proposed amendments would have the effect of transferring a portion of a just national burden from Federal revenue sources to the citizens of our city and those of other cities and communities with similar conditions.

The test of the adequacy or desirability of any law is the degree to which the purposes of the law have been achieved. The purposes of