TABLE 1.-ESTIMATED PERCENTAGE INCREASE IN STATE TAX RECEIPTS REQUIRED TO REDUCE INTRASTATE SCHOOL SPENDING DISPARITIES AFTER TAKING ACCOUNT OF THE ESTIMATED IMPACT OF FEDERAL REVENUE SHARING AND WELFARE TAKEOVER

Estimated State share of Federal funds to be distributed under H.R. 14370 (House Ways and Means Committee "revenue sharing" bill) plus estimated State and local savings in welfare expenditures under H.R. 1 times the ratio of State-local expenditures for local schools to total State-local general revenue from own sources, 1969-70.

Sources: Col. 1: House Ways and Means Committee, Department of Health, Education, and Welfare, and Bureau of Census "Governmental Finances"; col. 2: President's Commission on School Finance, "Review of Existing State School Finance Programs," vol. 2; Cols. 3 and 4 ACIR staff analysis.

ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS, APRIL 1972 Private Citizens: Robert E. Merriam, Chicago, Illinois, Chairman; Howard H. Callaway, Pine Mountain, Georgia; Edward C. Banfield, Cambridge, Massachusetts.

Members of the United States Senate: Sam J. Ervin, Jr., North Carolina; Karl E. Mundt, South Dakota; Edmund S. Muskie, Maine.

Members of the U.S. House of Representatives: Mrs. Florence P. Dwyer, New Jersey L. H. Fountain, North Carolina; Al Ullman, Oregon.

Officers of the Executive Branch, Federal Government: Robert H. Finch, Counsellor to the President; George Romney, Secretary, Housing and Urban Development; George P. Shultz, Director, Office of Management and Budget.

Governors: Dale Bumpers, Arkansas; Richard Kneip, South Dakota; Richard B. Ogilvie, Illinois; Ronald Reagan, California.

Mayors C. Beverly Briley, Nashville, Tennessee; Harry G. Haskell, Jr., Wilmington, Delaware; Richard G. Lugar, Indianapolis, Indiana, Vice Chairman. Members of State Legislative Bodies: W. Russell Arrington, Senator, Illinois; B. Mahlon Brown, Senator, Nevada; Robert P. Knowles, Senator, Wisconsin. Elected County Officials: Conrad M. Fowler, Shelby County, Alabama; Edwin G. Michaelian, Westchester County, New York; Lawrence K. Roos, St. Louis County, Missouri.

Mr. PUCINSKI. We want to impress upon the Commission our thinking from the legislative standpoint. I cannot tell you what to do but I do believe that the Commission ought to be apprised of the fact that while we want your input, if we have to wait for that input beyond early June, we may have to take off on our own and not have the benefits of your good judgment and good counsel.

Mr. BELL. Mr. Chairman.

Mr. PUCINSKI. Yes.

Mr. BELL. As I understand it, Mr. Myers, this is a commission that has been studying intergovernmental relationships but I understand your specific point is to study means of financing schools.

I am a little confused. There has been a commission on school finance and that report is back already. Yours has not reported back as I understand it; is that correct?

Mr. MYERS. I think it would be helpful if I cleared up a couple of points here.

The Commission was established by Congress in 1959. It has 26 members and it is bipartisan. Six of those members are from the legislative branch of the Federal Government, three Members of the House, three Members of the Senate and three members are from the executive branch of the Federal Government.

There are Governors, mayors, elected county officials and public members along with the members in the Federal level.

The Commission is supported largely by Federal appropriations. It is chaired by Robert E. Merriam, who is a private citizen and who lives in Illinois.

The Commission acts as a body. The President has asked the Commission, through Mr. Merriam, to study a proposal involving school finances, property tax relief, and the value added tax and that is the study that the Commission is now engaged in.

Mr. BELL. I see. When your Commission completes its study, you will come forth with a recommendation of some kind, I assume, relative to the best way to go about solving the school problem?

Mr. MYERS. Yes.

Mr. BELL. That is good because the other commissions have come up with general recommendations but have not come up with the big answer on what is the best school finance system. So you would be the only commission that would come up with that and I am thankful for that.

Mr. MYERS. One other point, Mr. Bell.

The staff of the Commission did a project for the President's Commission on School Finance dealing with State and local revenue systems

in educational finance and that was part of the input that the McElroy Commission considered when it wrote its report.

Mr. BELL. Your report will be completed sometime in June, you say?

Mr. MYERS. This is the one that we did for the President's Commission on School Finance and this looks at the State and local revenue system and its relationship to education and finance.

Now, the other report is one that the President requested us to makehe requested the Advisory Commission on Intergovernmental Relations to make-as a result of his comments in the state of the Union message about the problem of property tax relief and school finance. Yes.

We are working on that, Mr. Bell.

Mr. BELL. So you shall have a report sometime

Mr. MYERS. At the time that the Commission met on February 10, the Chairman announced that it would take the staff 9 to 12 months to complete this study.

The difficult part of the study relates to the property tax relief provisions and the related data.

The President's Commission on School Finance has studied the school finance problem. But we don't have that same kind of background and backup to look to in the property tax area nor in the valueadded-tax area.

These subjects will take a while to analyze. I don't know precisely when the Commission will make its recommendations.

Mr. BELL. I want to point out for the record that I think some of these commissions and studies that are made are very wise and beneficial for the simple reason that in the course of these studies, you have an opportunity to get exposure to all kinds of views and all kinds of concepts which you don't find here in Washington.

So this is highly beneficial, I think, and we get some very good input. For example, maybe if we had had this kind of a study, we would not have made the mistakes we made in some of our elementary and secondary education programs when the bill first came out. Now that we look back on them, we made some unfortunate errors. However, I think the bill was a good one and I supported it.

Nevertheless, I think education is such a complicated subject that you have really got to look at it. It is one of those areas where we cannot simply say as we did in the past that this is the right route and let's do something even if it is wrong. This isn't the route we should take in education.

We have to study it to make sure that the right route is taken so we don't make some awfully bad mistakes and waste a lot of the taxpayers' money. I think you are right in the study you are doing. I happen to feel that the value-added tax has a great deal of merit and I am pleased that you are studying that. I think we have to have a change in the property tax.

Mr. PUCINSKI. I don't know what the committee's findings are going to be but obviously my good friend from California and I have a strong disagreement. I don't think that we need another

Mr. BELL. Mr. Chairman, I don't think I have to waste our time debating that issue.

Mr. PUCINSKI. That is a subject that is not going to be before this. committee. I think it will be before the Ways and Means Committee.

Mr. MEEDS. If the chairman will yield, I don't think it would be a waste of time.

Mr. PUCINSKI. On your table, Mr. Myers, at the conclusion of your statement, you list the education pro rata share of new funds from Federal sources and, for instance, you give for Illinois $53.8 million but it is my understanding that the revenue-sharing bill which comes before us next week I believe as reported by the Mills committee provides that two-thirds of that money, two-thirds of whatever the State will get, two-thirds will be distributed to local communities and they can only use it for police protection, transportation, and environmental services, but they cannot use it for education.

Mr. MYERS. Mr. Chairman, I am sorry that this table has led to some misunderstanding on your part because in collapsing the table to the size that it is, we have apparently left out some important elements.

What we have done in constructing this table is described in the footnote down at the bottom of the page-footnote No. 1. I hope this explains the assumptions. We have taken only the State proceeds that can be anticipated from the House Ways and Means Committee bill, H.R. 14370, and the money that is anticipated to be freed up as the result of the enactment of something like H.R. 1 and then applied to that amount the percentage of State and local general revenues that are devoted to education.

So it isn't the whole amount of fiscal assistance in H.R. 14370. It does not have any of the locally directed money from the revenue sharing bill in it. It is only saying that if States act the way they now do with respect to money that they get what is not devoted to any specific purpose, they will spend some part of it, perhaps 30-odd percent in Illinois, in support of elementary and secondary education. That is what that $53 million represents.

Mr. PUCINSKI. The problem I have with that table, let's assume that Illinois gets $75 million from revenue sharing, and I have no idea what they will get at this time, but if they get $75 million, $50 million will immediately be siphoned off to local communities for three specific purposes having nothing to do with education.

Mr. MYERS. No, I have already taken care of that in this table. The $3 billion of the $5.3 billion bill, goes to local governments. We have not taken any part of that and applied it to education.

Mr. PUCINSKI. This $53 million then is part of the $12 billion that goes to States.

Mr. MYERS. It is $1.8 billion to the States.

Mr. PUCINSKI. You are assuming then that the States will use one-third of revenue sharing which a State is free to use anyway it wishes to, you are assuming it will use one-third of that for education. Mr. MYERS. Yes.

Mr. BELL. Mr. Chairman, may I suggest that the panel be given the same opportunity as given anybody else to make their statement or summarize it first.

Mr. PUCINSKI. We have done that.

Mr. BELL. I understand they haven't read the statement.

Mr. PUCINSKI. I said the statement would go in the record in its entirety. We are getting along fine.

Mr. BELL. I am questioning whether or not they had an opportunity to discuss their program in the way in which they are here to do it.

Mr. PUCINSKI. I think they are getting along pretty well. I want to identify the $53 million. So as I understand it then, anyone of these figures, that is what you estimate the State would likely devote its one-third to education?

Mr. MYERS. The sort of unconditional money that would result from the enactment of H.R. 14370 and H.R. 1. It is an estimate of what they would do with that new money on the basis of what they are now doing with money that they have free reign to deal with, yes.

Mr. BELL. I still insist they ought to have a right to proceed to present their case the way they want to.

Mr. PUCINSKI. If the gentleman had been here when the witnesses came before the committee, he would know that we are getting along fine.

Mr. BELL. It is my understanding you immediately asked questions and we are not allowing them to have a chance to make their statement. All I am saying is let them have a chance to have their day in court and then you can ask questions.

Mr. PUCINSKI. We said at the time the gentlemen came before the committee, having read their statement, the statement is in the record in its entirety and we have been getting along very well.

Mr. BELL. I think they may have a statement they may want to make. Would you have a statement you would like to make?

Mr. PUCINSKI. They are free to make any statement they would like.

Mr. BELL. Or a summarization of what your Commission has done or intends to do?

Mr. PUCINSKI. We have talked about what the Commission did.

Mr. BELL. You asked it in the form of questions. But that has not given the witnesses a right to present their statement.

Mr. PUCINSKI. The committee will have regular order. The gentleman will be recognized in due time and we are going to proceed with the witnesses as we have with all other witnesses.

The statement of the witness has been placed in the record in its entirety. We are now discussing a very important element of the whole concept of financing.

Mr. BELL. May I ask the witnesses a question?

Mr. PUCINSKI. The question that I had been asking the witnessesMr. Myers-is whether or not there was not a disparity in the figures in the table which he has presented to the committee. He is now in the process of explaining that it may seem like a disparity but it is not because he has taken into account the fact that two-thirds of the revenue sharing received by each State will automatically be transferred on a pro rata basis to local communities within that State to be spent for three noneducational purposes but what Mr. Myers is telling the committee is that a State like Illinois, for instance, will receive $53.8 million to be distributed throughout the State in any manner a State wishes and that $53.8 million comes from what he considers a prevailing practice on the part of the States to spend about onethird of the Federal aid programs on education and he arrives at the 53.8 figure by taking the one-third of the total one-third of revenue sharing and the saving out of welfare reform.

Is that a correct statement, Mr. Myers?

Mr. MYERS. Yes, with a couple of amendments. It is what they spend of their own funds, Mr. Chairman, not simply Federal aid.