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Mr. CANTOR. In 1959, for example, local governments raised more tax revenue than the States. This is shown in table 4 which I have submitted for the record.

Mr. FOUNTAIN. Without objection, a copy of table 4 will be entered in the record at this point.

[The material follows:]

Table 4

(Frequency Distribution of States)

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Mr. CANTOR. The States have also done a great deal in helping local communities ease the property tax burden on lower income groups and the elderly through financing "circuit breaker" type property tax relief. Twenty-nine States now finance such local property tax relief measures through allowing credits against the State income tax.

These factors, compounded by the precarious position of the economy, indicate to us that the GRS program must continue. Failure to authorize the program could make any recession longer and deeper and create particularly severe consequences for the States and local governments that depend most on those funds and are most vulnerable to an economic downturn.

We do feel, however, that Congress should take this opportunity to improve the program's effectiveness in targeting funds where needs are greatest and the program should also become a framework for extending Federal minimum wage and overtime standards to State and local government employees.

We maintain our view that since the funds available for the program are collected from all Americans through the authority of Federal laws and Federal tax structure, it is appropriate that Federal standards and safeguards be included.

In summary, we urge:

One, that the GRS program be continued at current funding levels and attempts to reduce or eliminate the States' share be rejected. The States have markedly increased their responsiveness to local government needs. And, in light of the demands to reduce local property taxes, court-mandated educational financing reforms and the disturbing economic outlook, the pressure on the States is likely to continue to grow.

Two, that changes be made in the allocation and enactment formula to provide a better targeting of funds to areas in line with their need for essential public facilities and services with particular emphasis on the Nation's urban centers. The 20-percent per capita payment floor and 145-percent ceiling has resulted in a diversion of funds to tiny government units with narrow functions and few responsibilities. We feel that the minimum payment floor should be reduced substantially or eliminated, and the 145 percent of the statewide per capita allocation ceiling should be increased.

Three, we would also like to see States and localities be required to meet the requirements of the Fair Labor Standards Act, similar requirements to those of the National Labor Relations Act, and other basic labor standards legislation.

Mr. Chairman, we believe that the general revenue-sharing program is playing an important role in helping to meet the Nation's public needs and it should be continued and fully funded at current levels. Thank you.

Mr. FOUNTAIN. Thank you very much.

We will now hear from Mr. John E. Cosgrove, director of legislation, Public Employee Department, AFL-CIO.

Mr. Cosgrove, we welcome you to the subcommittee. Please proceed as you wish.


Mr. COSGROVE. Thank you, Mr. Chairman.

The AFL-CIO Public Employee Department, a coalition of 33 national unions representing a total of over 2 million employees at every level of American Government, appreciates this opportunity to testify. The subject of the general revenue-sharing program is one of particular significance to our members and, of course, is a central element in national public policy.

The public employee department supports the reauthorization of the general revenue-sharing program for 5 more years at the present level. We believe that the general revenue-sharing program over its 8 years, has proven to be a valuable method of sharing national tax income among the different levels of government. While we have urged, and continue to support a larger Federal financial role in such vital programs as welfare, national health, and education-all of which consume major portions of State and local revenues-absent major changes in the assumption of Federal responsibility in such areas, general revenue sharing is increasingly important.

As the testimony of the AFL-CIO on March 6, 1980, indicated, the real volume of outlays for State and local public construction has moved in 9 of the 11 years to a 1979 level of $40 billion, including Federal aid, which, after adjustment for inflation, is 32 percent below 1969 levels.

Many communities, as has been observed by many other witnesses here this morning, have yet to recover from the 1974-75 recession and are unable to deal with the current or predicted recession, much less the runaway inflation, which is at a rate of over 18 percent annualized and has, in fact, introduced severe economic dislocation in the country. The high unemployment of 6.2 percent now, with its decreased revenue income and the increased social cost implied, remains a problem. It is particularly troublesome in our larger cities. These problems will accelerate as the recession advances.

The share of the Federal budget devoted to State and local aid has declined in the last several years. Many Federal grants to States for payment to individuals require State or local matching payments, and public assistance and medicaid are particular examples of this. These add to the financial problems of State and local governments.

We in the Public Employee Department oppose the elimination or reduction of the one-third share of revenue-sharing entitlement which would go to the States. The chief result of this would be to seriously impair the ability of the States to respond to the demand for assistance from local governments at a time when these demands are increasing. One of the most important considerations facing public employees is the fact that tax revenue contributed by virtually all of the citizens of the country flow to States and localities, with few conditions attached. Particularly important is the establishment of basic labor standards and labor relations criteria, in order that the Nation's tax

dollars not, in effect, subsidize substandard social conditions. Consistent labor policy in public and private sectors will better serve the national interest.

We can do no better on this point than to quote, and urge your most careful attention to, the recent testimony of the AFL-CIO on this point:

Now that Congress is considering extending the Revenue Sharing Act, it is appropriate to include the basic minimum wage and overtime provisions of the Fair Labor Standards Act in this statute. Such action would be a reaffirmation of the intent of the 1974 Fair Labor Standards Act in a manner cited by the Supreme Court.

Similarly, standards granting State and local government workers the right to organize and to bargain collectively should be a prerequisite for revenue sharing funds. In 1935, the Congress found that it was in the public interest to establish a method for determining the wishes of workers regarding their desire to be represented by a union and to assure workers a basic right to bargain collectively with employers concerning wages and conditions of employment. Congress found that the denial of the right of employees to organize and the refusal to accept the procedure of collective bargaining led to strikes and other forms of strife or unrest. In the 1935 Wagner Act, Congress recognized the beneficial effects of establishing a system to determine workers' desires regarding union representation and the encouragement of collective bargaining. Similar requirements for State and local government employees should be enacted to enhance their basic rights.

Currently, 38 States and the District of Columbia have statutes or executive orders providing the legal framework for collective bargaining for some or all of the employees. Comprehensive statutes covering all employees are currently in force in 23 States and the District of Columbia.

Thus, we maintain that since the funds available for the program are collected from all Americans through the authority of Federal laws and the Federal tax structure, it is appropriate that Federal standards and safeguards be included.

Let me paraphrase that. The problem arises in that the extension by the 1974 amendments of the Fair Labor Standards Act to employees of States and localities was declared by the Supreme Court, in the case of National League of Cities v. Usery, to overextend the commerce clause. It was held in a 5 to 4 decision that the plenary power of the commerce clause was not sufficient but indeed ran into the reserved powers of the States and so was invalid.

This decision has not only been troublesome, of course, in terms of denying the protection of the Fair Labor Standards Act-the minimum wage and overtime provisions-to the States and local employees, but in addition to that, it has been used as an argument on the Hill and in other quarters to seek to preclude labor relations legislation, aside from the Fair Labor Standards Act.

Our judgment is that you could, under the commerce clause, still enact such legislation, because, as we all know, a case before the court decides only the precise question presented. And a different question presenting the National Labor Relations Act may well result in a different answer than when you present the issue of the Fair Labor Standards Act.

But, aside from that, even if that ground is not found to be tenable, there are other grounds that one might adduce for the constitutionality of the protection, of the extension of labor relations protection. The fact is that the ability of Congress to tax and to spend for the general welfare could have attached to it as one condition that the States have as an option which would be a prerequisite to acceptance

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