Mr. Chairman and Members of the Subcommittee:

Thank you for providing me this time to appear before you.

I am appearing today on behalf of the National Governors' Association and the NGA Committee on Executive Management and Fiscal Affairs on which I serve. I am Co-Chairman, with Governor Lamar Alexander of Tennessee, of the Committee's Task Force on Revenue Sharing.

These are unsettling times for the country both at home and abroad.

We elected officials must provide the leadership and intellectual guidance necessary to move our country forward. While I believe the President and the Congress are providing that leadership, I also must emphasize the importance of a significant state role in the process of federal budget reduction. We who are administering, implementing and partly funding federal programs have an interest and a responsibility in the substance as well as the effective delivery of those programs.

It is in this regard that I wrote to the President last week. I would like to share that letter with you and have attached it to my testimony to be included in the record of these hearings.

Obviously Mr. Chairman, an important facet of my recommendations

is the program we are discussing today, General Revenue Sharing. It is uniquely suited to meet the demands that will be placed on the intergovernmental system in the 1980's. I believe the following points support this conclusion:

Revenue sharing permits state and local governments to allocate
federal dollars to their highest priorities at a time when all
public funds must be spent in the most effective way possible.

Revenue sharing is a productive method for using federal funds
at a time when increased productivity in the public and private
sectors is a major national goal.

Revenue sharing is controllable at a time when a consensus has
been built for slowed growth in federal spending.

Revenue sharing promotes cooperation among the three levels of
government at a time when shifting roles will place new strains
on intergovernmental relations.

REVENUE SHARING FUNDS SUPPORT HIGH PRIORITY PROGRAMS

General Revenue Sharing has an important role in an intergovernmental

grant system shaped by increased controversy over expenditure of federal

funds because it permits state and local governments to use the money for high priorities.

In Maryland, the disposition of the state share of revenue sharing is provided in the state budget which is voted upon by the 188 elected representatives of the 23 counties and Baltimore City.

The range of purposes for which states currently use revenue sharing funds demonstrates that the program is now accommodating the diverse priority needs of different sections of the nation. Over half of the money which states receive are earmarked for education and social service programs. Thirteen states spend all of their funds for educational programs; these state are Florida, Illinois, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Virginia and Wisconsin. Eight states Alaska, California, Connecticut, Colorado, Idaho, Michigan, Minnesota and New Mexico

of their funds for social service programs.

State funds are also used to:

- spend all

finance construction projects. These provide immediate job
opportunities and lasting benefits to state citizens and help
make public facilities accessible for handicapped persons.
support pension benefits. This is an emerging area of public
sector concern in light of the House Pension Task Force finding
that public pension plans face a $150-$175 billion unfunded
liability. Revenue sharing supports part of an effort in many
states to put their pension systems on an actuarially sound basis,
and many of the workers covered by pension plans aided with state
revenue sharing dollars are local government employees.
provide tax rebates. Revenue sharing is being used directly to
alleviate property taxes in four states; rebates are targeted to
homeowners, farmers, renters, and handicapped persons.

For 1981, Maryland has budgeted General Revenue Sharing in the Loan Fund of the State. If the program is reauthorized, these monies will be used in lieu of issuing General Obligation bonds. This pay-as-you-go approach will result in interest savings of more than $22 million to the taxpayers over a 15 year period.

On the national level, because of the substantial portion of the state share passed through to local units of government, ending state revenue sharing payments will have the effect of adding $1 billion to the property tax burden faced by taxpayers. The reduction proposed by the House Budget Committee should not be taken lightly by House members, and I hope the members of this Subcommittee will act to preserve state participation in the revenue sharing program. REVENUE SHARING IS A PRODUCTIVE GRANT-IN-AID

According to the National Productivity Council team that examined the federal impact of the grants system on state and local productivity "the impact is primarily negative because of the delays and additional costs caused by the myriad of regulations and excessive 'red tape'." General revenue sharing at $2.3 billion for the states has administrative requirements costing the federal government an estimated $437,000 of the program's budget each year. Or put another way, for every dollar spent on administration, $5,263 are put to work. It is a model for all of us who seek increased government productivity. REVENUE SHARING IS CONTROLLABLE

Revenue sharing is a highly controllable federal aid program. Through Administration and Congressional control it has grown at an annual rate of only 3 percent since the program began. This growth rate is far short of the rate of growth of federal outlays, which have increased by 12.5 percent annually in the same period.