It says in Ohio that the $93 million that our State receives, about half of it goes to the school foundation program, which is distributed to the local schools throughout the State on the basis of more going to those considered needy.

It then says the other half of the State's revenue-sharing payment is split about evenly between funding for higher education and general operating expenses for State agencies.

The largest proportion of State aid is for operating expenses which goes to mental health and retardation programs at the local level.

I hope you will confirm for this subcommittee my interpretation of that in that first, Ohio is one of the States where schools are operated specifically at the local level by local boards of education and financed heavily from local taxes.

So, State distribution to schools in Ohio, in effect, means that the money comes back to the local level to be spent. Is that correct?

Mr. DEGOOD. That is correct.

Mr. BROWN. And, with reference to higher education, we are also also one of the States that has a system of branch universities and joint vocational schools and technical schools at the 2-year level above high school in almost all the major cities in the State, and, I would assume, also Toledo.

So, higher education money also comes back to local communities. Is that correct?

Mr. DEGOOD. That is correct.

Mr. BROWN. And, finally, Ohio is one of the States that has had an aggressive program in education and employment, and even residential centers for the retarded and local mental health facilities of a rather generalized nature.

So, in effect, that other portion coming back predominantly in that area, means that the State revenue sharing, at least in Ohio, tends to be very strongly distributed to the local communities.

Would you agree?

Mr. DEGOOD. It is probably not as strongly as it is in some other States. It is still very strong.

I think there is another dimension to this which is very difficult to quantify. The thing I fear is that if the States lose their share of general revenue sharing, they will, in turn, mandate those costs which they formerly picked up with those Federal funds, back on local general purpose units of government.

Mr. BROWN. Has the Conference of Mayors, or any other group with which you are associated-I do not know if you belong to the National Municipal League-done any analysis of how much of the money comes back to municipalities or local units of government?

Mr. DEGOOD. I think those studies have been done. I think in the statement we referred to some 40 percent of the funds, as a rough measure, come back to local communities.

It is very difficult to assess this because of the fungibility of revenuesharing funds and so it is difficult to count how much is passed through. Mr. BROWN. Could you identify-I do not want to offend Mr. Weiss with this question, but I made the comment yesterday in this hearing that at least in my area, which is made up of small cities, suburban, and rural areas, that every local official I talked with has suggested that revenue sharing would be the last program that they would want cut.

They indicate there are other categorical aid programs that are certainly higher in their interpretation or that should be higher on the hit list for attention when one directs his mind to budget cutting than revenue sharing.

Would you share that view? Could you identify any programs that you feel may not be as efficient or effective in terms of the benefit to the local governments?

You do not have to do it now, if you do not want to, but I would be happy to have your reaction to that.

Mr. DEGOOD. I would concur that general revenue sharing is probably our highest priority at the local level simply because we tend to fund conventional nuts and bolts municipal county services with general revenue-sharing receipts.

In my instance, it goes into such things as refuse collection and into what I call nuts and bolts and traditional fundamental services, as compared to some other Federal programs which are programs to bring about change in a community.

And, given the nature of the times, it may be true that we are going to have to change at a somewhat slower rate in terms of renovating cities and bringing about some changes that are very desirable.

But I think it would be just short of disastrous to lose general revenue sharing.

Mr. BROWN. And State revenue sharing versus some specific or categorical programs-do you have any thought in that regard?

Mr. DEGOOD. I really do not want to get into the game of paying general revenue sharing versus some particular specific grant program. Mr. BROWN. Our problem is that we are in that game, though, by the President's direction, and perhaps by the direction of some State legislatures that feel strongly that we ought to balance the budget.

We perhaps could use some guidance from the Conference of Mayors if they would wish to offer any help in that regard. I am sure we could take it.

I do not say that facetiously. I know it is not an easy thing to do. But I would like a very clear statement from the Conference of Mayors as to whether they think that State revenue sharing is the first thing that ought to be cut as opposed to some other choices, if there are other choices that you think are less effective programs than State revenue sharing, from your standpoint.

I think it would be helpful for us to have that information.

Mr. DEGOOD. Our position may well be one that is not, given the times, fully acceptable to the Congress. We have some quarrel with the way OMB determines the amount of Federal aid flowing to State and local communities. They tend to use a figure in the $90 billion range.

It is our argument and contention that when you take out Federal transfer payments, and you take out aid to States, the cities in this country receive only some $20 billion in Federal aid. Many of the current proposals envision the cities of this country losing some $6 billion of the $20 billion. We think we are being asked disproportionately to bear the brunt of balancing the budget.

Mr. BROWN. Finally, Mr. Chairman, if they would, I would appreciate both mayors, or the Conference of Mayors, giving us some strong statement of how they feel about it.

I am one who does not want to see any revenue-sharing cut at the State level or any other level. I feel if we must cut, there are some categorical programs where the administrative costs run as high as 30 or 40 percent of the money distributed, and, I think could either more over to a revenue-sharing approach and save the administrative costs. or do away with that program entirely, or cut that program back down

to save money.

If I am wrong, then I ought to be corrected. But if I am not wrong. I can be sustained and get a little help out of the Conference of Mayors as to the programs that might be higher on the administration or congressional hit list for reduction than State revenue sharing.

So, if you can offer us any guidance in that regard, a little courage and true grit would be helpful at this point.

Thank you, Mr. Chairman, for your courtesy.

Mr. FOUNTAIN. Our next witness is the Honorable Francis B. Francois, councilman in Prince Georges County, Md., who is representing the National Association of Counties, of which he is currently the president.

You may proceed with your testimony at this time.

STATEMENT OF FRANCIS B. FRANCOIS, COUNCILMAN, PRINCE GEORGES COUNTY, REPRESENTING THE NATIONAL ASSOCIATION OF COUNTIES

Mr. FRANCOIS. Thank you, Mr. Chairman. I am Francis B. Francois. speaking on behalf of the National Association of Counties, and my own county, Prince Georges County, Md.

I have a rather lengthy statement. What I would like to do is submit that for the record and make some comments, if I may.

Mr. FOUNTAIN. Your entire statement will be inserted in the record. [See p. 318.]

Mr. FRANCOIS. We do want to direct our comments today to general revenue sharing and to the general Federal budget situation, as we see it.

This hearing, of course, deals primarily with revenue sharing. I do not think it is any secret to any of you here that the National Association of Counties strongly supports the reenactment of general revenue sharing, for counties, cities, and States.

We have made it our number one legislative priority this year, and it will remain that until the battle is over.

We realize that we are in a budget-cutting period here in Washington, and that all of us are going to have to find some answers to some very difficult questions.

Within that context, we have been engaged, as have all of you, in looking at the Federal budget, and we have had occasion to meet some high officials in the White House and Members of Congress, to review the situation as we find it.

The choices are clearly not easy, but our strong position is that the last program which should be cut is general revenue sharing. We think this is good program which provides the flexibility that no other Federal program offers. In a time of budget cutting, that flexibility and the amount of money available from general revenue sharing is more important than ever before.

It must be remembered that categorical grant programs are precisely that. The money is targeted for use only in a very narrow category.

The needs across this country vary in cities and counties. Some of those categorical programs are needed; some are not. As they are cut, the one way that we can fill in behind and try to pick up the problems which are left is by using general revenue-sharing moneys.

So, at this time of budget cutting, we would say that a very strong case can be made that the way to help relieve some of the pain of the cuts in the categorical programs is with general revenue sharing.

It is a mechanism which will allow State governments, city governments, and county governments to adjust.

We, then, do strongly support general revenue sharing, not only for that reason, but for a number of other reasons, too.

I would like to touch on just a few of those.

County governments are, of course, as is true of all local governments, very hard pressed these days to pay their bills. In the past several years we have had a number of new programs thrust upon us by State and Federal levels of Government. We have had to create new programs to deal with local needs that our citizens say must be met. But our resources to do that job have grown less and less. Generally, as you well know, the property tax is the principal source of revenue for local government. The property tax is under heavy attack in this Nation.

Aside from this factor is that in many States, and in increasingly more, some city and county governments, including my own, are now facing absolute limitations on the amount of property tax which can be levied.

As we bump up against these property tax ceilings in those cities and counties, more and more we must rely on general revenue sharing for general governmental purposes. That, indeed, is what is happening.

Across this Nation general revenue sharing was originally used for capital programs and special projects. They kind of kept it out of the regular budgets. We do not have that luxury any more.

In most governments now, you will find that general revenue sharing is the main fiscal underpinning of many programs. In counties, especially, for example, you find revenue sharing is frequently used for law enforcement activities and for other activities relating to property, and the kinds of things that normally would have been borne out of the real property tax.

So, when you cut revenue sharing, you are not cutting something that is a luxury. You are instead cutting something that is now a part of the heart of the budget of many local governments in this Nation, and there are no replacement revenues.

The mandate issue is one that has us greatly concerned, too. Why has the cost of local government risen so drastically in recent years? In part, it is because State governments and the Federal Government have been imposing more and more mandates directly upon local governments, which they must respond to without also receiving further resources.

There was a recent study done by the University of California at Riverside that put the combined number of mandates on local govern

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ments at over 1,000, and nearly 500 of those are direct order mandates Thou shalt do this or that.

It is those mandates, to a great extent, that are causing much of the problem. Again, revenue sharing is one of the tools we have to try to accommodate and adjust.

As I have said, the budget cuts probably will be coming. It is Naco's belief that those budget cuts need to be shared by everyone. We ough to leave general revenue sharing alone as much as possible.

What we mean is this. We recognize there are some national priorities that simply must be met, the national defense being one of them. We also recognize and would hope that there are some programs that will be cut very carefully. We include here those programs that are targeted on human services which will simply transfer costs for necessary programs from the Federal Government to the county governments if the cuts are made. That is not cut in governmental expenditure. It is simply a transfer of costs to another level of government, one that cannot pay it.

Once we do the surgery to identify those things, then it is our belief that the best way, and perhaps the only realistic way, to proceed, given your timetable and the schedule you are on, is to make an across-theboard percentage cut from the remaining programs.

That across-the-board cut, we think, would hit everyone reasonably fairly. Certainly, it would hit everyone. Then let us use general revenue sharing to fill in behind, to pick up the pieces where they have to be picked up.

Back on the States' share of general revenue sharing, we do strongly support the reenactment of the States' share.

We believe that the original concept of revenue sharing was that the Federal Government would share collected revenues with the other levels of government in this Nation, to build an intergovernmental partnership.

You cannot take one of those partners out and still have a partnership.

We believe also that to take out the States, as has been emphasized here, is simply going to transfer costs to other levels of governments, cities, and counties.

In some 18 States almost all of the States' share of general revenue sharing is passed directly throught to local governmental units. South Dakota, a State we do not talk about much, is one that would come to mind. In South Dakota, all the State's share goes to local boards of education. If it is cut, then the county governments in that State will have to raise their taxes to fund those boards of education. It is that simple.

In many other States, the same state of affairs exists.

We thus will not get rid of costs by cutting the State share. Rather, we will simply transfer costs.

Even in those States where there are no passthroughs, this is true. I think all of us recognize that States, too, have some budget limitations upon them. To the extent that they lose general revenue sharing, they are losing a resource which will be reflected in the quality and extent of other State programs.

Make no mistake that to cut the States' revenue sharing is going to do damage to all levels of government beneath that of the Federal level.