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"(1) STATE GOVERNMENT SHARE.-The State

government shall be entitled to receive

"(A) one-third of the amount allocated to that State for each entitlement period ending

before October 1, 1979, and

"(B) no part of such amount for any entitlement period beginning after September 30, 1979. "(2) LOCAL GOVERNMENT SHARE.-Two-thirds

of the amount allocated to a State for an entitlement period shall be allocated, as provided in section 108,

among the units of local government of that State.".

(b)(1) Subsection (c) of section 105 of such Act (31 13 U.S.C. 1224; relating to authorization of appropriations for 14 entitlements) is amended

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(1) by striking out "$6,650,000,000” in paragraph (1) and inserting in lieu thereof "$4,428,900,000",

(2) by striking out "$6,850,000,000" in such and inserting in lieu thereof

paragraph

"$4,566,662,100",

(3) by striking out "$4,780,000" in paragraph (2)

and inserting in lieu thereof "$3,186,663", and

(4) by striking out "$4,923,759" in such paragraph and inserting in lieu thereof "$3,282,473".

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1 SEC. 2. The amendments made by section 1 of this Act

2 apply with respect to entitlement periods beginning after 3 September 30, 1979.

Mr. FOUNTAIN. Mr. Horton?

Mr. HORTON. Thank you, Mr. Chairman.

First of all: I want to congratulate and thank you, Mr. Chairman, for having these hearings and for getting underway the efforts to renew revenue sharing.

Second: I want to indicate my strong support for the bill that was referred to by Mr. Wydler which I cosponsored and which provides for an extension of the revenue sharing program on the same basis to include the same participants and to include the same formula.

First of all: I think it is important to establish that this program has been in existence for a number of years. It was first devised and handled by the Ways and Means Committee.

Then, some years back, the jurisdiction was transferred to the Government Operations Committee. Approximately 311⁄2 years ago this subcommittee and the Government Operations Committee took on the question of the renewal of revenue sharing. Ultimately, it resulted in the renewal of the program for some 31⁄2 years, which will expire in September of this year.

That program, as it was devised and as it was worked out as a result of the work here in this subcommittee and in the Government Operations Committee, provided for an entitlement program which is very important insofar as the municipalities that share under the program are concerned.

Entitlement means that the recipients do not have to go back each year for an appropriation. This is very important for States, cities, towns, villages, counties, when they make up their fiscal budget.

Many of them have a fiscal year that corresponds to the calendar year. They need to know with some degree of certainty whether or not their money is going to be coming in the next year, because they are always working ahead at least 1 year in their budget preparations.

So, it is important that that item be retained in the revenue sharing program.

Second: This subcommittee and the full Committee on Government Operations worked very carefully and spent a lot of time looking at different formulas and changes in the formula some 32 or 4 years ago.

I do not think that you can devise a better formula than the formula that exists now. I know from personal experience that if you try to change the formula, it will create a great many problems.

So, I urge that the formula be retained.

The next point is a very important one insofar as the program itself is concerned. The program as it has been administered from the beginning has required a very small number of people.

When the program came back for reauthorization some 31⁄2 years ago, it did require us to make some changes so that we added some requirements that municipalities had to comply with that were not in the earlier program.

But, basically it is a very small bureaucracy, with minor administrative functions.

Some 39,000 units of Government participate with a minimum of paperwork, redtape, and administrative requirements.

You hear some people talk about the State share. Mr. Wydler re

ferred to it. There are a number of people that have already suggested that the President apparently has suggested in his budget reduction program that the shares to the States be eliminated. Some States have shown surpluses.

These people forget the important point. Eligibility for this program has not been based on need. When you start basing the program solely on need, as we found out in the past, you get just another categorical program. When you have a categorical program, that requires an administration. It requires paperwork. It requires a lot of redtape. It requires people to make applications to demonstrate their need. So, it becomes very nonproductive and costs a lot insofar as the bureaucracy is concerned.

As a matter of fact, I recently spoke before the Governors' Association. I emphasized the need to consolidate categorical grants because of the tremendous amount of paperwork and the burden that is imposed on those units of Government that try to participate in those programs.

The last thing we want to do is put this program solely on the basis of need.

I remember as Chairman of the Paperwork Commission, when we held hearings out in Oklahoma, one of the superintendents of education from Utah came to testify before our Commission.

That individual testified that it cost them $6,000 to get a $4,500 grant. That can be repeated over and over and over.

That indicates to me what can happen when you get into these categorical grants. If we eliminated the categorical grants and emphasized revenue sharing, it seems to me that we would save a lot of money and a lot of headaches and a lot of redtape and a lot of paperwork.

I urge that we not tamper with this program. I think it is important to include the States. For example, in my State, the State of New York-and this is true of other States-there is 100 percent passthrough to localities.

The money that goes through the State goes to the local communities. That is done over and over and over again.

It is going to be a severe jolt to not only the States, but localities,

too.

One other thing. Look at what is happening in this country. Interest rates at almost 20 percent. Inflation almost at 20 percent. A cut in State revenue sharing will worsen our economy.

There is a tax on the American people put on about 3 years ago when we upped the base and when we upped the tax on social security in order to keep that system solvent. We just recently passed a tax on the American people of some $227 billion for "windfall profits." That is really just a tax on the consumer.

I added these all up to about $454 billion tax that we have put on the American people in the 311⁄2 years because of the social security and the windfall profits tax.

In addition to that, the President is talking about a 10-cent-a-gallon tax increase to discourage the use of the automobile and to lessen consumption of imported gasoline.

In addition to that, we just had a meeting of the New York delegation this morning. The New York telephone people testified to us that

they are going to come back each year now for an increase because of the problems they have with their company.

That means in a way an additional tax on the American people. The American people are just loaded up with taxes. If you remove revenue sharing, they are either going to have to increase taxes locally or they are going to have to cut back on the services that they provide. Goodness knows, these local governments cannot do it. So, I make the strongest plea possible that we continue the program exactly as it is, that we do not drop the States out of it.

It seems to me this would be cutting off our nose to spite our face. The States, in many instances, need the money just as badly as the local communities. In many States, including my State, the State of New York, there is a 100-percent passthrough of that money back to the local government. It is going to hurt to reduce it.

Mr. Chairman, I urge that we move very expeditiously through this hearing stage and that we get the bill-either something like Mr. Wydler has introduced this last year, or that we get something like it out very quickly.

I would like to join with my colleague, Mr. Wydler, in condemning the administration for not being here. I think this is a very important program. The fact that the administration is not willing to send top people here to testify before this subcommittee, in my judgment, is a slap in the face, first of all, at the Government Operations Committee, and, second, at this program.

I think the administration ought to explain why they are not willing to be up here and testify to tell us what they propose to do. I have read it in the paper, but I do not know what they propose to do with regard to the continuation of revenue sharing.

I urge that, if we do not hear from the administration, this subcommittee, and this full Committee on Government Operations, move expeditiously to renew this program on the same basis that it was and as it exists today.

Mr. FOUNTAIN. Mr. Synar?

Mr. SYNAR. Thank you, Mr. Chairman.

I, too, want to commend the chairman for beginning these hearings this morning. But I would like to take a different angle on this thing. During better economic times, the concept of revenue sharing was probably appropriate because it allowed local people to solve local problems.

But I think the whole concept of revenue sharing would be better off if it were described as exactly what it is.

What revenue sharing is is debt sharing. We are passing the national debt down to our cities, towns, and States.

As we consider these bills in this subcommittee in the next couple of days and weeks, we must take a responsible position. At a time when economic matters are in difficult situations, we should be paring down those programs which least affect people.

I do not think it is unreasonable to think that when 50 States are running at a surplus and when there is not necessarily a direct passthrough by the majority of the States to the local levels, to ask the States

Mr. HORTON. I think that is an erroneous statement. Fifty States are not running surpluses. That is incorrect.