be penalizing those States which did not do that. It is nice that hey have, but that is one of the reasons I have been suportive of this. am generally supportive of revenue sharing as a concept. But now e may be faced with penalizing those States who did not give their are to the localities.

Mr. TAYLOR. If the State share is eliminated, all States will be enalized in that sense.

I do not mean to play with words, but what we are saying is this. tates ought to be provided with an incentive to do better targeting t their own level. Some States would receive a reduced share under ur proposal, and we hope they would have an incentive to move up in he rankings by doing a better job of targeting. We think that is the ind of approach to take in an era of fiscal restraint.

Mrs. SNOWE. Thank you.

Thank you, Mr. Chairman.

Mr. FOUNTAIN. Mr. Ginsburg, on page 3 of your prepared statement, you noted that the entire GRS amount has been spent on police and ire outlays in a number of jurisdictions. Is this information based upon the expenditure reports filed by those local governments?

Mr. GINSBURG. That is correct. We use those reports. We took the information from that according to the budget lines which were indicated by those reports.

Mr. FOUNTAIN. As it was brought up many times in the subcommittee's 1975 hearings-in which you participated-revenue sharing funds are fungible. That is, this money becomes commingled with and indistinguishable from a local government's own funds in most cases. Consequently, allocations that are spent on police and fire may simply be substituted for the local government's own money thereby releasing an equivalent amount for other purposes.

Did your survey determine the purposes for which this released money was actually spent?

Mr. GINSBURG. No, it did not. You do raise the whole issue of fungibility and the difficulty of tracking down revenue sharing which adds to the complexity of citizen participation.

Mr. FOUNTAIN. Yet that is the thing they all like.

Mr. GINSBURG. Right.

Mr. FOUNTAIN. In those instances where money was appropriated for police and fire protection, does your survey disclose whether those uses were approved or opposed by a majority of the local residents? Mr. GINSBURG. No, it does not. What it shows, though, is that in most cases these funds are used as substitutes for previously allocated funds for those same purposes. In most of the cases, this does not represent any increase in the funds for public safety. They were simply putting $100.000 of general revenue sharing into the general fund.

In some cities, the entire police department, for example, in St. Paul, is funded with general revenue sharing funds. There are no "locally raised funds" being used for general revenue sharing. This supports your view, Mr. Chairman, that this is a kind of substitute which releases formerly designated police and public safety funds for other purposes.

We recognize that there is a real statistical weakness in these facts. Mr. FOUNTAIN. On page 5 of your statement, you refer to instances in which notice for the second budget hearing did not follow the

statutory requirements. Have these violations been brought to attention of the Office of Revenue Sharing?

Mr. GINSBURG. No, but we are, on the basis of the survey which just completed in February, sending a copy of each of those situation to the Office of Revenue Sharing.

Mr. FOUNTAIN. I would like to direct this question to you, Mr. Ginburg, and also to other members of the panel who may care to comment The requirement for filing a use report with the Census Bureau the end of each fiscal year was recommended by the subcommittee ar included in the law in order to give interest groups in the commun an opportunity to compare the budget decisions made by the loca legislative body with the report on how these funds were spent.

We adopted this reporting requirement with full knowledge tha this information would not be useful in many or most instances as a representation of the actual end use or impact of the revenue sharing funds.

To your knowledge, has this reporting requirement been of assis ance to local interest groups and citizens in holding the public officials accountable?

Mr. GINSBURG. I would have to say very candidly that we have not found local groups using that in the manner you have described. Ou unfortunate conclusion at this stage is that general revenue sharing as a high visibility local revenue issue does not exist. Because of the other factors I mentioned, it does not get the kind of attention w think it deserves, and we are doing all we can to promote and foster more citizen interest in it.

So, to your question, very directly I would have to say it has not been used by most of the local groups in the manner Congress intended. Ms. RUBIN. Mr. Chairman, our members who did respond to survey in this area did not comment directly on that point, but the did stress the need for long-term preparation and involvement br citizens in order to participate effectively. It is my feeling that a preliminary hearing of that sort, even if the fiscal information is not the hardest information, would be helpful in putting together the kind of continuing citizen effort that you would need in order to do anything effective in something as complicated as the budget process.

As a matter of fact, we feel that it would be important for loca officials to be encouraged to foster an ongoing effort to involve citizens in fiscal affairs and in the budget process through advisory committees or task forces or other techniques that could proceed from the be ginning once officials start getting involved in allocating moneys Because if you wait until just a short time before the legislative body votes to adopt the budget, you are then coming into the process at s time when all the important decisions have already been made.

Mr. FOUNTAIN. You mentioned advisory committees. It was sug gested, when we extended this legislation, that we include a provision requiring advisory committees. We finally concluded that would be another layer of bureaucracy that would result in unnecessary expense. Yet, I can see the benefit which may be derived. Let me ask you this.

In the course of your monitoring of this program, did you come across any of the areas of government where, on a voluntary basis, they appointed anybody to come in and make suggestions or to take an inventory as to the way the funds were being used?

Ms. RUBIN. Yes. Actually I am talking about voluntary advisory ommittees. I am not suggesting mandatory advisory committees. In a few of the communities where members reported successful and ›ffective citizen participation in this area, they felt that that was in art because local officials were more creative in involving the public arlier through advisory committees or task forces or neighborhood committees which could engage in a longer planning process.

Mr. FOUNTAIN. You stated on page 3, Ms. Rubin, that the League of Women Voters would support the five formula changes that have been suggested by the administration, including the lowering of the floor from 20 percent to 10 percent and raising the ceiling from 145 to 175 percent of the statewide per capita average.

I would direct this same question to the other groups represented at the panel. Would your organization support the complete elimination of the floor and ceiling constraints in the interest of permitting the formula elements to operate fully and freely?

Ms. RUBIN. I would have to answer that by saying that we would need to see the effects of such changes. I feel this way even about the five formula changes. The intent of those changes seems to be very good. It is in line with our thinking, but none of us has seen the specifics.

Mr. FOUNTAIN. That is precisely the kind of discussion which I have been having with the staff. Some people seem to think that you can have hearings and the next day start a markup and come out with a piece of legislation, without realizing that we are now in the computer age, and some of these formulas are highly complicated. Without appropriate computer printouts, we have no way of knowing what the impact will be. Some of these things sound very equitable on their face, and we don't really know what the outcome will be.

In several situations we have examined, we found that certain changes which seemed in theory to be equitable, would cause substantial losses to needy governments. It is important to know what the practical, pragmatic effect of that sort of thing would be. These are some of the considerations I think we have to take into account-try to find equity, but at the same time consider what can actually get passed.

Mr. TAYLOR. Let me add something to that, Mr. Chairman.

Last time, as I remember, we tried to address that very question that you are raising.

I think we came up with the view that you did need to set some kind of cap or otherwise there would be distorted effects. But I think the last time our judgment was that the caps should be higher than 175 percent-perhaps as much as 250 or 300 percent. However, we have not reexamined that in the light of any new data so that I join with Ms. Rubin in saying that we would have to take a close look before we came down with a precise recommendation.

Mr. FOUNTAIN. Dr. Goldberg, do you recall whether or not we found in the computer printouts we have had that there would be much change if we eliminated all constraints?

Dr. GOLDBERG. The computer simulations made in 1975 and 1976 never went so far as to completely eliminate the 145 percent upper constraint.

We did track what would happen by raising it to 160, 175, and then 200 percent. What we found, generally, is that a relatively small num

ber of local governments gained roughly $150 million a year fre raising the 145 percent to 175 percent. The most prominent ge from raising the upper constraint were city-county units of gover. ment like Philadelphia, Denver and St. Louis which have no ov lying local government.

In the case of Philadelphia, its increased allocation would have -mainly at the expense of Pittsburgh. Philadelphia would have ga and Pittsburgh would have lost funds.

More recently, in looking at this problem again, we have recog that we omitted one element in this comparison. While that res would still occur today-money would flow to Philadelphia and wo not flow to Pittsburgh-we now believe this is not an appropriate parison because Pittsburgh has an overlying county of Allegh which also receives money. If we add part of Allegheny County's a cation, in proportion to the city's share of the county population. Pirburgh's per capita allocation would be about as large as Philadelph if the ceiling were raised, despite the fact that Philadelphia makes a larger tax effort than Pittsburgh.

So I think that is another element of the equity question that must look at in evaluating the effects of eliminating the ceiling.

Mr. FOUNTAIN. Ms. Rubin, I wonder if you would elaborate on y statement on page 4 that there is mounting evidence that elimina: of the county middleman would have a favorable effect on centr cities.

I think you are aware that the formula at the present time initia". allocates funds to a county area and then proceeds to reallocate the funds directly to all of the local governments within the county area Consequently, it is not clear to me what you have in mind when y refer to the county middleman role.

Ms. RUBIN. What we had in mind was the direct distribution to the local communities without the county. I must say that I cannot su stantiate that any further than to tell you that I have read a numicet of statements and there was testimony, I think, from the administ tion that they are looking at computer printouts to see if, in fact, th would have a favorable effect on the central cities. But I have not mi self seen any printout that indicates the effect that this would ha

Mr. GINSBURG. The concept, as you probably know, Mr. Chairman... that you could have two municipalities within adjacent counties, != because one county, on the basis of the county allocation, had far men than the others, then these two municipalities of equally low incre would get sharply different amounts as a result of the first intermedist step of the counties receiving the funds. I think, as we said, we have to take a close look at what the administration has found.

Talking to some of them, there is some indication that there is s need to examine that proposition far more carefully.

Mr. FOUNTAIN. Mr. Faso?

Mr. FASO. Let me follow up on that with Ms. Rubin. The question f eliminating the county middleman, as it is called in your testimony. presume in light of what Mr. Ginsburg said, is that you are referre: to the detiering of the formula.

Ms. RUBIN. Right.

Mr. FASO. Detiering-have you seen the administration work on this hich would indicate that central cities, indeed, would fare better der such an arrangement?

Ms. RUBIN. I have seen none, that is, no printout or statistics. I have ard and read comments from the administration claiming that this ould be so.

Mr. FASO. That obviously would be a subject of much concern tomorw when the Secretary comes up.

As I understand this change, all that would really be accomplished that each community within a State will, in effect, be competing gainst each other instead of the current arrangement where each mmunity within a county competes against one another.

We are concerned that the administration may be suggesting this hange and the net effect may be negligible in terms of dollars shifted round.

I would add a word of caution. Before anyone jumps on board with at proposal, we should see what the changes are.

Ms. RUBIN. This is why the statement indicated that we hoped you would consider this, but really we have not seen enough information urselves to know whether in fact it would work out in the way it eems to be talked about.

Mr. FASO. Thank you. I think that would be a general commentary in the administration's proposal so far. Thank you, Mr. Chairman. Mr. FOUNTAIN. Thank you.

I want to thank all of you for coming today to give us the benefit of your testimony. You have given us the benefit of your monitoring esults, and they will be extremely helpful to the subcommittee. I do not know what we will finally come up with, but we thank you for your help.

Next, we will take testimony from representatives of organized abor. I would like to have the witnesses present their individual statenents and then sit as a panel for questioning. It is my understanding hat this procedure is agreeable to you gentlemen.

First, we will hear from Mr. William Lucy, secretary-treasurer of the American Federation of State, County, and Municipal Employees. The rest of the panel may come forward at this time, if they like. STATEMENT

OF WILLIAM LUCY, SECRETARY-TREASURER, AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES; ACCOMPANIED BY ANTHONY PATRICK CARNEVALE, DIRECTOR OF LEGISLATION

Mr. Lucy. Thank you, Mr. Chairman.

With me this morning is Mr. Anthony Carnevale, who is the director of legislation for our organization.

My name is William Lucy, I am the secretary-treasurer of the 1million-member American Federation of State, County, and Municipal Employees AFSCME a union made up of men and women who work for local and State government in virtually every State in this country.