CONGRESSIONAL RECORD – SENATE

February 7, 1975

Page 2844

THE FEDERAL BUDGET AND THE CITIES: REPORT BY THE NATIONAL LEAGUE OF CITIES AND THE UNITED STATES CONFERENCE OF MAYORS

Mr. MUSKIE. Mr. President, this is the fourth year the National League of Cities and the United States Conference of Mayors have published a study of the Federal budget and its impact on our cities. They do this because of the budget's increasingly important impact on Federal-State-city relationships and their interaction with the private sector.

These organizations are concerned with the President's budget and the kind of attention paid to State and local government needs. They ask: "Is this the end of the road for New Federalism?" And they add: "If the 1976 budget is a headache for President Ford, it is a concussion for the Nation's cities."

I commend this report to my colleagues and ask unanimous consent that highlights of the report, together with the text, be printed in the RECORD.

There being no objection, the material was ordered to be printed in the RECORD,

as follows:

SOME HIGHLIGHTS OF THE REPORT

The budget projects an unemployment rate of 8.1 percent in 1975 and 7.9 percent in 1976. This will translate into unemployment five times that rate among the young, the minorities and the other vulnerable members of the work force who tend to live in cities or are drawn to them in hard times in search of work. The budget falls far short of addressing the needs of these workers who will not receive unemployment benefits and will be unable to afford housing, health care, and other social services for themselves and their families.

The cost of running cities is now rising at an annual rate of 11 to 14 percent, but the yield of local taxes is up only 8.8 percent. Nevertheless, the budgeted grants for local governments fail to keep up with this inflation rate; indeed, in constant dollars, the budget actually cuts federal aid to cities.

The budget for defense procurement and construction, factors in an inflation rate of about 10 percent, but allowances for any inflation in domestic programs such as housing, transportation, etc., are ruled out.

One of the budget's strategies is to restrain the rate of growth of income assistance programs, a plan that most burdens dependent city dwellers, who therefore will turn in desperation to City Hall for services they cannot afford to buy themselves.

The budget's attitude toward state and local governments and social programs is characterized by the Public Health Services budget, which, in the words of the Administration, "reflects the decision to require that states, local governments" and other non-federal sources contribute 20 percent more than they did in 1975 to the cost of health care programs receiving federal support.

The federal budget relies heavily on both state and local governments to compensate for lagging social effort at the federal level. The effect is counter-productive in two ways:

First, the Federal Government, which is sustained by a progressive tax structure, would virtually force state and local governments to take the unpopular step of raising taxes, many of which are regressive, at the same time the Federal Government is prescribing popular tax cuts for itself as an economic stimulator. Second, the displacement of responsibility from federal to non-federal governments compounds the fiscal problems of cities, which heavily depend on state aid for education, health, welfare, public works and other programs.

The budget is so preoccupied with dealing with deficits, containing social assistance costs, and meeting the energy crisis that it does not adequately address the entire range of needs of the people and of the other levels of government. As an example, the budget is so oriented toward tomorrow's energy costs and tomorrow's feared inflation, that it fails to take account of the cumulative effects of previously skyrocketing inflation on top of which city government budgets are now precariously balanced.

A central problem of the budget is that it virtually ignores the interdependence of the intergovernmental system, the relative inflexibility of the revenue resources available to local governments, and the escalating social and fiscal demands upon the cities. Absent any coherent and comprehensive federal strategy for dealing with local fiscal and social needs, the cities have a right to ask: Is this the end of the road to the New Federalism?

THE FEDERAL BUDGET AND THE CITIES

(A review of the President's budget in light of urban needs and national priorities)

Published by the National League of Cities and the United States Conference of Mayors, 1520 Eye Street, N.W., Washington, D.C. 20006.

Allen E. Pritchard, Executive Vice President, National League of Cities.

John J. Gunther, Executive Director, United States Conference of Mayors.

Additional copies of this publication may be obtained from: NLC and USCM Publications Center, 1620 Eye Street, N.W., Washington, D.C. 20006.

Price: 1-9 copies, $8 each; 10-99 copies, $6 each; 100 or more copies, $4 each.

PREFACE

The National League of Cities and the United States Conference of Mayors are the two organizations which jointly represent the nation's cities in Washington. With offices located in the nation's Capital for more than 40 years, the League and the Conference have developed a highly professional staff.

The League, founded in 1924, and the Conference, founded in 1933, maintain joint Washington offices; however, each organization retains its own members, president, officers, policy committees, members, and staff.

This study, "The Federal Budget And The Cities," is the fourth edition of an annual series. It is prepared by League and Conference staff under our direction in accordance with League and Conference policies adopted at annual meetings by locally elected officials.

The federal budget, submitted to the Congress on February 3, represents President Ford's proposed financial plan for the Federal Government for the year beginning July 1, 1975. It not only takes into account economic and other factors; it also sets forth the priorities which he deems essential to carry out his plan.

The budget is a political document expressed in accounting terms. It is the single most important federal document published each year. It is the vehicle for the most important and comprehensive collection of priority decisions which the United States makes in the course of a year.

All too often the public does not pay sufficient attention to the implications contained in the budget. The reason for this public inattention are clear enough. The budget is not one document but four, ranging in size up to the 1,092-page budget appendix. It is highly complex and it abounds with numbers whose meaning are often elusive.

Although the budget reports the results of the hard decisions among competing priorities, the budget does not indicate which choices were the most difficult or what plausible alternatives were available.

The report, "The Federal Budget And The Cities," examines the budget from an urban perspective. The report contains 22 chapters.

The first chapter offers a budget overview. The second highlights subjects of major concern. The 20 remaining chapters deal with specific topics.

ALLEN E. PRITCHARD, Jr.,

Executive Vice President, National League of Cities.

JOHN J. GUNTHER,

Executive Director, U.S. Conference of Mayors.

OVERVIEW

The Cities' View of the Budget – In Brief: Seeking public approval of his proposed Budget, President Ford personally briefed the press Saturday morning, February 1, at the State Department. The last time a President of the United States had done that was on January 19, 1952, when Harry Truman told reporters: 'This budget has been the biggest headache I have ever had," Mr. Ford recalled. He went on to say, "Well, as I look at the Federal Budget for the fiscal year 1976, I can only say, 'Harry, I hope you left some aspirin for me.' "

If his 1973 Budget is a headache for President Ford, it is a concussion for the cities.

As seen by the cities, the faults in the Budget include:

The Budget projects an unemployment rate of 8.1 percent in 1975 and 7.9 percent in 1976, which may translate into unemployment five times that rate among the young, the minorities and the other vulnerable members of the work force who tend to live in cities or are drawn to them in hard times in search of work. The Budget falls far short of addressing the needs of these workers who will not receive unemployment benefits and will be unable to afford housing, health care, and other social services for themselves and their families.

The cost of running cities is now rising at an annual rate of 11 to 14 percent, but the yield of local taxes is up only 8.8 percent. Nevertheless, the budgeted grants for local governments fail to keep up with this inflation rate; indeed, in constant dollars, the Budget actually cuts federal aid to cities.

The Budget for defense procurement and construction factors in an inflation rate in the neighborhood of 10 percent, but allowances for any inflation in domestic programs – housing, transportation, etc.– are ruled out.

One of the Budget's strategies is to restrain the rate of growth of income assistance programs, a plan that most burdens dependent city dwellers, who therefore will turn in desperation to City Hall for services they cannot afford to buy themselves.

The Budget's attitude toward state and local governments and social programs is characterized by the Public Health Services budget, which, in the words of the Administration, "reflects the decision to require that states, local governments" and other non-federal sources contribute 20 percent more than they did in 1975 to the cost of health care programs receiving Federal support.

The Federal Budget, as illustrated by the Public Health Services budget, relies heavily on both state and local governments to compensate for lagging social effort at the Federal level. This is unrealistic: State and local governments in 1974 registered about a $7.5 billion deficit, according to the National Income Accounts. The effect is counter-productive in two ways: First, the Federal Government, which is sustained by a progressive tax structure, would virtually force state and local governments to take the unpopular step of raising their taxes – many of them regressive – at the same time it is prescribing popular tax cuts for itself as an economic stimulator. Second, the displacement of responsibility from the Federal to the state governments compounds the fiscal problems of cities, which heavily depend on state aid for education, health, welfare, public works and other programs.

The FY 76 Budget is so preoccupied with dealing with deficits, containing social assistance costs, and meeting the energy crisis that it does not adequately address the entire range of needs of the people and of the other levels of government. As an example, the Budget is so oriented toward tomorrow's energy costs and tomorrow's feared inflation, that it fails to take account of the cumulative effects of previously skyrocketing inflation on top of which city government budgets are now precariously balanced.

A central problem of the Budget is that it virtually ignores the interdependence of the intergovernmental system, the relative inflexibility of the revenue resources available to local governments, and the escalating social and fiscal demands upon the cities. These points have been reiterated to Federal policy makers in recent meetings with state and local leaders, but the Budget ill reflects our concerns. Absent any coherent and comprehensive Federal strategy for dealing with local fiscal and social needs, the cities have a right to ask: Is this the end of the road for the New Federalism?

In short, the cities are pounded by inflation and recession at home and by inept and insensitive Federal policies in Washington. Hence the concussion. It will take more than aspirin to cure it.

Highlights of the budget: Describing the Budget, President Ford told the press on February 1, "... the President's annual budget is a carefully considered and integrated set of policies, programs, and priorities that a President recommends to the people and to the Congress to set our national course into the future."

Highlights of his Budget – his first since taking office less than six months ago – include proposals for:

Total outlays of $349 billion in FY 76, an increase of $36 billion over FY 75.

A deficit of $52 billion – a peacetime record, and the second highest deficit in history.

Congressional approval of another $17 billion in rescissions and deferrals of appropriations, and economies to be achieved by imposing a five percent ceiling on increases in Federal civilian and military pay and Federal benefit payments (e.g. Social Security, railroad and Federal retirement pay, Supplemental Security income, food stamps, and child nutrition programs) that are tied to the cost of living.

Increased aid to the unemployed, totaling $17.5 billion in unemployment insurance benefits and $1.3 billion for public service employment.

An import fee on oil, and taxes on domestically produced petroleum and natural gas and on their producers, including a $12 billion windfall profits tax, all adding up to $30 billion.

Turning around that $30 billion in FY 76 as "equalization rebates and payments" in the form of: $2 billion to state and local governments to be distributed under the existing General Revenue Sharing formula, $16.5 billion in individual income tax cuts, $2 billion to persons too poor to pay Federal Income taxes, $6.5 billion in corporate income tax cuts, and $3 billion for Federal operations.

An increase in budget authority for defense of $16.4 billion, up 18 percent over FY 75.

A one-year moratorium on new Federal spending programs, except for energy and defense.

The economy and the cities: The economic decline of 1974 had a severe impact on the fiscal resources of state and local governments. Beginning with the third quarter of 1973, the National Income Accounts figures for state and local governments shifted from a surplus to a deficit position. By the third quarter of 1974, the annualized deficit was estimated at about $7.5 billion.

The severity of the economic crisis and its implications for state and local government was recognized by the Joint Economic Committee in its final report to the 93rd Congress. The report predicted:

"The combination of inflation-affected expenditures and recession-induced revenue shortfalls will make it very difficult for many state and Local governments to make it through the upcoming year without tax increases, employee layoffs and cuts in levels of service."

This gloomy prediction is now a harsh reality for many city governments, as shown by a recent survey of 67 cities:

The 55 cities that provided data on fuel costs reported an average rise of 90 percent from 1973 to 1974.

Thirty-six cities reported that the economy was forcing postponements of planned capital improvements.

Twenty-one cities reported municipal job layoffs or job freezes.

Forty-three cities anticipated revenue shortfalls in 1975.

Forty-two cities expected to raise taxes and/or cut services during 1975.

The budget and the cities: While the President's Budget outlines a specific set of programs for dealing with the economic crisis, it fails to recognize the unique potential of state and local governments in the recovery process. Instead of developing a coordinated intergovernmental approach to our economic problems, the Budget would force local governments to take budgetary action that could work at cross purposes with national economic recovery strategies. For example, local governments are being forced to:

Increase taxes, while the Federal Budget proposes stimulation of the private sector through tax reductions.

Lay off employees, while the Federal Budget proposes to create jobs in the private economy by these Federal tax cuts.

Reduce essential public services, many of them most needed by those hardest hit by the economic crisis.

The sheer magnitude of the state and local sector should be reason enough to coordinate carefully the national economic program with state and local governments. As of 1972, 47.5 percent of all government expenditures took place at the state and local levels, and employment at those levels was four times greater than federal employment. With the public sector accounting for more than 32 percent of the gross national product, and state and local governments accounting for 43 percent of the combined public sector, common sense should dictate a coordinated intergovernmental approach to the current crisis.

The President's Budget sets forth economic recovery policies that both help and rely heavily upon the private sector. In his Budget Message, the President said: "I believe that tax relief, not more government spending, is the key to turning the economy around to renewed growth." The Budget calls for $16 billion in tax rebates during 1975, with $12 billion for individual tax relief and $4 billion for corporate tax relief. This anti-recessionary measure will be coupled with $3.5 billion in increased aid to the unemployed.

Thus, the President proposes to shift some billions of dollars in purchasing power to private business and to individuals. In the process, he is taking some funds away from Federal programs that aid cities and that also help to support the economically weak and others who are unable to help themselves. The League and the Conference recognize that there must be some belt- tightening and acceptance of hardship in our recovery effort, but they also believe that the President's program is uneven and unfair in its likely impact and unwise in its support of the private sector at the expense of the public sector. For after all, the state and local public sectors interact with the private sector no less than the Federal public sector does.

The long run: The President's Budget is also designed to "avoid commitments to excessive growth of Federal spending in the long run" and thereby to reduce the inflationary pressures during the recovery period. To achieve this objective, the President is proposing that Congress approve budgetary reductions and restraints to prevent an additional $17 billion deficit. In addition, the rate of growth of many programs would be curtailed over the next two decades, despite the Budget's own projection of unacceptably high unemployment rates for the rest of this decade.

The President's determination to provide the bulk of the anti-recessionary economic stimulus through the private sector, as opposed to increased public sector activity, means that the urgent needs of the cities will go largely unmet.

The cities, it should be stressed, are the locus for the increased private sector activity that the Administration wishes to promote. The cities provide necessary services and infrastructures. Crippling of cities could limit or undermine the gains of the private sector. The recovery program, we assert, should aid cities as well as the private sector.

The FY 76 Budget does not adequately address the needs of cities. Instead of fully capitalizing on the potential ability of state and local governments to contribute to the recovery effort, the Budget proposes a reduction, in real dollar terms, of Federal assistance to the cities. This reduction can only place an additional burden on hard-pressed municipal budgets, increasing the likelihood of regressive local tax increases or cutbacks in essential services, or both.

Energy: In its energy tax and payment proposals, the Administration plans to make available to state and local governments $500 million in FY 75 and $2 billion in FY 76 to offset the new fuel and energy costs the Ford program will impose on local levels. But municipal energy bills are already high because then have been rising rapidly for more than 18 months. Twenty-five to thirty billion dollars already have been drained out of the economy to pay for inflated energy related costs, and cities have paid their share of this huge sum. No remedy, however, for the inflated fuel costs already burdening municipal budgets is provided in the President's Budget.

The President's proposal to compensate state and local governments prospectively for rising energy costs is computed under the General Revenue Sharing formula which is based on population, income and tax effort. This formula relates poorly, if at all, to actual municipal energy costs. Cities use energy in proportion to the number of miles of road that have to be lighted and patrolled, the number of buildings that have to be heated, the number of trash pickups that have to he made, and so on. Moreover, cities that rely on oil and natural gas for fuel are in a distinctly different situation from those that use coal and hydro-electric power. Further, the General Revenue Sharing formula excludes schools, which are heavy energy users for buildings and buses.

A critical long-term city concern is the cost, supply and distribution of energy and the related economic impacts. The immediate picture does not seem bright. And the longer range Budget, insofar as it sheds light, is not favorable, for example, budget authority and outlays for natural resources, environment, and energy are expected to fall from 1976 to 1980.

From the standpoint of the cities and the nation as a whole, the President's program leaves no room for a reduction in oil prices. His tax and allowance program would put a floor under the current quadrupled international price, which has been established by a cartel of oil-exporting countries. This seems to be an inflexible policy of despair, from the standpoint not only of the consumer, but also of local government.

Finally, the Administration's decision to increase the price of petroleum products generally, rather than to focus on gasoline prices, signals its continued willingness to promote the use of energy-inefficient automobiles, rather than to concentrate national growth around mass-transit- serviced metropolitan modes.

Some bright spots, including general revenue sharing: Despite the foregoing, there are some bright spots in the Budget for cities. Though the Administration has resisted the amount of subsidy for public passenger vehicles that would be necessary to provide real incentives to use them instead of private cars in metropolitan areas, the President's transportation budget, discussed in detail elsewhere in this book, is a distinct plus. So, too, is the Budget's release of $4 billion in previously impounded water pollution control construction funds.

We are also pleased that the President proposes to renew the General Revenue Sharing Act through 1982. But the specific figures for 1976 show an anticipated outlay to state and local governments of $6.3 billion, almost the same figure as for 1975. Our pleasure is tempered, therefore, by the fact that no provision has been made for the 11 percent increase in prices over calendar year 1974 and the additional increase sure to take place before FY 76 begins next July 1. The Budget figures themselves show that overall Federal aid to state and local governments will advance about 6 percent in 1976 over 1975, an increase far short of the inflation rate experienced in the past year. If state and local governments are to continue to carry out vital programs adequately, and if their citizens are to receive the service and assistance they require, some provisions must be made to bridge the gap caused by inflation.

Between 1976 and 1980, Federal aid for community and regional development will drop from an outlay of $5.9 billion to $5.3 billion. Compare this 10 percent drop with the defense budget, which is projected to grow over the same period by more than 50 percent. Meanwhile, education, Federal manpower and social service expenditures will remain level. Revenue sharing will show a small rise, going from $7.2 billion in 1976 to $7.7 billion in 1980, an increase well below the expected pace of inflation. The Administration's budget projection thus gives extraordinary emphasis to defense expenditures – at the expense of domestic programs.

Economic assumptions: While the proposed Federal response to the critical fiscal and economic needs of the cities is disquieting, the economic assumptions underlying the President's Budget are also a cause for concern. Present economic conditions are extremely unstable: few predicted that the unemployment rate would climb to seven percent as early as December 1974. The revised budget deficit estimates are a good illustration of the effects of economic instability on the Federal Budget. In mid-January, the President said the deficit for FY 76 would be 45 to 47 billion dollars. Two weeks later, he was forced to revise this estimate upward by four to six billion dollars because of rapid decline in projected revenue and rise in Federal payments for unemployment compensation.

Double standards: As indicated elsewhere in this discussion, the FY 76 Budget applies a double standard to different sectors of the economy and the intergovernmental system.

On the one hand, we find that the Budget encourages private investment in capital expansion. On the other hand, we find that capital investment in the public sector is discouraged – e.g. there are to be no new construction starts in the Army Corps of Engineers domestic public works programs.

On the one hand, we find that the Budget assigns greater responsibility for program planning and management to the state and local governments. On the other hand, we find that the Housing Act Section 701 program, a vital planning and management capacity building tool for state and local governments and regional planning councils, is to be cut in half.

On the other hand, as already noted, we find that the defense budget is both increased and allowed to take account of future inflation. On the other hand, domestic Federal programs are given no such leeway.

The historical perspective: One of the premises of the President's budget-makers is that Federal grant outlays have been going up and up, and therefore the time has come to restrain them. This premise requires analysis.

First, the proposed rate of increase in federal aids to state and local governments next year is well below the 11 percent inflation rate. Second, the proportion of Federal grant outlays in relation to total Federal outlays, domestic Federal outlays. and state and local expenditures peaked in FY 73, has been going down since, and is projected to decline further in FY 76. Table Overview I demonstrates these points.

[Table omitted]

In reviewing this Budget, we recognize that it includes a variety of intergovernmental fiscal transfers. The sum of these transfers is depicted in Table Overview I. While General Revenue Sharing and block grants (e.g. community development, law enforcement, employment, etc.) comprise a growing share of the total, it must be remembered that the remaining categorical grant programs still are important to cities.

The New Federalism

Despite the fiscal problems created for the cities by recent Federal budgets, the National League of Cities and the U.S. Conference of Mayors did express satisfaction last year with the direction of the Nixon Administration in grant consolidation and apparent decentralization of the intergovernmental system. There was a coherent strategy for dealing with the non-Federal partners in that system and a recognition of their interaction with both the private sector and the Federal portion of the public sector. The strategy and the partnership were known as "The New Federalism."

Our problem with the Ford Administration's Budget is not only that it creates greater fiscal problems than ever, but also that it sees only dimly the vital and dynamic role of local governments in the intergovernmental system.

This Administration's obvious lack of attention in its FY 76 Budget to state and local government needs is even more distressing when one considers the amount of discussion that has taken place among Federal, state, and local government officials since President Ford took office.

At numerous meetings and forums, governors, mayors, county officials, and the President himself discussed issues of mutual concern. Yet there is little evidence that the Budget reflects what state, county and city leaders were saying.

It is for those reasons that we feel the cities are entitled to ask: Is this the end of the road for "New Federalism"?

BUDGET HIGHLIGHTS

Community Development and Housing

The President seeks $5.9 billion in new appropriations for HUD, up 13 percent from last year, mainly to liquidate prior year commitments, but not to generate significant new ones. Second year funding for the new Community Development Block Grant program would increase only slightly. The new Section 8 Housing Assistance Payments program would continue through FY 76 at an annualized rate of 400,000 units. The severe reduction in Housing Act Section 701 planning funds would be continued.

Community Services Administration (OEO)

Funding for the remaining community action and economic development activities of the old office of Economic Opportunity, now the Community Services Administration, would be cut almost $60 million. Research and development would be dropped. State economic opportunity offices no longer would receive federal funds.

Drug and alcohol abuse

Drug Abuse.– Enforcement funds would increase by $20 million, primarily for tighter border control in the Southwest. FY 76 funds available to communities for treatment services would decrease by $4 million from the FY 75 level of $126 million, a loss that would be compounded by a proposed 10 percent reduction of the federal match.

Alcohol Abuse.– While the FY 76 budget for alcohol abuse reflects a slight increase over the FY 75 request, the additional funds are to be used primarily for continuation grants, rather than new starts. At the same time, the FY 76 Budget calls for drastic rescissions in the FY 75 budgetary resources. Cities are most affected by these proposed cuts.

Economic Development Administration

The Economic Development Administration (EDA) budget would rise by $46.4 million to $314.3 million, but $36 million of the increase would be for new trade adjustment assistance. Public works programs would be substantially cut, while business development, economic adjustment, and state grants would be increased. Preliminary estimates suggest that SMSAs, which receive only about 25 percent of EDA funds, would receive the same amounts in FY 76 as in FY 75. The effect would be a severe cut in resources for ongoing local economic development activities and an increase in aid only for short-term adjustment to local economic crises.

Education

The overall education budget contains a cut of $400 million, with three-fourths of the reduction in elementary and secondary education programs. The major programs would be advance-funded again, but with about $500 million less than this year. Funds have been requested for the major programs to cover the transition quarter – July, August, and September, 1973. The Administration again proposes legislation to decrease by two-thirds the amount of money available for impact aid. Higher education would be cut by $133 million, of which $122 million would be for student assistance.

Employment

The level of Comprehensive Employment and Training Act (CETA) funding, other than for temporary public service jobs (Title VI) would remain constant at $2.4 billion, including $1.6 billion for training and summer youth employment (Title I), $400 million for public service employment (Title II), and $414 million for national and special programs. No new funds are sought for summer youth employment or the Recreation Support Program. Summer of 1975 and 1976 youth programs are to be funded from local CETA Title I resources. The Budget also proposes a rescission of $12 million in FY 75 funds for public service employment for the elderly.

Energy

To reduce the nation's dependence on foreign oil, a comprehensive plan for reducing consumption and increasing domestic energy supply is proposed, featuring oil import and excise taxes, income tax rebates, and an energy research and development program. The Budget emphasizes production over conservation and nuclear over non-nuclear energy sources in its $1.7 billion outlay request.

Environment

The President directs the Environmental Protection Agency to release $4 billion in previously impounded water pollution control construction grants in FY 76, bringing the total available for them since 1972 to $13 billion. But the level of support for local government's air pollution control and monitoring, insufficient in past years, would be further cut, despite Federal requirements to improve air quality. Solid waste resource and energy recovery effort again will be minimal.

Food stamps and nutrition programs

Proposed regulations would reduce food stamp outlays by $217.3 million over projected FY 76 amounts. The Department of Agriculture will propose a new block grant nutrition program which would reduce nutrition outlays by $410.8 million below FY 75 levels.

Health

The budget would slash community health programs (comprehensive health formula grants to state and local governments, community health centers, maternal and child health, family planning, migrant health, health maintenance, and National Health Service Corps) by an overall 30 percent. State and local governments are asked to join private institutions and third-party payers in picking up 20 percent of the Federal share of other Federally supported health programs. The President's Budget Message says: "We should begin plans for a comprehensive national health insurance system. However, ... I cannot now propose costly new programs."

Income security and social services

Major restraints on public assistance expenditures are proposed, thus potentially burdening state and local governments with financing a larger portion of income security programs. The burden would be compounded by a plan to impose a five percent ceiling on cost of living increases to beneficiaries of income security programs. These plans, however, are subject to Congressional approval.

Intergovernmental personnel assistance

For the second year in a row, the Administration requests $15 million for the IPA program. The actual operating level of the program has now been frozen for the last three years at about $14 million.

Law enforcement assistance administration

LEAA's budget authority will decrease from $880.1 million in FY 75 to $796.8 million in FY 76. This will mean a decrease of $88 million in crime control aid to state and local governments.

National defense

The President seeks $107.7 billion in budget authority for national defense programs – a $16.4 billion (18 percent) increase over FY 75. If appropriated by Congress, this military budget would be the largest in U.S. history.

Office of Minority Business Enterprise

The Office of Minority Business Enterprise (OMBE) program budget for FY 76 is $52.6 million, an increase of $600,000 over FY 75.

$1.1 million is requested to establish a new "city OMBE" demonstration project in seven cities.

Research and development

The budget proposes increases in obligations for research and development totaling nearly $3 billion, but these are not for the agencies most concerned with cities. The total research and development budget would increase from $18.8 billion to $21.6 billion, but the proposed HUD research and development budget would be the same as FY 74 – $65 million. That for HEW would be slightly less than in FY 74. The proposed energy research and development budget also does not appear to respond to the needs of the cities.

Rural development

The Administration requests a decrease of $120 million in rural development loan funds and proposes to maintain FY 75 levels for rural development grants. The rural housing budget is $112 million below this year's level.

Transportation

Mass transit capital grants would increase slightly from a FY 75 level of $1.05 billion to a FY 76 level of $1.1 billion. But formula grants, to be used for both capital and operating purposes, would be increased substantially from $300 million in FY 75 to $500 million in FY 76, as authorized by law. Funding for urban highways would be increased slightly in FY 76, although the proposed funding level of $685 million is substantially below the $1.3 billion authorization.

The large increase in funding for the Interstate, $500 million, makes clear the Administration's strong commitment to this program at the expense of all other highway programs. Airport and Airway Trust Fund grants for planning and construction would be increased slightly from $345 million in FY 75 to $350 million in FY 76. However, the FY 75 level included a one-time Congressionally-sponsored 1975 supplemental of $25 million; hence the FY 76 Budget seeks a $30 million increase over the equivalent FY 75 program.

Veterans

Reflecting 12 percent pension and 22.3 percent G.I. Bill increases voted in 1974, the Veterans Administration Budget is to climb from $13.6 billion in FY 75 to $15.6 billion in FY 76. G.I. Bill spending, with supplementals, is expected to total $4 billion in FY 75 and decrease to $3.6 billion in FY 76.

THE FEDERAL BUDGET PROCESS:

A NEW APPROACH

The Congressional Budget and Impoundment Control Act of 1974 mandates a comprehensive role for the Congress in shaping the Federal budget and holding the Executive branch accountable for spending programs. It creates a process to:

Improve Congressional control of the total federal budget:

Bring order to the piecemeal approach that Congress has taken toward the budget in the past;

Enable citizens to join in an annual Congressional debate on budget priorities;

Rationally deal with Federal tax expenditures;

Relate the Federal budget to current and projected economic conditions; and

Restrict the President's ability to withhold the expenditure of funds.

Congress will fully implement its new process in 1976 to develop the FY 77 Budget. The limiting of the President's ability to "impound" or withhold funds made available by the Congress through appropriations or other actions became effective when the law was enacted last year.

Under the Act, the traditional fiscal year (July 1 through June 30) is changed to October 1 through September 30. This change is intended to give Congress adequate time to formulate its budget before the start of the fiscal year. Under the present system, Congress is unable to complete action on all budget bills before the fiscal year begins, tending to produce uncertainty.

Under the new Act, Fiscal year 1977 will begin October 1, 1976. Therefore, the FY 76 Budget must take account of the fifteen-month 1976 federal fiscal year – the months of July, August and September make up the extra three months.

The primary significance of the new budget process is that Congress for the first time must vote on the priorities within the annual Federal budget as a whole. Less than two-thirds of the budget is appropriated by Congress each year, and these funds are allocated piecemeal through thirteen regular appropriations bills and a few special measures.

The old Congressional budget system contrasts sharply with that of most state and local governments, which vote complete annual budgets at one time. Further, only about 40 percent of the total Federal budget is controllable by Congress in the short run, because the remainder of the budget is expended in mandatory, permanent or trust fund programs established previously in law. Now, Congress must determine the relative worth of all spending programs and the internal tradeoffs of the tax structure itself (including special interests through tax breaks). The new process will not be limited to the immediate year; it will take into account a five-year frame of reference as well.

The new Act limits the President's ability to refuse to spend funds voted by Congress. A special message must be sent to Congress if the President wishes to rescind or defer spending of appropriated money, stating the amount and reasons for his request. A rescission i.e., not spending appropriated money at all, will require affirmative action by both the House and the Senate within 45 working days or the money must be spent. A deferral means that spending will be delayed to a later time in the same fiscal year; it will take effect automatically unless at least either House of Congress disapproves.

COMMUNITY DEVELOPMENT AND HOUSING

The Administration's FY 76 Budget for the Department of Housing and Urban Development proposes a series of expected steps to further realize the objectives of the 1974 Housing and Community Development Act.

The President is requesting $5.9 billion in appropriations, up 13 percent from the previous year. Nearly all of this increase results from the necessity of liquidating commitments made in prior year housing and community development programs. It does not represent a significant increase in commitments for future activities. Outlays are projected to increase substantially over last year, up 28 percent to $7.1 billion. The bulk of this rise is due to a projected "draw down" of funds under the new block grant program. HUD's budget includes approximately $322 million in impounded or deferred funds in three basic programs. This figure would drop to $264 million during FY 76 as some carryover funds were spent.

For community development, the budget proposes to fund the new block grant program during its second year at a level only slightly above the appropriation for FY 75. The Section 701 Comprehensive Planning program would continue a second year at the $50 million level, existing entirely on deferred funds from FY 75.

For assisted housing, the budget acknowledges that, at best, only half of the original goal for subsidized units will be reached during the balance of FY 75. New budget authority is sought in order to support a 100,000 unit level of activity in FY 76.

Community development

The Administration is asking Congress for a 2 percent increase in the funding level for the Community Development Block Grant program (CD). The proposed second-year appropriation for the new program of $2.55 billion would be $450 million below the actual authorized level in the 1974 Housing Act. At least 1,000 local governments will be receiving initial block grant contracts during the last five months of FY 75. Second-year block grant contracts will also be lumped in the second-half of FY 76. Thus, since no annual grant commitments are scheduled to come up for refunding during the July 1, 1976-September 30, 1976 transitional quarter (due to the change in the fiscal year), the Administration has not proposed any transitional appropriation for CD.

The FY 76 budget for HUD also reports on the transfer (authorized under the 1974 Act) of $628 million in unutilized, previously-impounded community development categorical funds into HUD's revolving funds. These funds, which will be used to liquidate program commitments already outstanding, had originally been provided by Congress for such activities as basic water and sewer facilities, open space, neighborhood facilities, and public facilities loans. Future HUD assistance for such activities will come through the Community Development Block Grant program.

701 comprehensive planning

On December 16, 1974, the President's deferral of one-half or $50 million in already appropriated Section 701 comprehensive planning assistance went into effect. The proposed FY 76 budget for HUD announces that no new 701 funds will be requested and that the program is projected to continue for a second year at the same $50 million level. While the budget does not address the department's funding strategy, it is presumed that the present approach of excluding further funding of cities over 50,000 population will continue.

Policy development and research

Also on December 16, 1974, the deferral of $8 million in funds for HUD's policy development and research activities became official, thereby reducing the FY 75 program level to $57 million. For FY 76, the Administration proposes to add the $8 million carryover to a request for a new appropriation of $57 million, producing a $65 million level for the year. Nearly one-quarter of the FY 76 funds are proposed to go toward continued testing of the twelve "direct cash assistance" or "housing allowance" experiments around the country.

Housing

As expected, the Administration's proposed budget continues the nearly total reliance of HUD on the new Section 8 Housing Assistance Payments program in lieu of all other available low- income housing subsidy mechanisms. All of the new contract authority provided by the 1974 Act for low-income subsidies has been released by the Department, including $900 million in Section 8 funds. During the rest of FY 75, HUD estimates that approximately 200,000 units will reach the commitment stage. During FY 76, the balance of another 200,000 units will go to commitment under the 1974 Act funds.

The budget also requests Congress to authorize an additional 200,000 units for FY 76, bringing that year's total to 400,000. Thus, the Administration estimates that 600,000 units of assisted housing could be committed between January 1975 and June 1976. The budget cautions that all these figures are rough estimates. The actual number of subsidized units will depend upon several factors, including the ultimate mix of new versus existing units placed under subsidy (since new units require nearly twice as much subsidy as existing units).

The budget also confirms an earlier announcement by HUD that the $215 million in Section 202 elderly housing funds are now available for construction loan financing only, with Section 8 subsidies available for "rent-up."

For the existing inventory of public housing projects now under management around the country, the budget proposes to increase operating subsidy funds for FY 76 by $75 million – up to a total $525 million. Distribution of these funds will be through HUD's recently-developed performance funding formula. Under the new budget control act, all previous "back door" contract authority, such as public housing funds, must now go "front door," meaning that Congress must give prior approval before the funds can be committed.

The two major low- and moderate-income FHA interest subsidy programs from the 1968 Housing Act would continue to remain essentially dormant, according to the Administration's plan. At the moment, some $264 million in Section 235 home ownership subsidy funds are frozen and the department remains adamant in its intention not to utilize those funds. For the Section 236 multi-family rental program, $181 million will be available and unutilized at the beginning of FY 76. However, HUD anticipates that all of these funds will have been committed by the end of FY 76 (approximately 70,000 units) in conjunction with its present policy of meeting bona fide commitments which the department incurred before the January 1973 moratorium.

Comment

For the first time in the last five years, the Administration's proposed budget for HUD is relatively simple and straightforward with few, if any, surprises. This is in sharp contrast to the previous four budgets which had each been based in large part upon a series of legislative actions by the Congress, none of which actually occurred as projected. Instead, this budget is focused on the process of carrying out the new activities created by the 1974 Housing and Community Development Act.

For cities, the message is a mixture of satisfaction and disappointment. On the positive side, particularly in light of recent experience with HUD budgets, there is a certain relief that comes with a hold-the-line budget. The two major programs of the department – Community Development Block Grants and the Section 8 Housing Assistance Payments program – would be continued into FY 76 at about current levels. Since both are new programs, such an approach might appear satisfactory at first.

However, inflation and the increasing needs of the cities continue. In the case of the Community Development Block Grant program, the decision of the Administration not to seek a significant increase in funding in the second year, if upheld by Congress, will cause very serious problems.

Moreover, it was generally understood at the time of the debate on the 1974 act that the Administration was prepared to support a series of annual increases in the funding of the program that would get it to the $2.9 to $3 billion level by the third year (FY 77). Indeed, HUD officials based much of the selling effort to the smaller, first-time CD communities that will rely on discretionary funds on the assumption that subsequent increases in the total appropriation would produce substantial discretionary funding resources for their needs.

Instead, with the first year of the new Community Development program at a level of $55 million below that authorized, there is now a probability that there will be little or no discretionary funds for first-time communities within metropolitan areas. The minor 2 percent rise proposed by the Administration in the second year will certainly be absorbed by the many "urban counties" whose entitlement amounts will double under the act in FY 76. One year without reasonable funds for discretionary communities is bad enough, two years would be intolerable.

Also bearing heavily on the negative impact of the Administration's proposal to hold-the-line on C.D. funds is the corresponding reduction being proposed elsewhere in the FY 76 budget in various urban-oriented social service programs, particularly in the area of health. Under the C.D. block grant program, communities are required to first exhaust other federal grant-in-aid sources for social services funding before using C.D. funds (other than for matching). As the alternative sources of these "software" funds decrease, the local pressures upon the limited C.D. block grant dollars measurably increase. For those communities with "formula" (rather than "hold harmless") entitlements, failure to increase the total national C.D. pot will hurt.

A parallel disappointment, and one possibly even more serious on a dollar-for-dollar basis, concerns the Section 701 comprehensive planning program. Recently, the 701 program has become one of the most valuable funding tools for local governments of all sizes and locations. The Administration's decision to cut the program in half – down to $50 million – and to eliminate the funding for cities over 50,000 population on the grounds that these communities can use C.D. block grant funds is disastrous. It is simply not true that C.D. funds may be used for the same purposes as 701 funds. A careful comparison of the two programs makes this point immediately. Moreover, the argument itself exposes a basic lack of understanding about 701. It is a capacity building, general planning and management tool, not a functional planning system.

The reduction in the budget for policy development and research is similarly troubling, since it comes at a time when new and better approaches to old problems are clearly needed. In periods of high stress such as the present, research funding should be increased rather than reduced.

The significance of the Administration's recommendations in the area of assisted housing is hard to judge with any precision, since the primary mechanism on which all bets have been placed is untried and is certain to have a rocky start. While cities will express disappointment at the reduced estimate of Section 8 units to be processed to commitment in FY 75, there are strong signs that even the projected 200,000 units will not be reached by this June 30.

All of this suggests that there should be a willingness to adopt some of the more important administrative changes that have been proposed in the design of the Section 8 program and to utilize the existing Section 235 and 236 programs in tandem with the new program – a more flexible strategy that this budget forthrightly rejects.

COMMUNITY SERVICES ADMINISTRATION

OEO becomes CSA

The budget of the former Office of Economic opportunity, now the Community Services Administration (CSA), reflects the changes authorized in the recently enacted Head Start, Economic Opportunity and Community Partnership Act of 1974, and a cut of $57.8 million for FY 76 activities.

The law changed the name of the Office of Economic Opportunity. It also allowed the submission of a reorganization plan, currently being developed, which would transfer CSA to the Department of Health, Education and Welfare and the Title VII "Special Impact" program for local community development programs to the Department of Commerce. CSA will continue to administer the Legal Services program until the new Legal Services Corporation is fully operating.

The CSA budget reflects some important reductions. Last year's budget requested no funds for OEO programs, a move strongly resisted by Congress, NLC, USCM, and other public interest groups and community organizations. The program level finally appropriated came to $420.8 million. This year's budget continues the phase-out of "categorical" programs within the CSA structure. The FY 76 budget indicates the following new steps:

Research development and evaluation

No funds are requested for R & D activities. During 1974 they were delegated to other federal agencies with statutory responsibility and funds were appropriated to these agencies (HEW, DOL, etc.) at a program level of $4.4 million for 1974 and an estimated $6.3 million for 1975. The FY 76 budgetary change completes the transfer of these activities and phases out R & D.

Community action operations

At the cutting edge of the "war on poverty" were the local community action organization (CAA's). They received the bulk of the former OEO budget and will get the majority of proposed FY 76 CSA spending. Total CAA "local initiative" funds will be reduced from $330 million to $295 million according to the proposed budget. The law authorizing the creation of the Community Services Administration also reduced the maximum federal share from 80 percent of programs or activities under this category to 70 percent in 1976. Thus, CAA activities could continue at the present level but local governments will have to increase their matching share.

Exempted are CAA's whose annual operating level is $300,000 or less. In these cases, the federal share shall not exceed 75 percent of the total approved cost.

Other important changes in the CSA budget include the following:

Senior Opportunity Services (SOS)

No budget request was made. Last year SOS operated at a level of $7.5 million.

Funding of State Economic Opportunity Offices

No budget request was made. Last year, $9 million was spent for staffing and administration of SECO's in 50 states, the District of Columbia, Virgin Islands, Guam, Samoa, and the Commonwealth of Puerto Rico. The budget reflects the insistence by the Administration that states and local governments pay the administrative costs for CSA activities.

The Youth Recreation and Sports program operated by HEW and Emergency Food and Medical Services which was funded for $22 million in 1974 will also be discontinued.

Community Economic Development

This program presently funds 35 grantees in urban and rural areas to stimulate economic development activities in minority and low-income areas. The legislation changing OEO to CSA also transferred the Title VII "special impact" program to the Office of Minority Business Enterprise in the Department of Commerce. The FY 76 Budget requests a total of $39 million for community development corporation programs.

Legal Services Corporation

Until the Legal Services Corporation (LSC) is operated as an independent agency and a board of directors is appointed, CSA will continue to have jurisdiction over LSC program activities. No budget request will be made until the new corporation is operating; current program levels are on the basis of a "continuing resolution" which sustains the present funding level.

Comment

While less stringent than last year's attempt by the Administration to phase-out completely the Office of Economic Opportunity, this year's budget proposals nevertheless will have a negative impact on the urban poor and the elderly, on research and development efforts in metropolitan areas and, finally, on the technical services given to Community Action Agencies by State Economic Opportunity Offices throughout the country. The new Community Services Administration and the present lack of direction on the reorganization plan ordered by Congress compound the present financial picture at the troubled agency.

The Administration proposes to eradicate the Senior Opportunity Services (SOS) program which serves the elderly poor in many metropolitan areas. A relatively small program, SOS allowed Community Action Agencies (excluded from consultation on the larger HEW aging programs) some "leverage" money to stimulate activities for the elderly.

The budget would cut off funds for the State Economic Opportunity Offices. These offices have provided the necessary technical assistance to CAA's in both urban and rural areas to develop new programs. They have acted as information points within specific geographic regions for CAA's.

The CSA's R&D activities, too, provided some financial assistance to urban governments seeking ways to solve the age-old problems of poverty with new approaches and new solutions. Even though most of the functions of R&D in the former Office of Economic Opportunity have been transferred, these special R&D funds permitted great flexibility and gave cities a valuable tool for developing new approaches to solving urban problems.

Finally, the proposed reduction of the percentage in the federal share constitutes another "squeeze" on local governments, already hard-pressed because of inflation and other high costs of services, to continue the more than 900 local community action agencies across the country.

DRUG AND ALCOHOL ABUSE

Drug abuse

The estimated budget authority of $763.4 million for federal drug abuse efforts for FY 75 is an increase of $18.3 million over FY 75. It represents a greater emphasis on enforcement programs but provides less for drug abuse prevention.

Prevention

$336.9 million are requested for prevention efforts in directed programs and $106.9 million for prevention support within larger federal programs. The National institute on Drug Abuse (NIDA) will administer the major portion of the directed funds with a budget request of $221.8 million with $173 million to be available for community programs. Most efforts in cities are supported through treatment grants and contracts with the category of community programs in NIDA which is broken down as follows:

[Table omitted]

Treatment for ninety-five thousand persons is supported within the total scope of the community program. Eighty-seven thousand of the 95,000 treatment slots are within the treatment grants and contracts.

Requests for the remaining categories – education information, research, evaluation and planning direction support – do not differ significantly from FY 75 levels. In the area of training, however, $7 million less is requested, i.e., $3 million as compared to the FY 75 level of $10 million. The reduction primarily represents the elimination of regional treatment centers, with these activities being transferred to the National Drug Abuse Training Center.

As for preventive education, no funds are requested for the Office of Education to implement the Drug Abuse Education Act, as none were requested for FY 75. The $3.9 million requested for education programs are to be administered by NIDA and could be available directly to communities.

The Law Enforcement Assistance Administration (LEAA) within the Department of Justice will continue to administer the treatment alternatives to the Street Crime Program from its discretionary program budget with $3.7 million estimated for FY 76, which is $2.1 million less as compared to $5.8 million in FY 75.

The Special Action Office for Drug Abuse Prevention (SAODAP), which has coordinated federal prevention activities for the past three years, from the Executive Offence of the President, will cease to exist June 30, 1975, when the Drug Abuse Office and Treatment Act of 1972, (P. L. 92-255), expires. Many of SAODAP's functions will be transferred to NIDA. P. L. 92-255 also authorizes the major portion of funds which NIDA administers.

Law enforcement

Of the total enforcement budget authority of $319.6 million, (not including prevention activities of enforcement agencies) $147.9 million is for the Drug Enforcement Administration (DEA) within the Department of Justice. This represents an increase of $15.1 million over FY 75 and is to be used for criminal enforcement primarily along the southwestern border to combat an expected rise in the availability of both Turkish and brown heroin. The estimates for drug enforcement activities of LEAA and other Justice agencies total $64.7 million with the major portion of the $13.8 million requested for the U.S. Attorneys and marshals for personnel to continue drug related prosecution.

Most of the remainder of the enforcement budget is accounted for through the following estimates: $42.5 million to the State Department, $42.6 million to the Bureau of Customs and $20 million to the Internal Revenue Service in the Department of Treasury. These FY 76 estimates are set at approximately the same level as in FY 75.

Comment

The $17 million requested increase for treatment grants and contracts should be evaluated in light of the 10 percent decrease in the federal match for these funds which is to drop to 63 percent. Under the present 73 percent federal match (approximately $1,500 of the $2,100 necessary per annum per treatment slot), $130.5 million is estimated as necessary to continue the 87,000 treatment slots supported by NIDA administered treatment grants, which most directly provide services at the local level. The estimate does not take inflation into account or the anticipated increased need for treatment which is predicted by SAODAP due to the growing infiltration of Turkish and brown heroin, as documented by both SAODAP and DEA. Also, at present most NIDA funded programs are operating at 100 percent capacity due to reallocation of unused treatment slots during the past year.

The federal government expects state and local government to allocate funds for the 10 percent reduction in the federal match. This expectation is based on the false assumption that state and local governments are in a "better fiscal position" than the federal government. Thus the federal government is pressuring local governments to provide additional support.

The Treatment Alternative to Street Crime Program, administered by LEAA, was conceived by SAODAP to provide treatment for all persons graduated from TASC programs. However, the recent shortage of treatment slots is making it difficult for NIDA to honor SAODAP's commitments, particularly since NIDA must provide a 90 percent match for any new grants.

LEAA has developed TASC programs out of its 15 percent discretionary funds based on this commitment and does not want to continue the operational costs of TASC programs on a long term basis or to graduate clients where no treatment is available. State governments will be expected to assume costs for any TASC program in existence over two years.

The Administration is recommending that SAODAP be allowed to expire as part of a move to transfer to appropriate federal agencies the duties of all special offices operating from the Executive Office of the President. However, it is doubtful that NIDA will be able to assume the broad coordinating functions of SAODAP, operating as an agency four layers from the top of the Department of Health, Education and Welfare. There is also concern in some quarters that since the director of the DEA reports directly to the Attorney General, the enforcement aspect of drug abuse may receive mere emphasis, particularly in view of the new heroin infiltration.

Extension of the Drug Abuse Office and Treatment Act is of major importance to continuing national, state and local efforts against drug abuse.

Alcohol abuse

The President's FY 76 Budget for the National Institute of Alcohol Abuse and Alcoholism (NIAAA) reflects a slight increase over last year's request. The requested funds, however, are to be used primarily for continuation grants rather than new starts. At the same time, the FY 76 Budget calls for drastic rescissions in the FY 75 budgetary resources.

Rescissions

If the proposed reductions were to be accepted, the alcohol budget would diminish from a total of $165.8 million (including both the Congressional appropriations and remaining 1973 impounded funds) to $90.3 million. This would represent a cut of approximately $54.4 million, or one-third of the current budget authority.

Cities would be most affected by the proposed rescissions as project grants and contracts, which are the main source of funds for local programs, would be reduced from a level of $80.9 to $40.4 million. Since $16 million represents 1973 appropriations and cannot be reduced by the Administration, the actual revised 1975 Budget request for community projects and grants is $24.5 million.

Budget request

The total budget request for FY 76 is $114.2 million, as compared to $99.9 million in FY 75. Project grants and contracts are aimed at improving the capability of communities to establish programs of alcoholism prevention, treatment and rehabilitation. The budget authority requested for these programs is $45.5 million, more than $32.1 million initially requested for FY 75. The FY 76 Budget will provide continuation funding for grants initiated in 1975 and before. Funds will provide up to 80 percent of previous funding levels for all categorical programs with the exception of Indian and poverty programs, which will be continued at 100 percent and 90 percent respectively. All other programs will be expected to obtain funding support from sources other than the federal government.

Research was decreased from $10.4 million to $9 million, and management and information from $9.9 million to $7.1 million. Grants to states remained at the same level ($45.6). The Administration will propose legislation for 1976 to require a non-federal match for formula grants. Training increased from $1.9 million to $7.0 million. In supporting alcoholism training projects, NIAAA intends to increase the number of qualified professional and para-professional personnel working in the field of alcoholism and to improve the knowledge of such persons as law enforcement officers and lawyers who come into contact with alcohol offenders. NIAAA is also establishing four area Alcoholism Education and Training Programs in different sections of the country to assess the localized need for manpower in alcohol programs.

Comment

Both the requested rescissions for FY 75 and the justifications for the FY 76 Budget clearly indicate the Administration's decision to require local governments, states and categorical programs to assume financial responsibility for the continuing cost of alcohol services. A significant part of the revised FY 75 budget for community projects and grants is focused on assisting cities, states and individual programs to establish the capacity for seeking non-federal funding, and to utilize resources such as third party payments in providing services. However, not all programs may have the time to obtain enough resources for their 20 percent contribution between FY 75 and FY 76.

Although alcohol abuse has been recognized as the nation's foremost health problem, and Congress has consistently passed high levels of funds for alcohol programs, the Administration has still chosen to reduce these funds. While all programs of the National Institute of Alcohol Abuse and Alcoholism are cut in the revised FY 75 Budget, the impact of reduced funds will be felt most heavily in the cities. If the rescinded funds for project grants and contracts were obligated, approximately 534 new projects could be awarded, as well as 188 renewed. Only 295 new awards will be possible under the rescissions.

ECONOMIC DEVELOPMENT ADMINISTRATION

The Public Works and Economic Development Act of 1965, through its creation of the Economic Development Administration and the Regional Action Planning Commissions, has as its purpose the strengthening of those local economies "suffering substantial and persistent unemployment and underemployment." While the program has been largely rural oriented and seriously underfinanced (approximately $3 billion has been appropriated since FY 65), it has given significant assistance to struggling urban economies.

In its Federal Budget for FY 75, the Nixon Administration recommended that EDA and the regional commissions be phased out and replaced by federal revenue sharing through block grants to states for economic development. That effort failed and Congress extended the Public Works Act for two more years. The 1975 EDA extension legislation also made several changes in the agency's program which could be beneficial to cities as well as other communities: new planning and capacity building grants for cities and other sub-federal levels of government; an easing of the requirements for cities being designated for assistance; an improved business loan program more responsive to urban conditions; and a new economic adjustment program for state and sub-state jurisdictions. The total amount appropriated to EDA for FY 75 excepting funds for the regional commissions was $267.9 million. This latter figure assumes Congressional approval of a pending Administration rescission request of $2 million from EDA's technical assistance program.

For FY 76 the Administration proposes a budget of $314.3 million, an increase of $46.4 million, and an addition of 88 permanent EDA employees. It should be noted that this budget includes the addition of funds for the newly created trade adjustment program established by the 93rd Congress in the Trade Adjustment Act of 1974. Nearly $36 million in trade adjustment monies are included. Thus, EDA's current programs will receive substantially less than the $46 million projected budgetary increase. Federal officials concede that the need for trade adjustment assistance is as yet unknown. Finally, the Office of Budget and Management continues to prohibit the release of nearly $150 million in accrued funds in EDA's revolving fund.

The following is an outline of the major program components of the proposed FY 76 EDA Budget.

Public works grants and loans

EDA's Public Works Program will undergo a substantial reduction of $32.2 million including the elimination of funding for the Public Works Impact Program, which provides for short term labor intensive public works projects in high unemployment communities and neighborhoods. Urban communities have expressed general support for PWIP. The Administration maintains that public works are ineffective for the stimulation of emergency employment, and that programs involving federal project approvals should be de-emphasized. The public works programs have provided important assistance for local governments to install support facilities for business development, e.g., utilities, transportation improvements.

Business development

This program of business loans, loan guarantees and lease guarantees will be increased substantially by $35 million, including $17 million under the Trade Act of 1974 for firms adversely affected by import competition. It should be noted that in the past SMSA's have received far less money percentage wise from this title of the EDA program than from any other.

Planning, technical assistance, and research

EDA's planning budget will receive a net increase of $6.3 million, but that will include a reduction of $1.5 million in economic planning grants for cities and other sub-state jurisdictions. The technical assistance budget will receive a net increase of $2.7 million with the new monies going to a new $3 million program of technical assistance under the Trade Act of 1974, while the current technical assistance program suffers a $300,000 reduction.

Grants to States for supplemental and basic funding of EDA programs

The FY 75 EDA extension legislation established a new program of grants to the states for use in supplementing or making grants and loans for activities authorized under Titles I, II, and IV of the EDA Act, with the states providing 25% of the assistance. Funds are distributed among the states in proportion to the amount of public works grants each state has received since EDA was created. This program will receive a substantial increase of $7 million in F Y 76.

Economic adjustment assistance

This program, begun in 1975, provides special economic development and adjustment assistance to states and local areas to assist them in meeting actual or threatened unemployment arising from increased competition from imports, natural disasters, environmental closures, defense closures and other impacts of federal action, and other economic adjustment problems resulting from severe changes in economic conditions. The program's budget will be increased by $26,250,000. It should be noted, however, that the FY 75 start up appropriation of $38,750,000 was a six months' appropriation, and the FY 76 $65 million budget also includes $15 million for trade adjustment assistance.

Comment

While the Economic Development Administration survived Administration efforts phase out and replace it with a state oriented economic adjustment revenue sharing program, the proposed FY 76 budget for EDA indicates the persistence of Administration thinking: greater emphasis on assistance to states; a shift away from federal project approvals to revenue sharing program decentralization; a shift to economic adjustment programs rather than longer term economic development; and continued limited financing of federal economic development efforts.

The increase in EDA's FY 75 proposed budget is largely accounted for by the infusion of funds for trade adjustment. While our preliminary estimates suggest that SMSA's, which presently receive approximately only 25% of EDA funds, will receive the same dollar amount in FY 76 as in FY 75, this will involve a severe reduction of monies available for on-going economic development activities, e.g., public works, economic planning, and technical assistance, and an increase in monies only for assistance for economic adjustment to external developments impacting local economies. The dollar amounts may remain relatively equal but the change in the budget's composition. would be significant. With the requested 26.5 million dollar increase in its budget, the pivotal question is whether EDA's new economic adjustment program will become a program of short-term reactions to local economic crises, or a more flexible vehicle for long-term redevelopment of local economies, and hopefully, increasingly urban economies. The substantial increase in grants to states indicates the continued emphasis on strengthening the state role in economic development.

The Administration's overall economic strategy is also manifested in the EDA budget. Economic stimulation will be sought through assistance to the private sector, e.g., increases in the business development program, while public sector programs are curtailed. e.g., severe reduction in public works. While business development assistance, especially with the improved financing programs added in FY 75, is a valuable anti-recessionary and economic development tool, commensurate assistance is also needed for public sector infrastructure, technical assistance and economic planning to support local economic development. In line with its view that public works are a poor vehicle for emergency employment the Administration is also seeking to defer the $125 million accelerated public works program established by the Emergency Employment Act of 1974 (Title X) and to have those monies transferred to the public service employment program of the Department of Labor. In contrast, proponents of accelerated public works programs have indicated that such programs, while providing short term job opportunities, would also contribute to the long-term improvement of the national and local economies and increase long-term private sector job opportunities.

In contrast to the Administration's proposed EDA budget, mayors recently called for nearly a sevenfold increase in EDA's budget. This increase would include over $1 billion in additional funds for current EDA programs and $500 million for an anti-recessionary accelerated public works program.

EDUCATION

For FY 76 the President is requesting a total budget authority of $6.086 billion, a decrease in funding of approximately $400 million. Cuts in elementary and secondary education programs (down $291 million) account for approximately three -fourths of the decrease.

Rescissions, deferrals and reductions

At the same time the President has decreased the education budget, he has sent to Congress proposals to rescind or defer another $560 million of appropriated FY 75 education funds. If Congress should support these requests, educational funding would decrease by more than $1 billion. In particular, the President has proposed rescissions of $35.9 million in elementary and secondary education ($21 million will come from Bilingual Education and Follow Through funds); $102.5 million in education for the handicapped; $39.7 million in occupational vocational, and adult education; $58.3 million in higher education; and $49 a million in library resources.

Deferral proposals amount to $374.3 million: higher education basic opportunity grants, $298.7 million; higher education construction, $72.8 million; and library resources, $2.8 million. These proposals represent one-half of the rescission and deferrals proposed from all HEW funds.

Advance funding for consolidated programs

With an overall decrease of $400 million no programs will be significantly increased in FY 76. Support and innovation for elementary and secondary education increased by $41 million but that increase is based on approval of a $9 million rescission in funds for strengthening state departments of education. Grants for the Disadvantaged increased by a mere $24 million; Education for the handicapped increased $24 million, while at the same time the President has proposed a rescission of $102.5 from FY 75 funds and FY 76 advance funded monies.

Legislation supporting the consolidation of programs in elementary and secondary education was passed in FY 75. The FY 76 budget reflects this by providing funds to trigger the consolidations and provide advanced funding for the programs. In addition to the $6.086 billion requested for the Office of Education, $2,328 billion, in advance funding has been requested. The programs for which advance funding is requested, at FY 76 levels, are Grants for the Disadvantaged, Consolidated Programs (elementary and secondary education), Education for the Handicapped, Adult Education, and Libraries and Instructional Resources.

Programs maintaining fiscal peer 1975 levels

Other elementary and secondary programs are funded at FY 75 levels which, due to inflation will be viewed by some as a decrease. Of particular interest in this category are Bilingual Education (with a $15 million rescission proposed); Follow Through (with a $6 million rescission proposed); and Vocational Education (with a $38.7 million rescission proposed and the introduction of new legislation to consolidate programs, the result of which will increase the non-federal dollar share).

Emergency school aid

Funding the Emergency School Aid program continues to be an unresolved issue. Congress has not yet passed an appropriation for the program which is currently operating under a temporary continuing resolution. The continuing resolution funds the program at $234 million, which is at a much higher level than the President proposed. The Administration wants to reduce the level to $75 million. Its rationale is that funds can be targeted to those school districts with the greatest need of desegregation assistance rather than allocations being based on state apportionment formulas. At the same time, the Administration has indicated that if the continuing resolution becomes the budget authority for FY 75, rescissions of continuing resolutions will also be proposed. If approved the rescission. would reduce federal spending by $159 million.

Impact aid

The proposed impact aid legislation would reduce FY 76 budget authority by $390 million and reduce outlays by $270 million.

Library resources

The President will also propose legislation in the area of Library Resources. This legislation will support the integration of library and information service as well as new methods of delivery of library services.

Higher education

Although higher education fared rather well in FY 75, this is not the case for FY 76. Student assistance funds, which accounted for the major portion of the increased funds in higher education last year have been decreased by some $122 million. This $122 million is a net decrease resulting from the following changes in funding: Supplement Opportunity Grants $240 million are to be eliminated; the Direct Loan program is to be reduced to $9 a reduction $320 million; and Work-Study funds are to be reduced by $50 million.    These reductions amount to $610 million. Of this $610 million reduction, only $488 million will find its way back into student assistance programs. Basic Opportunity Grants will increase by $390 million; Guaranteed Loans by $74 million (the President has also requested supplemental appropriations in FY 75 of $150 million for this program); and Incentive Grants for state scholarships will increase by $24 million.

 

Research

 

The federal role in education, as viewed by the Administration, is devoted to developing and encouraging improvements in the educational process through research, innovation and reform, extending and assuring equal educational opportunity, and supporting projects that will enable the states to improve their capability to provide and finance educational activities. The F Y 76 Budget indicates that requests for the National Institute of Education have been increased from $70 million in FY 75 to $80 million. Additional authorizing legislation appropriating $357 thousand for FY 75 research will be proposed. The National Center for Education Statistics, created by the Education Amendments of 1974, will be funded at an increase of $7.6 million over the FY 75 request of $9.1 million; and $17.5 million is requested for the fund for the improvement of Post Secondary Education. Overall, funds for research in education will more than double in FY 73 increasing from $119 million in FY 75 to $254 million in FY 76.

 

The FY 76 budget provides about $39 million for innovative and experimental programs authorized under the Special Projects Act included in the Education Amendments of 1974. The FY 75 budget included $13 million for some of these activities which were formerly conducted under the Cooperative Research Act which has been repealed. The Special Projects Act is designed to support experiments with new educational and administrative methods and techniques, and to meet special educational needs and problems.

 

Comment

 

The Administration’s FY 76 budget for education again clearly indicates the federal government’s continued position that education is the responsibility of states and local governments. At the same time, local education agencies generally have been experiencing a hold-fast, if not a decline, in the states' support for local education.

 

Consolidation of elementary and secondary programs will be completed during FY 76. At best it can be said that the Administration has continued advanced funding for these programs. Whether or not the level of funding is sufficient to have an impact on monumental urban education problems remains to be seen. Regardless, they are not of the nature to relieve the present

"financial crunch" urban education agencies are experiencing today, particularly in terms of basic operating expenditures.

 

As usual, because all education funds are controllable funds (Impact Aid being the only exception) money for education along with other social programs, continues to suffer first and severely when there are cutbacks in federal spending. This year the crunch will be particularly severe because of increased energy coots. Because the vast majority of the nation's local education agencies are financially autonomous, they will be greatly affected by increased energy costs and will be pressing for federal financial support to offset their increased costs.

 

The Administration's proposed change in the Impact Aid program can have a tremendous effect on the general operating revenue of local education agencies. Impact Aid represents one of the few programs that provides unrestricted funds to school districts. A decline in these funds will place an additional and unnecessary burden on urban school systems already plagued with financial dependencies and no new sources are on the horizon to raise additional funds.

 

The Emergency School Aid program is again challenged by the Administration. The Administration argues that allocation of these funds should be based on need, not on a formula and that local education agencies must develop definitive plans for the use of these funds in assisting school desegregation. The shift in allocation criteria again raises the question of the Administration's level of commitment toward eliminating the occurrence of other Bostons and it places the tough responsibility for initiating desegregation activities on the local school district.

 

The court decisions affecting education for the handicapped have only exposed the top of the iceberg. Many more federal dollars are going to be needed to assist local education agencies in meeting their responsibility for educating this segment of the urban population.

 

The greatest need for education funds is at the elementary and secondary levels – in the public schools of the nation's cities – not in higher education. Based on a need factor, higher education receives a disproportional share of the federal education dollar.

 

EMPLOYMENT

Manpower Training and employment programs.

 

The President's FY 76 Budget calls for an appropriation of $2.4 billion for programs funded under the Comprehensive Employment and Training Act (CETA) of 1973. This is the same level of funding for CETA (excluding Title VI) as is presently in place after the December Labor- HEW appropriation. Title I of CETA would require $1.6 billion, Title II $400 million, and Titles III and IV $414 million, all of which equal current funding levels. Title I funding includes comprehensive manpower services and summer youth employment programs. Title II of CETA provides public service employment activities, and Title III monies for support manpower activities to special target populations. Title IV of CETA represents the nationally operated Job Corps Program.

 

Title I

 

Out of the $1.6 billion available for Title I activities 80 percent, or $1.3 billion, will be distributed among prime sponsors through the Title I formula. The remaining funds will be used to maintain the 90 percent hold harmless requirements, provide bonuses to promote consortiums of local jurisdictions, supplement vocational education activities, support state manpower services councils, fund manpower activities through the states, and to provide other activities at the Secretary's discretion.

 

Emergency Employment

 

The FY 75 appropriation of $875 million for the Emergency Jobs and Unemployment Assistance Act of 1974 is incorporated into the President's FY 76 budget as outlays. The Budget proposes transfer of $125 million appropriated for Title X of EDA (for public works projects) to Title VI of CETA. The budget anticipates therefore, that $1 billion in funds will be available for public service employment under Title VI in a time frame of calendar year 1975. Of this amount, it is estimated that $350 million will be consumed by June 30, 1975, and that $650 million will be available during FY 76. No FY 76 funds are being requested for Title VI pending an evaluation of the nation's needs and the program's success.

 

In addition, no funds are being requested for any further extensions of the Emergency Employment Act of 1971. Total new funding being requested by the President for public service employment in FY 76 thus amounts to $400 million, solely for Title II of CETA.

 

Job Corps

 

The budget reflects anticipated outlays during FY 76 of $171 million for the Job Corps Program, compared to $175 million in FY 75. The President's budget, therefore, requests a reduction of $4 million in funding for this national program.

 

Comment

 

The President's budget reflects two basic considerations of the Administration: the projection of significant amounts of carryover funds from FY 75, and a cautious, wait-and-see attitude toward public service employment. The manpower budget request also ignores the impact of a rate of inflation of 12.2 percent on manpower activities.

 

A $2 billion level of FY 75 public service employment activity is proposed to be refunded with a $400 million FY 76 budget request. Even with projections of carryover funds, this request would barely suffice for an orderly phase-out of the project, when reality calls for its immediate and substantial expansion. The failure to take early recognition of the problems of the unemployed and deal effectively with them can only lead to a severe reduction in our capacity to respond to an urgent national crisis that is growing worse, not better.

 

The proposed level of public service employment activity could result in lay-offs of workers in these programs as early as June, 1975. With most projections calling for a prolonged downturn in the economy this prospect is unacceptable.

 

The following table compares FY 75 public service employment resources with the President's 76 budget:

 

[Table omitted]

 

Should no resources beyond the proposed $400 million be made available to CETA prime sponsors during FY 76, slowdowns in hiring under existing resources would begin to occur within the next few months. This would be extremely detrimental to the nation's unemployed, but necessary if prime sponsors are to avoid mass layoffs of public service workers. The current pace of hiring is extremely rapid and participation in the programs is expected to peak at 320,000 by April, 1975. This peak would then fall-off precipitously unless additional resources were provided. More unemployed must be served if this effort is to be at all meaningful, yet as their needs grow, the President's Budget would only reduce the resources available to serve them.

 

Under the Budget, CETA manpower training efforts in urban areas also would suffer at a time of rapidly expanding needs. CETA Title I funding of $1.6 billion, while equaling the FY 75 level in total, does not mean that prime sponsors will be receiving the same allocations as last year. The Title I formula will continue to reduce the funding levels of most major cities through the 90 percent hold harmless provision of the Act.

 

In light of the above discussion, the expectation that prime sponsors will fund summer youth employment and recreation programs from future and existing Title I resources is ludicrous. Unemployment among youth is soaring and may reach 50 percent in urban areas by this summer. In failing to request a supplemental appropriation for the summer of 1975 or to seek budget authority for a summer of 1976 program, the President's budget plainly disregards the enormous needs of this group.

 

It is clear that despite Administration statements to the contrary, public service employment and certainly manpower training are not reflected in the budget as part of the President's anti- recession program.

 

Related manpower programs

 

In related areas, the Budget reflects deferral of funds in one program while requesting a continuation of others at current operating levels.

 

A budget authority request of $218 million is sought for the Work Incentive Program. The requested amount and projected carryover funds will sustain the program at the FY 75 level of $315 million. Since FY 75 operations were conducted largely with FY 74 carryover funds, a $93 million increase in the Department of Labor's authority and a $27 million increase in authority for the Department of Health, Education, and Welfare portion of the program are being requested.

 

The budget proposes an increase of $116 million for the Occupational Safety and Health Administration, including $5 million to provide on-site technical assistance to small employers, $2.5 million additional for state administered programs and $6.2 million for 300 new compliance officers.

 

To cushion the impact of statistics gathering in light of emergency employment legislation, the budget requests authority of $61.7 million, a $7 million increase over FY 75, to improve statistics gathering activities.

 

A budget request of $79.7 million, an increase of $3.6 million, is included for employment standards and equal employment opportunity activities. The increase is to be used primarily for an additional 200 compliance officers.

 

The Budget requests a rescission of $12 million for public service employment under Title X of the Older Americans Act – the entire amount appropriated for FY 75.

 

An additional $36 million has been requested for Special Workers' Compensation Benefits, increasing its budget to $201 million.

 

To administer the Department of Labor's portion of the Employee Retirement Income Security Act of 1974, the budget requests an addition of $4.9 million to be incorporated into a $42 million request for labor-management services.

 

The Budget also requests a $5.1 billion FY 75 supplemental appropriation for advances to the Unemployment Insurance Trust Fund. No new budget authority is requested for payments to workers not previously covered by unemployment insurance, as provided by the Emergency Jobs and Employment Assistance Act of 1974.

 

Summer youth programs

 

While the Department of Labor anticipates a 1975 summer youth employment program of approximately the same magnitude as last year (710,000 slots at a cost of $380 million), there are no specific funds earmarked and the budget states that a supplemental appropriation will not be sought for either summer 1975 or summer 1976. CETA prime sponsors are expected to fund summer youth programs out of existing CETA Title I allocations and surplus carry-over funds accruing from FY 75 CETA operations.

 

The Recreation Support Program is also not reflected in the budget this year. The new Community Services Act of 1974 transferred this program from the Department of Labor to OEO. OEO, however, has not proposed any funding for recreation support during FY 76. This program received $17 million during FY 75.

 

Comment

 

Rapidly rising unemployment rates and deteriorating economic conditions will have a severe impact on joblessness among youth this summer. With projected increases in the number of disadvantaged youth and alarming numbers of lay-offs in both the private and public sector, an unemployment rate of 50 percent or more is anticipated among disadvantaged youth this summer.

Cities have estimated that they can effectively employ 1.2 million youth at a cost of $650 million (at the new minimum wage rate of $2.10 per hour). A supplemental appropriation in this amount that specifically addresses the growing crisis of youth unemployment is essential if there is to be a summer program of meaningful magnitude. The recent enactment of the Emergency Jobs and Unemployment Assistance Act of 1974 responded to the needs of the rapidly increasing ranks of unemployed adults. A similar response is necessary to meet the separate crisis of youth unemployment.

 

ENERGY

Energy programs

 

Energy is one of the central issues of the President's FY 76 Budget. President Ford proposes:

 

An excise tax on imported oil of $2.00 a barrel;

An excise tax on domestically-produced petroleum and natural gas;

Decontrol of oil prices;

A windfall profits tax;

Deregulation of prices on new natural gas;

Leasing of off-shore oil and gas resources on the outer continental shelf;

More extensive use of the naval petroleum reserves;

Conversion of utilities from oil to coal;

A petroleum storage system;

An expanded research and development program which focuses on nuclear and non-nuclear resources;

Amendments to the Clean Air Act which would permit deterioration of air quality standards;

A five-year moratorium on automobile emission standards;

An $80 rebate to non-taxpayers for increased energy costs;

A low-income energy conservation program;

National mandatory thermal efficiency standards;

Energy facility siting legislation which would allow state override of local land-use decisions in facility siting;

Mandatory appliance and automobile efficiency labeling;

Decreased individual and corporation income taxes;

An income tax credit of 15% of expenditures on energy-saving home improvements;

A five-year moratorium on auto emission standards;

A two billion dollar payment to state and local governments; and

A three billion dollar payment to federal agencies.

 

Energy policy

 

This program is designed to reduce our dependence on foreign oil by raising the cost of energy in every sector of the economy, thus encouraging conservation through price rationing. The effects of the rising prices are expected to be modified somewhat by the tax cuts and rebates to corporations and individuals. These various payments are not viewed as an economic stimulus but as one part of an energy strategy which will reduce energy consumption without undue hardship upon any one sector of the economy.

 

The loosening of environmental standards, the leasing of federal lands, and the energy facility siting legislation all are efforts at increasing the domestic supply of energy. The Administration feels that the energy needs of the country warrant a slowing of the environmental gains made during the past decade.

 

The efficiency labeling and the mandatory thermal efficiency standards both attempt to increase conservation through public education and through energy efficient building codes.

 

Research and development

 

In terms of budget impact, the proposed energy research and development budget is among the more important aspects of the President's energy proposals. It serves to point out the direction in which the Administration feels that we as a nation should travel.

 

The FY 76 budget allocates $2.2 billion to federal energy programs representing a little more than one-half of one percent of the total federal budget. This budget will meet programmatic needs in four broad categories: general operating programs ($478 million), regulatory programs $164 million), uranium enrichment ($738 million), and research and development program ($1.7 billion).

 

"The funds for energy R & D ... will be in research and development with the newly created Energy Research and Development Administration (ERDA) responsible for over 90% of energy research funds.

 

"The funds for energy R & D ... will support a broadly based and balanced development effort on technologies for energy supply, environmental control, and conservation" (Special Analyses, p. 253). Within ERDA, the budget allocates the agency's funds as follows:

 

[Table omitted]

 

The research and development effort is divided into five major areas.

 

Fossil Energy – This program is intended to stimulate increased energy supply from oil, gas, and coal. The major programs within this area are coal liquefication, tertiary recovery methods for oil and gas fields, adaptation of low quality synthetic fuels for automobiles, and in site production of oil and gas from oil shale.

 

Solar and Geothermal Energy – This program will be conducted to establish the economic viability of solar energy in the heating and cooling of buildings and wind conversion. The geothermal program will continue to develop the technological base necessary to stimulate the generating of electricity in substantial amounts by 1985.

 

Nuclear Energy – This program will accelerate the development of fusion power technology. The program will also continue to increase the support of existing and developing fission technologies.

 

Environmental and Safety Research – This program will continue to study the effects of energy production on living systems. The effort will primarily focus on the effects of fission technology in the production of electricity.

 

Conservation – Program emphasis is on improving the efficiency of electric power transmission, advanced automotive power, and storage systems.

 

Comment

 

President Ford's proposals for increasing the nation's energy supply within the context of the nation's immediate needs and within the context of the long term needs of the country appear to be misdirected.

 

There is no question that if we are to reduce our energy consumption it must be done through the economy and include all forms of energy. The President's proposal, which will raise energy costs through oil taxes and the gas deregulation, is aimed at this reduction of consumption. But the questions remain: does the President's proposal reduce consumption equitably? and, can our already depressed economy stand the shock of such drastic price hikes in so short a time?

 

In terms of equity, the President's energy proposal fails for at least four reasons:

 

1. It raises prices for goods and services which are inelastic for the low income groups without providing enough support to offset the increases.

 

2. It affects regions of the country disproportionately without a similarly disproportionate tax rebate system.

 

3. The distribution of rebates to cities is not based upon a formula which bears any relation to the differing impact of the energy crises upon cities.

 

4. It does not provide relief to school systems.

 

It is difficult to judge the ability of the economy to stand the strain of this policy, but estimates place the direct costs of the President's proposals at over $50 billion. The proposals return $30 billion through various mechanisms leaving the economy and the consumer with a $20 billion shortfall and a national deficit of $30 billion.

 

The proposed strategy for increasing energy supply through the loosening of environmental standards and the leasing of federal lands appears to indicate a serious change of policy on the part of the federal government. The League and the Conference are committed to a policy of developing environmentally safe sources of energy. Thus, the amendments to the Clean Air Act, the conversion of utilities, the leasing of off-shore drilling rights, and the five-year moratorium on auto emission standards appear to eradicate much of the progress made during the past 10 years of increasingly stringent environmental protection. No one can argue our need to develop domestic energy resources, but there can be no excuse for degrading the environment for the sake of cheap energy.

 

The environmental gains this country has made have been hard won, and we should not sacrifice them in a frenzy of energy development.

 

The President's research and development proposals appear to be the most misdirected of the energy proposals. The R & D budget is almost entirely production oriented. Of the more than $4.2 billion allocated to ERDA for FY 76 only $3 million will be committed to research on end-use conservation. This budget must cover residential, commercial, and, industrial conservation research. It appears that the President not only expects the public to use less energy, but also expects it to do without the benefit of conservation research.

 

The FY 74 Budget proposed to provide adequate, reasonably priced, clean energy through the energy R & D programs. In that year, and in every succeeding year, we have witnessed an ever quickening march in the opposite direction with only a slight hesitation for FY 76. The energy R & D effort puts 60% of its resources into nuclear development allocating $120 million to fusion development and over $1 billion to fission R & D even though the promise of nuclear fission has dimmed as we have seen billions of dollars invested in nuclear power plants which are inefficient, unpredictable, and constantly threaten disaster. Not only are the plants cost-inefficient but the ever-increasing wastes from these plants continue to present an insoluble disposal problem. Fusion offers promise, but not without a greater commitment than the federal government has been willing to make.

 

But nuclear power is not the only environmentally dirty power source being invested in by the federal government: oil shale, coal development, and off-shore drilling have also received a disproportionate share of resources given their rather limited promise for long-term usefulness and acceptability.

 

For years, the League and the Conference have called for an energy research budget which more clearly meets the needs of the American people. The nation needs a budget which for the short term focuses on conservation – not production – and for the long term, develops a broad based program for clean energy – not the environmentally dangerous development of fission and other destructive technologies to the exclusion of more acceptable technologies.

 

This year the budget proposes an over 500% increase in funding for solar and geothermal energy, but still only commits 9%, of the total R & D budget to the development of these inexhaustible sources of clean, inexpensive energy.

 

Cities are by nature energy conserving. Their concentration of human and physical resources guarantee energy efficiency. Population density reduces travel distances and makes possible the use of mass transit. Housing concentrations limit energy use and transmission costs. And in cities the existing physical facilities are well-used, reducing the need to expend scarce energy on the creation of new facilities.

 

Not only are cities by nature energy conserving, but city governments have shown their ability to reduce urban energy use even further. While city fuel costs have risen 90%, cities have managed to keep the increase in their expenditures for fuel to 45% . The proposed federal energy policy acts contrary to the nature of cities and the efforts of city governments ignoring a cooperative approach to the problem. Instead, it works at cross purposes to local governments, forcing higher taxes and reduced services at a time when people should be encouraged to live in cities.

 

ENVIRONMENT

 

The FY 76 Budget provides for an increase of $47 million in authority for the Environmental Protection Agency (EPA), raising the total of its operating budget to $743 million.

 

Water pollution control

 

The EPA will allot $4 billion to states next week for further construction of water pollution control facilities. The money will not be available for obligation, however, until the beginning of the next fiscal year. This will bring the total amount of funds obligated under Section 207 of the Water Pollution Control Act Amendments of 1972 to $13 billion. The act authorized $18 billion, which was to be obligated over three years concluding with the current budget cycle. During FY 76, EPA expects actual construction activity to substantially increase. Figures listed below indicate that the level of funds obligated for reimbursement purposes was substantially lower during the current fiscal year, thus making available more dollars for new construction activity which will actually be initiated during the latter half of 1975.

 

[Table omitted]

 

The EPA water quality operating budget reflects a fundamental realignment of staff effort from permit issuing to compliance enforcement and monitoring. Along with this is an increasing emphasis on improving the management and administration of the construction grants program. A reduction of 151 persons is sought in those functions involving permit issuance. In contracts, the grants administration, and related enforcement activities have been substantially increased. EPA indicated in a special briefing session that the agency had completed permit work for 94 percent of major industrial and 88 percent of major municipal users as of Jan. 1, 1975, thus justifying the shift.

 

EPA operating programs

 

The EPA's operating budget will be increased by $47 million from $696 million for FY 75 to $743 million for FY 76. Over half of this increase is due to the enactment of a Safe Drinking Water Act during the last session of Congress. Other significant increases include: $3.6 million for construction grants management; $4 million for noise abatement control; $10 million for pesticides; and $14 million for management and support. This budget reflects the emphasis placed on improved management of the wastewater construction grant program discussed above, increased technical assistance to farmers and other crop growers who must comply with pesticide standards during the ensuing fiscal year, and implementation of a new water supply program.

 

Air pollution

 

The proposed $140 million air budget represents a decrease of almost $12 million. The decrease is primarily attributed to a reduction in commitment to stationary source pollution control technology research. This reduction, however, does not reflect a lack of emphasis on pollution control technology. Rather it is indicative of the fact that the first phase in a series of research efforts in this area undertaken during the current fiscal year was a capital intensive and non-repetitive one.

 

Grants to pollution control agencies will remain the same at $51.5 million, while technical assistance and training grants will be reduced somewhat below their FY 75 level of $10.8 million due to a transfer of several functions, including the advanced automotive power systems program to the newly created Energy Research and Development Administration.

 

Funding for 11 new positions has been requested for the assembly line monitoring program aimed at reducing the number of automobiles shipped to cities which have inadequate emission control devices.

 

Solid Waste Management

 

The Administration's FY 76 budget request for EPA's solid waste management program, including resource and energy recovery, is $16.6 million. The entire proposed increase of $2 million will be applied towards the development of guidelines for the disposal, storage, treatment, and transport of hazardous wastes. This continued narrow focus of EPA's solid waste program will attempt a further classification of hazardous materials by types and sources. In addition, EPA desires to identify the potential health effects of hazardous wastes and to study various approaches aimed at controlling hazardous waste pollution. The budget provides an increase of 10 full time positions for the Office of Solid Waste Management Programs for these purposes.

 

The remainder of this year's budget request is expected to support program components similar to FY 75. No new resource or recovery demonstration grants are planned, despite a continued emphasis on technical assistance to cities, counties, and states beginning resource recovery programs. In addition, the Administration did not request funds for planning demonstration and construction grants for conventional solid waste systems.

 

Water Supply

 

The budget request of $32.3 million for the water supply program represents an increase of almost $25 million over FY 75. Most of the money will be used to carry out the newly enacted Safe Drinking Water Act. In the aggregate the Administration has requested $24 million out of $78 million authorized by the act, including $10 million out of $15 million authorized for state program grants, $2.9 million out of $15 million authorized for health research, and $4.3 million out of $15 million authorized for control technology development Although the act specially authorizes the appropriation of $40 million for technical assistance and training for local government agencies, the Administration has requested less than $10 million.

 

Noise abatement control

 

The noise budget request has been increased by $4.9 million over FY 75. This increased authority will be used to speed up the issuance of guidelines and regulations under the act. Thirty-two additional staff persons would be authorized; 20 to work on the development of standards and 10 to be dispatched to the 10 regional offices.

 

Parks and recreation

 

The Land and Water Conservation Fund administered by the Interior Department's Bureau of Outdoor Recreation would again be funded at its ceiling level of $300 million. Of this $175.8 million would be available for matching grants to state and local governments for outdoor recreation planning, land acquisition, and development of facilities, and $117.9 million would be spent by federal agencies to expand various recreational opportunities.

 

Comment

 

This year's EPA budget, like some new domestic programs, appears to have been "held harmless". In any other budget year, perhaps a level of funding such as contemplated by the Administration for environmental programs would be satisfactory. However, requirements imposed on local governments by federal environmental statutes make this year quite different from all others.

 

Of paramount concern to cities is the Administration's recent proposal to place a five year moratorium on automobile emission standards. This would insure that the nation's localities will suffer a larger amount of noxious emissions from automobiles than is technologically necessary. At the same time, the Administration has failed to request an increase in the pollution control technical assistance program to aid cities in the development and implementation of air control plans. As of June 1, 1975, cities will have to implement indirect source reviews for all new construction activity. Transportation control plans with parking management requirements will also be in effect. These two requirements will be a tremendous burden to cities both from an economic and a technical point of view, and adequate financial assistance should be provided to help in carrying out these federal programs.

 

The second most distressing item in the EPA budget again is the minuscule budgetary request for solid waste management. The nation is in a period of economic ill health due to a number of related factors, not the least of which is an imbalance in the demand for and supply of energy. Solid waste activities, because of that commodity's great potential as a supplemental energy source, should be funded at a level at least 50 times what the current budget calls for, rather than ignored in the absence of any prior congressional initiative.

 

The Safe Drinking Water Act, signed by the President in December of last year, places onerous reporting, monitoring, and economic burdens on localities. Realizing this to be the case, Congress established a series of program grants and technical assistance programs aimed at helping states and localities comply with federal drinking water standards. The Administration proposes to spend less than half of the state program grant money and less than one-fourth of the technical assistance dollars during FY 76. Furthermore, the $50 million water facility construction loan program has been completely ignored, with Administration spokesmen indicating that they "may" deal with this issue in a supplemental appropriation request later this year.

 

Finally, the funds authorized to assist organization of localities in the first year of comprehensive areawide planning under the complex and often delayed procedures governing the Section 208 (Water Pollution Control Act) program will expire at the end of the present fiscal year. Only $53 million has been requested for FY 76, and only $123 million, out of the $150 million appropriated for FY 75 will be expended. This phasing down of Section 208 funding comes at a time when many localities have begun to overcome the deliberate inertia injected into the program by the Office of Management and Budget (which opposes this type of funding) and could prove to be disastrous to the program's already failing health.

 

FOOD STAMPS AND NUTRITION PROGRAMS

Food stamps

 

Proposed USDA regulations, effective March 1, will reduce food stamp outlays by $217.3 million over projected FY 76 figures and by $61.4 million over estimated FY 75 outlays. The proposed regulations would require all eligible food stamp families to pay 30 percent of their income in order to receive their full coupon allotment. These regulations would lower income limits for food stomp eligibility, reduce net benefits for people who do qualify, and discourage the participation of marginally-eligible families and individuals in the program. Congress has overwhelmingly approved and sent to the President legislation prohibiting any change in the food stamp program, thus freezing for all of 1975 the amount of payments at the Jan. 1, 1975 level. Most observers feel that a Presidential veto is unlikely.

 

In other food-related programs, the Administration is requesting a slight increase for elderly feeding over FY 75 and the same amount as last year for nutrition education. The Administration is also preparing legislation which would place a 5 percent limit on price index (cost-of-living) adjustments during the period Jan. 1, 1976 through June 30, 1976 for all child nutrition and food stamp programs. The direct food distribution program to institutions is scheduled for termination.

 

Nutrition

 

The Administration will propose a new block grant program for child nutritional assistance, and will not seek extensions of legal authority for certain nutrition programs scheduled to expire in June. These programs (pilot school breakfast, non-school food, and supplemental food for women, infants, and children) will be folded into the proposed new block grant program. Under the proposed new program USDA would spend $410.8 million less for nutrition assistance than it did in FY 75. According to USDA, the new program would eliminate the present set of overlapping child feeding programs, increase assistance to the needy, reduce subsidies currently paid to the non-needy, and provide states with more discretion and flexibility to tailor feeding programs to local conditions.

 

If enacted, it appears that the proposed legislation would eliminate as eligible recipients, all but the poorest family groups ($4,500 for a family of four) unless the state chooses to provide assistance to families with higher incomes (up to 125 percent of the poverty level). The proposed legislation is expected to reduce the total number of children receiving nutritional assistance from 25 million to approximately 9 million.

 

HEALTH

 

The austerity of the overall Budget is reflected in the health proposals, which have three basic strategies: (1) rescissions of appropriations already enacted; (2) reduction or elimination of certain categorical programs; and (3) changes in matching ratios to reduce federal shares in formula grant programs.

 

The health budget is unrealistically low because it assumes congressional approval of all of these strategies, together with substantial costs savings attributed to the more efficient delivery systems which are supposed to be in place as the result of planning and organization.

 

The Administration is not proposing major new legislation. The national health insurance proposal of last year will not be resubmitted as an Administration bill, and manpower and services legislation will originate in the Congress.

 

Rescissions

 

The President has already requested the Congress to rescind appropriations previously made for health programs in the amount of $800 million. Three hundred and fifty million dollars of this is from the National Institutes of Health (NIH) research funds; $284 million from health services planning and development (principally unobligated "Hill-Burton" construction funds; $104 million from alcohol, drug abuse, and mental health funds (mainly community mental health center monies) ; and $26 million from health services funds (mostly maternal and child health grants).

 

The Administration continues to press for elimination of federally-aided construction programs and is again delaying and obstructing the commitment of appropriated funds for health facilities construction.

 

Reduction or abolition of categorical health programs

 

The comprehensive health formula grant program, which provides basic public health program support to states, is proposed to be terminated. This program provides $90 million in formula grants to states under expiring authority which is not proposed for renewal.

 

Proposed for substantial reductions (in addition to rescissions) are the rodent control, lead-based paint, venereal disease and immunization programs. These are all key urban public health programs, and the Administration views them as local, not federal, responsibilities. The total reduction would be $14.3 million.

 

Community mental health centers support is again proposed to be phased out, and only continuations of existing alcohol program grants and contracts are contemplated.

 

The new National Health Planning and Resources Act replaced the Comprehensive Health Planning, Regional Medical Programs, and Hill-Burton construction programs. While the new law visualized the commitment of significant new resources, the budget proposed $175 million, which, together with a proposed supplemental appropriation of $75 million, is to fund all of the activities consolidated in that law. Again this year, the Administration proposes the transfer of some PBS hospitals to local agencies.

 

Changes in the Federal share of Federal-State formula grant programs

 

In general, the budget proposes that the federal support for state and local programs such as Community Health Centers, Maternal and Child Health, Migrant Health, and Family Planning be reduced by about 20 percent.

 

Another proposal with significant effect on the larger states and major cities is the plan to reduce the floor under the federal share for medicaid from 50 percent to 40 percent. The 13 states affected (Alaska, California, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, and New York) currently spend nearly 70 percent of the medicaid dollars. This 10 percent shift represents a substantial amount in the $7 billion medicaid program, probably from $200 to $700 million over the next few years.

 

The change in matching proposed will have an impact on local public hospitals, especially if the state passes the increased local share to the local government. Other legislative changes are proposed in medicaid.

 

Proposed legislation

 

Health legislation to be proposed by the Administration includes the following:

 

Discounting federal matching for adult dental care under medicaid;

Providing reasonable cost limitations for hospital care (medicaid);

Offsetting the impact of medicare (Title XVIII) cost sharing on medicaid;

Reducing matching floor front 50 percent to 40 percent;

Transferring St. Elizabeth's Hospital from NIMH to the District government.

 

Other legislation expected to be considered by the Congress includes:

 

National Health Insurance – A variety of proposals, including catastrophic coverage, coverage of unemployed workers, etc., are being prepared for hearings before the Ways and Means Committee.

 

Health Manpower – The Congress will probably reach early agreement on a comprehensive bill along the lines of the bill which failed to emerge from conference in the final days of the 93rd Congress.

 

Health Services – A bill identical to the vetoed bill of the last Congress has been introduced.

 

Comment

 

The Administration's philosophy of moving health care toward a third party reimbursement system continues. More cost sharing is proposed, with tightened cost controls and eligibility requirements. Emphasis will be placed on development of planning and delivery systems with a "disengagement" by the federal government from support of programs and services. Direct service costs will be shifted more and more to state and local governments. Construction aid will be severely limited and eventually phased out under current budget philosophies.

 

From the cities' point of view, the fault with the health budget is summarized in the words of Dr. Theodore Cooper, Acting Assistant Secretary for Health, Department of Health, Education, and Welfare, in his Feb. 1, 1975 briefing:

 

"The budget reflects the decision to require that states, local governments, private institutions, and third-party payers contribute a greater share of the cost of the health care programs we are supporting. We are anticipating that this increased contribution will be about 20 percent of the revised 1975 program level."

 

The proposed reduction in categorical and formula grants that are vital to community health are to be 30 percent – significantly greater than the proposed 20 percent overall reduction in federal support for health care.

 

INCOME SECURITY AND SOCIAL SERVICES

 

A comprehensive review of federal programs which maintain or supplement personal income with cash benefits or in-kind services would encompass more than 40 activities ranging from social security (OASDI) to housing assistance and school lunches. Service programs, such as child care and manpower training for special population groups, increase earnings capacity or otherwise reduce the need for cash benefits.

 

However, in this analysis, "welfare" is limited to public assistance, including aid to families with dependent children (AFDC), medicaid, social services, training for state and local personnel and child welfare services; the Supplemental Security Income Program (SSI) which substantially replaced the adult public assistance categories (aged, blind and disabled) as of Jan. 1, 1974; and programs for special populations now incorporated into the new Office of Human Development (OHD) in the Department of Health, Education, and Welfare (HEW).

 

Grants to States for public assistance

 

The maintenance assistance figures of $4.663 billion shown in Table IS-1 are based on estimates submitted by the states in November 1974 and adjusted by HEW to reflect proposed regulatory and legislative changes. This table does not include monies for the aged, blind, and disabled categories (except for close out costs) which are now included under the Social Security Administration accounts.

 

[Tables omitted]

 

The projected caseloads for FY 76 indicate that although the rapid increases of the late 1960s have ended, there will be a greater growth in the next year due to the economic situation. The greatest relative growth is occurring in the average monthly payment which has increased from $56.56 in FY 74 to an estimated $67.41 in FY 76. The caseload increases in those three years in families are small – 10.845 (FY 74) ; 10,995 (FY 75) ; and 11,241 (FY 76). HEW has stressed repeatedly that management initiatives have been successful in reducing overpayments and eliminating ineligibles with the result that the funds can be used to increase individual payments.

 

Projected costs under the public assistance program for FY 76 need to be closely examined because of the possible implications of proposed federal legislation which will severely impact local and state finances. HEW is asking localities and states "to share a greater proportion of the financing of public assistance programs and health services programs for special target groups." A variety of legislation will be proposed (See Table IS-2), the most costly being a reduction of federal matching in the medicaid and social services programs. The reduction in medicaid from 50 to 40 percent would affect the 13 largest states. The services matching rate (from 75 to 65 percent in 1976 and to 50 percent in FY 77) would affect all states and localities.

 

A number of regulatory and legislative proposals are incorporated in the medicaid budget. The proposals are a reaction to the substantial increases in federal funding for the program – $3.2 billion in FY 71 to $6.8 billion in FY 75 – averaging 25 percent annually. Medicaid costs on the average are shared almost equally between the federal and state or local governments. The major emphasis in reducing costs through regulations will be through greater utilization review and greater use of eligible third-party payments.

 

The recently enacted Social Services Amendments of 1974 (P. L. 93-647) stabilizes the program for the first time in several years. Expenditures are expected to grow in FY 76 in this substantially broadened program which includes a greater role of cities in the development of overall planning. It is likely that many states will be reaching their ceiling of federal matching funds within the next fiscal year.

 

While no legislation is specifically proposed for reform of the income transfer programs, the President emphasizes in his budget message that he does not want to abandon the effort to simplify the system. He will work with Congress this year to seek alternatives to the present complicated welfare system, hopefully to develop a solution which he believes will be no more costly than the present program.

 

Until the enactment of some form of income security program, HEW will continue the emphasis on the WIN program. An additional $120 million are requested for FY 76, with the major part of the increase in training and incentives, rather than in child care and other supportive services.

 

Supplemental security income program

 

The SSI program, initiated Jan. 1, 1974, replaced the state administered program of assistance to the aged, blind and disabled with a program administered by the federal government with uniform eligibility requirements and support levels, and with optional state supplementation. The minimum benefits of $146 for an individual and $219 for a couple are subject to automatic cost of living increases and would be affected by the proposed 5 percent limitation on all such benefits.

 

The number of beneficiaries is substantially lower than estimates given prior to enactment of the program. Outreach efforts by HEW thus far have received few responses. The total number projected for the end of FY 75 is one million lower than the number estimated in the FY 75 budget. Benefit payments are approximately $200 million higher because of the provision for two cost of living increases during the last calendar year, and because the average monthly benefit under the SSI program is approximately 45 percent higher for the aged and 22 percent higher for the disabled than was anticipated.

 

Office of Human Development

 

The newly created Office of Human Development is responsible for administration of programs serving vulnerable groups including the aging, handicapped, children, native Americans, and youth. Organizational changes accomplished through Congressionally initiated legislation moved the juvenile delinquency program to the Justice Department and moved the vocational rehabilitation program from the Social and Rehabilitation Services to OHD.

 

All of the programs in OHD in the Federal Budget show either a constant level in FY 76 or small increases. However, in reviewing the FY 75 appropriations made by the Congress, there are actual decreases proposed in FY 76 aging and vocational rehabilitation programs. The elderly community services (Title III) budget is reduced $9 million, elderly nutrition (Title VII) is reduced $25 million, and training reduced $8 million in FY 76, if actual FY 75 appropriation figures are used. In addition, the FY 76 request for vocational rehabilitation represents a decrease of $23 million over amounts appropriated.

 

There will be a new initiative in child abuse programs and the runaway youth project will be maintained at the FY 75 level. The aging program will remain the same in FY 76 with the emphasis on providing the same number of meals within the same funding (despite increasing food and labor costs). The rationale for maintaining constant funding is that most programs are now operational and require no start-up and lower administrative costs.

 

The $434 million for Head Start will continue to provide services to approximately 300,000 children. Because of the emphasis placed by Congress on serving handicapped children through this program, an increase of $20 million will be targeted toward improving services to 38,000 handicapped children currently enrolled.

 

Comment

 

The financial status of the OASDI programs have come under close scrutiny this year because of the large potential net spending from the fund in FY 76. Without the 5 percent limitation, the fund will distribute $4.148 billion more than it receives in contributions; with the limitation, as well as with other cost saving legislation, that total is expected to be reduced to $837 million. This development is the result of new lower forecasts of the level of employment and of earnings for FY 76. It would mean that the reserves in the trust fund would be used to cover the difference in income and spending.

 

The OASDI (social security) fund is only one of a number of income security programs which are tied through legislation to a cost-of-living index. The President, at the press briefing on the FY 76 budget, emphasized that he believes that the "uncontrollables" in the federal budget, such as social security, can be controlled through legislation. Legislation to reduce expenditures in these programs in FY 76 would reduce expenditures by $17 billion. Table IS-2 shows that over $6.2 billion of these cuts would be in public assistance and Social Security Administration programs.

 

Total federal income security benefits are estimated to exceed $152 billion in FY 76. This represents an increase of over $41 billion or about 38 percent from the FY 74 total of $111 billion. The major factors accounting for this change include:

 

By law, $96 billion of the 1976 outlays are in programs tied to the cost of living.

 

Primarily because of increased costs of medical care, health care benefits will increase.

 

The new SSI program has increased both average benefits and the number of eligible recipients compared to the state operated adult programs which it replaced.

 

Anticipated new outlays of 917.4 billion for unemployment insurance reflect both an increase in benefit levels and also in the number of eligible workers.

 

All programs presently tied by law to changes in the Consumer Price Index would be limited to a benefit increase of 5 percent under administration proposals. The effect of this legislation as well as other cost saving measures is reflected in Table IS-3 which shows those programs included in the $152 billion total.

 

The rapid increases in income security programs reflect the impact of the administration's commitment toward an "income strategy." Such a strategy which places more cash directly into the hands of the poor and aged within the cities may be most desirable in terms of direct impact on a city's economy. The opposing strategy of providing "in-kind" services such as day care or manpower training may not place money directly into programs from which the cities benefit on a dollar for dollar basis. Furthermore, in times of an economic downturn, it is more difficult to quickly channel monies through in-kind services programs into purchasing power within the cities. The trade-offs between services and cash assistance programs are still under debate within the Administration and may not be settled within the near future because of the potentially great cost of "cashing out" services programs and the strong constituency developed in support of those programs in recent years.

 

The proposed limit of 5 percent on cost of living increases may cause problems for cities, since in the long run, localities may have to supplement the incomes of the most needy. If other health services, and maintenance programs expenditures are reduced, either through regulatory changes or through legislation, the net effect for cities could be disastrous given the billions of dollars involved in such programs.

 

 

INTERGOVERNMENTAL PERSONNEL ASSISTANCE

 

For the second straight year, the Administration is requesting $15 million for the Intergovernmental Personnel Act (IPA) program, An additional $4 million is requested for the July-September 1976 transition period to the new federal fiscal year. The actual operating level of the IPA program has been frozen for the last three years.

 

Comment

 

The Intergovernmental Personnel Act of 1970 authorized the U.S. Civil Service Commission to provide grants and other assistance to improve and strengthen the personnel, manpower, and management capabilities of state and local governments. IPA grants have been used to upgrade the quality and effectiveness of municipal personnel and management resources through a variety of approaches, including the development and implementation of training for municipal employees. It is a program in which small governmental investments have had significant payoffs, and is currently the only federal program providing flexible, comprehensive assistance in the personnel and management areas.

 

The IPA program is without fiscal year limitation, authorizing such sums as are necessary to carry out the intent of the act. Initial expectations for adequate program funding have not been realized, and inflation already has eaten away over $4 million of the program's total $52.5 million appropriation since FY 72. The Administration's FY 76 request of $15 million, therefore, can only be viewed as a net reduction for the IPA program.

 

Equally discouraging to cities is the apparent lack of federal commitment to improving management capabilities at the local level. This pattern emerged in the Nixon Administration with the phase out of HUD's Title VIII community development training program and university community services grants under Title I of the Higher Education Act. The trend has continued in the Ford Administration with the proposed deferral of $50 million in HUD comprehensive planning assistance (701) appropriations. The lack of other management improvement resources will produce an even greater demand for IPA funds in FY 76.

 

LAW ENFORCEMENT ASSISTANCE ADMINISTRATION

 

The requested budget authority for the Law Enforcement Assistance Administration for FY 76 is $769.8 million. Additional authorizing legislation is to be proposed for $195 million to cover July 1 through September 30, 1976, the three-month transition period from FY 76 and the start of FY 77 on October 1, 1976. This change was mandated in the Congressional Budget Reform and Impoundment Control Act of 1974. The $769.8 million figure represents a decrease of 12.6 percent under the FY 75 appropriation of $880.6 million and is 77 percent of LEAA's authorized funding level of $1 billion. LEAA's expenditures, however, will increase from $865.7 million in FY 75 to $887.6 in FY 76 due to carry over of unexpended funds from previous fiscal years.

 

As Table LEAA 1 shows, a substantial portion of the decrease is reflected in Category 2a, the block grant program, which is reduced by $66.4 million, representing a decrease of 14 percent. Category 6, educational assistance and special training programs, also decreases considerably, from $44.5 million to $26.6 million. Discretionary funds (Category 2b) are reduced from $84 million to $73 million, representing a decrease of 13 percent. The other major decrease is in Category 3, corrections, which is decreased by $15.6 million.

 

Category 1, planning grants to states and local governments, is increased by 9 percent, from $55 million to $60 million. This is the only category showing a significant increase.

 

With the exception of Category 5, research, evaluation and technology transfer, the budget for programs at the national level remains fairly stable. Category 4, technical assistance, stays at the FY 75 funding level ($14 million), as does Category 7, data systems and statistical assistance ($26 million). Management and operations, Category 8, is increased by 7 percent (from $21.6 million to $23.1 million). It should be noted that this category has increased by 49 percent since FY 73.

 

No budget authority is requested for implementation of the Juvenile and Delinquency Prevention Act of 1975, which is authorized for $125 million in FY 76.

 

Comment

 

While the League and Conference recognize the need for overall austerity in the FY 76 budget, they take strong exception to the proposed category reductions in the LEAA program. The purpose of the Omnibus Crime Control and Safe Streets Act of 1968, as amended in 1970 and 1973, is to aid states and localities in improving their criminal justice systems and in controlling crime. Yet, the proposed FY 76 budget ignores the necessity for increased federal crime control funds at the local level. Instead, the federal bureaucracy is kept intact, while the aid to state and local governments is reduced by $88 million.

 

The increase in planning funds from $55 million to $60 million, while welcome, merely will allow state and local planning agencies to keep pace with inflation; it will not mean increased planning capabilities. Moreover, only $2 million of the $5 million increase may go to localities, a barely adequate sum to be divided among localities in the 50 states.

 

The proposed reduction in funds available for research and evaluation will have serious ramifications for both LEAA and localities. This is the critical year for the LEAA program. Congress is demanding evidence of LEAA's effectiveness, while local elected officials are faced with decisions on the institutionalization of expiring LEAA-funded programs. But the very budget item that would enable both Congress and local decision makers to have information on the performance of LEAA projects is cut below both the FY 74 and FY 75 funding levels.

 

In the summer of 1974, Congress recognized the need for federal assistance to combat the ever-growing problems of juvenile crime and delinquency and passed the Juvenile Justice and Delinquency Prevention Act of 1974, which the President signed into law on September 7, 1974. The program is to be administered by LEAA and is designed to support badly needed innovative juvenile delinquency programs at the state and local levels. To date, no funds have been appropriated to implement the program, and no budget authority is requested for FY 76. The Act is meaningless without funds. Since nearly half of the crime in the United States is committed by persons under 18, who are the target service population under the Juvenile Justice Act, it seems incredible that funding is not requested in the LEAA budget. We will not begin to see a long- term downward trend in our crime rate until juvenile problems can be adequately addressed which certainly requires strong federal leadership and assistance.

 

Contrasting sharply with the austere LEAA budget requests are the requests for agencies involved in federal crime control efforts. The request for the Drug Enforcement Administration (DEA) represents an 11 percent increase over FY 1975 ($135.7 million to $150.8 million). The proposed increase for the federal prison system is $22.4 million, while a $25.1 million increase is requested for the Federal Bureau of Investigation (FBI). Salaries and expenses for U.S. attorneys and marshals are increased by $14.6 million. The League and the Conference are not opposed to these increases, but feel they are being made at the expense of local government.

 

NATIONAL DEFENSE

 

For the first time in U.S. history, the military budget may exceed $100 billion. For FY 1976, the Administration has requested that Congress grant budget authority for national defense activities totaling $107.7 billion. This figure represents an increase over FY 1975 of $16.4 billion or some 18 percent. Even when taking into account the effect of pay increases and inflation on military purchases, spending is increasing. That means military functions are being expanded very substantially in terms of real dollars.

 

Considering budget outlays controllable by Congress each year, the portion proposed for military purposes has increased from 67 percent in FY 1975 to 69 percent in FY 1976. (About 75 percent of the total Federal budget is made available in mandatory, permanent and trust fund programs established in law and, therefore, is relatively uncontrollable by Congress.)

 

The FY 1976 military budget could grow another $2.2 billion if certain assumptions made by the Administration do not materialize. The increase from FY 1975 to FY 1976 would then be $18.6 billion (20 percent). The Administration is assuming Congress will reduce reserve personnel costs in FY 1975, reduce certain equipment, authorize sale of petroleum reserves and hold FY 1976 pay and retirement increases to 5 percent.

 

For the second year since U.S. forces disengaged from the Vietnam conflict, the military budget continues to rise. The Administration argues that the military is entitled to a large increase in its FY 1976 budget to recoup cuts made by Congress last year.

 

The Administration also argues that spending should be increased to compensate for the effect of inflation on military programs. This policy is not applied to other programs of the Federal government except payments and benefits programs which are tied by law to increases in the consumer price index. In the latter case, the Administration proposes holding increases to 5 percent in FY 1976. At the same time, an inflation allowance of 8.4 percent is granted for total national defense activities. After taking account of the inflation factor, military programs grow $8.7 billion (9.5 percent) in real terms.

 

Highlights

 

Some of the major changes and trends in military programs and funding are:

 

Aid to Southeast Asia – For FY 1975, Congress enacted military aid of $700 million for South Vietnam and $275 million for Cambodia. The Administration has requested supplemental funding for FY 1975 of $300 million for South Vietnam and $222 million for Cambodia. For FY 1976, the Administration proposes an additional $1.3 billion for South Vietnam, an increase of 128 percent (including the supplemental) over the level approved by Congress for FY 1975. The FY 1976 request for Cambodia is classified at this time.

 

Personnel – Total military personnel will be reduced from 2,129,000 to 2,100,000 and civilian personnel will be reduced from 994,000 to 985,000. Assuming the 5 percent limit proposed for pay increases, pay costs for active military personnel will remain at about the same level as FY 1975.

 

Force Structure – Force levels are to remain relatively constant except for Army divisions. One division was added in FY 1975 and two more are to be added in FY 1976 bringing the total to 16. About $400 million will be required for equipment and construction for the three new divisions.

 

Procurement – Appropriations for procurement are to be increased 47.8 percent to $24.7 billion. This substantial growth in procurement funding is caused by a combination of increased purchases of certain systems and initial procurement of systems coming out of research and development phase. The systems for which procurement funding is to increase most dramatically are aircraft (A-10, F-15A, AWACS), missiles (Trident I, Sidewinder, Sparrow, Condor and Maverick), ships (attack submarines, destroyer tenders, fleet oilers, destroyers and patrol frigates) and tracked vehicles (M60A1 tanks and M113A1 personnel carriers). $2.3 billion will be requested to cover unforeseen costs in the shipbuilding program

 

Research and Development – Funding for research and development is to increase 18.9 percent to $10.9 billion. The major items contributing to this increase are modification of the B-52 bomber to carry the Harpoon missile, air combat fighter, B-1 bomber, sea launched cruise missile, Navy air combat fighter, SAM-D missile, SHORAD missile, PHALANX ship gun system, UTTAS tactical transport aircraft, site defense against ICBM's and the space shuttle.

 

Military Construction – The military construction program is to go up 49.8 percent to $2.9 billion largely due to major increases in support facilities for the Trident submarine, sheltering aircraft in Europe and troop housing.

 

Five year projection

 

The Administration forecasts that by FY 1980 the military budget will reach about $150 billion, an increase of nearly 9 percent a year. If Pentagon estimates of inflation are taken into account, obligations will rise at about 2 percent per year in terms of real purchasing power. This increase is deemed necessary "to provide for selective improvements and to take advantage of changes in technology."

 

OFFICE OF MINORITY BUSINESS ENTERPRISE

 

The Office of Minority Business Enterprise was established within the United States Department of Commerce by Executive Order 11458 on March 5, 1969, to provide the following services: (1) to coordinate programs and operations of the federal government which affect the establishment, preservation, and strengthening of minority businesses; and (2) to promote the mobilizations of activities and resources of state and local governments and the private sector to develop and stabilize minority business enterprise.

 

For the third consecutive year, the OMBE budget has remained relatively stable at approximately $52 million. The budget authority for FY 76, at $52.6 million, is an increase of $600,000 over the FY 75 Budget.

 

Although there was only a slight increase in the FY 76 Budget, OMBE's programs were modified significantly. A budget authority of $1.1 million has been requested to establish a new "city OMBE" project in seven cities. This effort will focus on local government's efforts in minority business activity.

 

An additional $1.6 million are requested to provide additional contractor staff for about 50 business development organizations to permit increased management and technical assistance to minority firms, and to establish six additional Construction Contractor Assistance Centers to assist minority construction firms.

 

These program increases are accompanied by some program decreases. There is a decrease of $1.4 million resulting from the termination of a minority business training program and another $1.4 million decrease resulting from the reduction in scope of assistance provided by OMBE- funded consulting firms.

 

Comment

 

There seems to be a slowly increasing recognition by the federal government, as reflected in the OMBE FY 76 Budget, that minority-owned business firms are a part of the local economy. Such recognition by the federal government is long overdue and necessitates the programming of minority business activities more around local economic planning and development activities. An effort of this nature should be designed to promote minority business development within the scope of the city's economic development framework. Unless minority business enterprises are recognized and dealt with as a part of the local economic infrastructure, the importance of training and education, the development of capital accumulating institutions, and of management and technical assistance will be drastically reduced.

 

RESEARCH AND DEVELOPMENT

 

The President's proposed research and development budget for FY 76 calls for total obligations of $21.6 billion, an increase of $2.7 billion, or 15 percent, from the estimated FY 75 obligations of $18.8 billion. It also proposes that another $1 billion be obligated for research and development (R & D) facilities in FY 76. Over half of the R & D budget ($11.4 billion) is in the category of defense, an increase of $1.9 billion from FY 75. Another $7.3 billion is proposed for civilian R & D and $2.9 billion for space R & D.

 

Within the civilian portion of the R & D budget, the largest functional category is health with approximately $2.6 billion FY 76 obligations. About one-fourth of total obligations is planned for energy with the largest share, $1.5 billion, going to the new Energy Research and Development Administration.

 

It is useful to look at the R & D budget in two ways: first, with reference to who is spending the money and second, according to the functional areas at which the money is directed.

 

Departments and agencies

 

Table R & D-2 details the proposed obligations and outlays for the conduct of research and development by major departments and agencies. It shows the Defense Department at the top with $10.6 billion, containing the largest proposed increase of $1.8 billion. A $1.4 billion increase is proposed for the Energy Research and Development Administration. The Department of Health, Education and Welfare, which has the fourth largest R & D budget, shows an increase in proposed obligations between FY 75 and FY 76, but a slight decrease from FY 74. And the Department of Housing and Urban Development, ranking 13th among the 14 departments and agencies which spend 99% of the federal research and development money, shows a proposed increase in obligations from $58 million to $65 million; but the sum is identical to that of FY 74. The difference is in proposed deferrals for FY 75.

 

Functional areas

 

For the first time, a separate document, a Report on the Federal R & D Program, prepared by the Federal Council for Science and Technology, was released with the budget. In addition to describing the agency R & D proposals, it pursues functional areas across agency lines in the categories of basic science, climate, energy, environment, food, health/bio-medical, materials, oceans, and social. Energy R & D is discussed in the section on energy above.

 

Social R & D, "all socio-economic R & D performed in support of projects, programs, or policies for federal social programs" totals $1.l billion of the proposed $21.6 billion R & D total. This is a confusing figure because of the variety of activities it contains – from "determining nutrition needs" in AID to investigating the "human factors involved in weapons systems development" in the Department of Defense to research in income supplements for low-income persons in HEW.

 

HEW has the largest share of the proposed social R & D obligations, i.e., $652 million, an increase of $112 million over FY 75 but only $61 million more than FY 74. The proposed amounts for NSF, the Department of Agriculture and the Department of Defense all exceed that for HUD.

 

Comment

 

If the President's budget is a statement of priorities for the coming year, the research and development budget is an assertion of goals for the future. What can or will be done depends on what is known and the knowledge will be gained only if it is sought. It is difficult to make judgments about the adequacy of proposed research expenditures separate from judgments about need, priorities, and potential for payoff. It is perhaps more difficult in the research area than in others because the possible benefits often remain unknown until the project is successful. It is especially difficult to deal with this budget because so many dollars are in the limbo of deferral, making FY 75 figures uncertain and FY 73 totals unclear. However, from the city perspective, the proposed R & D budget provokes serious questions.

 

Are city needs directly and adequately reflected in the R & D budget? The proportion of the total funds which is proposed for HUD, $65 million of the $21.6 billion, seems scant. When viewed over time it looks even less adequate. And when the proposed HUD deferrals, in areas such as energy conservation, housing rehabilitation, and improving local management are compared with changing and growing urban needs, it must be concluded that too little is being devoted to

the investigation of cities, their problems, and possible solutions. Can it be true that national needs justify an R & D budget for Agriculture seven times greater than that for HUD and for the Veterans Administration one-third larger?

 

Are city needs taken into account adequately in areas of research indirectly related to cities? The weaknesses in the energy R & D budget are discussed in the energy section of this report. In that area it is clear that special needs of cities with regard to energy receive incomplete and tangential concern. The decline since FY 74 in the Research Applied to National Needs (RANN) Intergovernmental Science and Research Utilization program from $11.5 million to $3 million also suggests a low priority for putting knowledge to use for cities. The figures on the distribution of social R & D funds among the various agencies suggests, also, that a great deal of research which might be of use to cities is conducted in departments that are remote from direct city interests. More, rather than less, money should be devoted to consolidating and communicating this knowledge.

 

Rural development

 

The Administration has requested a decrease of $120 million in rural development loan funds and proposes to maintain FY 75 levels for rural development grants. The Farmers Horne Administration budget requests $900 million in loan authority for water and waste disposal, community facilities, and business and industrial development. Proposed FY 76 grants for rural water and sewer, and business and industrial development total $160 million, pending congressional approval of a $3.75 million rescission requested by the Administration. The FY 75 budget authority of $3.5 million for rural community fire protection grants has been proposed for rescission, and no program is proposed for FY 76.

 

Municipalities of 10,000 population and under are eligible for rural water and sewer and community facilities loans. Industrial loans are available to cities of 50,000 or less in a rural setting, with preference given to cities under 25,000. The $120 million decrease in rural development loan assistance will be exacerbated by the slowness with which outlays are likely to reach the cities. On Aug. 8, in one of his last official actions, former President Richard Nixon vetoed the agriculture appropriations bill. USDA operated on a continuing resolution for the latter half of 1975, severely limiting expenditures for that period. FHA also has been slow in implementing many of the provisions of the Rural Development Act of 1972.

 

Rural Housing

 

Housing loans and grants are projected at $2,142 million in FY 76, a decrease of $112 million from the basic program which operated last year. Proposed cuts will be shared equally by both new and existing housing purchase programs under the low income subsidized ownership program. Approximately 62 percent of housing units financed will be subsidized. No funds are being requested in FY 76 for domestic farm labor housing grants (funded at $7.5 million and $5 million in FY 74 and FY 75) or for mutual and self-help housing grants (funded at $4 million and $5 million in FY 74 and FY 75).

 

The Administration's FY 76 Budget for transportation assistance for the nation's cities reflects funding levels for mass transit as authorized in the National Mass Transportation Assistance Act of 1974, substantial decreases in the commitment to urban highways, and a slight increase in funding for airport planning and construction programs. Given the continued crisis in energy, and the concomitant drastic need for more efficient modes of transportation, the Administration's plan falls far short of meeting the transportation needs of cities.

 

During this session of Congress, the Administration plans to send major new airport and highway legislative proposals to the Congress. It is expected that the highway proposal will call for substantial changes in financing, program structure and the federal role. It appears that the Administration will seek to make the Highway Trust Fund available exclusively for Interstate funding, return two cents of the gasoline tax to the General Fund and allow states the option of picking up one cent of the motor fuel taxes (gasoline, diesel and special fuels).

 

The more than 30 categorical grant programs would be consolidated into four major programs: Interstate System, urban transportation, rural transportation and safety construction. All but the Interstate System would be funded from general revenue.

 

The proposed airport legislation seeks flexibility in the use of funds, revised formula grants based on air carrier departures, transfer of general aviation airport responsibility from the federal government to the states, and changes in aviation user fees.

 

Urban mass transportation

 

Capital Facilities – Prior to enactment of the National Mass Transportation Assistance Act (NMTA Act) of 1974, Congress appropriated $1.35 billion for FY 75 transit capital grants. The NMTA Act created a new formula grant program for operating and capital purposes, authorizing $300 million for FY 75 and $500 for FY 76. Congress and the Administration then agreed to a total FY 75 funding level of $1.1 billion for capital grants and $300 million for the new formula grants, requiring a supplemental appropriation of $50 million to reach that level. Because DOT did not request a supplemental, the FY 75 level will actually be only $1.05 billion, instead of the agreed upon $1.1 billion level. For FY 76, the Administration is requesting $1.1 billion for capital grants.

 

UMTA estimates that an additional $200 million per year in 1975 and 1976 will be spent on transit capital programs through the interstate transfer provision and Urban System substitution provisions of the 1973 Federal-Aid Highway Act. According to UMTA, the increase in funding for capital purposes will permit a slightly higher level of assistance to meet requests from localities for capital grants, including the "acquisition of new bus and rail stock and continued construction support for new rapid transit systems and extensions."

 

Formula Grants – Formula grants, authorized in the National Mass Transportation Assistance Act of 1974 for capital and operating purposes at local discretion, will be increased from a FY 75 level of $300 million to a FY 76 level of $500 million. UMTA has made it clear that in addition to operating expenses, these funds should be used for routine bus replacement and bus purchases.

 

Technical Studies – Technical studies grants (Section 9 grants) will be increased from a FY 75 level of $37 million to a FY 76 level of $41 million. This program provides assistance to state and local public agencies for studies related to management operations, capital requirements, economic feasibility and other planning activities related to the construction, acquisition or improved operation of mass transportation systems, facilities and equipment.

 

Research, Development and Demonstration (R D & D) – R, D & D grants (Section 6 grants) will be increased substantially from a FY 75 level of $46 million to a FY 76 level of $67 million. Most of this increase is for R, D & D of new systems such as personal rapid transit systems and dial-a-ride systems. The increase also includes $10 million for transit-related bicentennial activities in the District of Columbia, and other programs related to planning methodology, policy development, and management methods. The estimated project level of 155 projects represents an increase over the estimated 140 projects last year.

 

Highway programs

 

Interstate System – Obligations from the Interstate System would be increased substantially from a level of $2.56 billion to $3.06 billion in FY 76. The increase of $500 million for the Interstate, compared with a total increase of $600 million in all highway funding demonstrates the clear commitment by the Administration to this program, at the expense of urbanized and small urban programs.

 

Rural and Small Urban Transportation

 

The rural and small urban transportation program would provide financial assistance to states for highway construction on the rural primary and secondary systems, the priority primary system in these areas and other programs for areas under 50,000 population. The FY 76 Budget would be increased by $22 million to a FY 76 level of $905 million.

 

Urbanized Area Transportation – The urbanized area program is to provide assistance for highway construction on the Urban System, urban extensions of the primary and secondary systems, the Priority System in urbanized areas, the Urban High Density Traffic program and other federally-aided programs for areas with a population of 50,000 or more. The Federal-Aid Highway Act of 1973 authorized a total of approximately $1.3 billion for these programs. The FY 76 estimated costs for highways is only $685 million, indicating that the Administration proposes to spend about one-half the amount authorized by the Congress. This continues the trend by the Administration to defer vitally needed urban highway funding. It should be noted that Urban System funds can be used, at local discretion, for highway transit purposes.

 

Airports

 

Airport planning and construction grants will total $350 million in FY 76 which is the funding level in the Administration's proposed airport legislation expected to be submitted to Congress within the next month.

 

Although this funding level represents only a small increase of $5 million over the FY 75 level, the FY 75 level included a one-time congressionally-sponsored 1975 supplemental of $25 million, hence the proposed FY 76 Budget will result in a $30 million increase over the equivalent FY 75 program. Nevertheless, the funding falls far below estimated requirements for airport construction.

 

Comment

 

Mass Transit – Although the capital grants program has been increased significantly over the past several years, it still falls far short of the estimated basic bus and rail requirements of the nation's cities.

 

Cities also are concerned about the need to provide incentives for increased bus production, although it does not appear from the Budget that the Department of Transportation plans to make any major thrust in this direction. Currently, there is about an 18-month waiting period from order to delivery of buses.

 

Highway Funds – Total obligations for highways in FY 76 are estimated at $5.4 billion. The $600 million increase over FY 75 funding will go almost exclusively to the Interstate System which is to be increased by $500 million.

 

The Federal-Aid Highway Act of 1973 authorized approximately $5.8 billion for FY 76 from the Highway Trust Fund. Given the previous failure to obligate highway funds authorized by the Congress, and the projected withholding of funds in FY 76, the unexercised obligational authority in the Highway Trust Fund will be approximately $10.7 billion. The Administration also is expected to recommend deferring $400 million authorized in the 1974 legislation, bringing the total amount withheld to $11.1 billion.

 

The Budget includes only $685 million for urbanized areas, although Congress authorized about $1.3 billion for urban highway programs. Based upon the Federal Highway Administration's composite price index, highway construction costs have risen substantially and funding for the urban programs has failed to keep pace with increased costs. Also, cities still have extensive highway needs, as demonstrated by the forecasted expenditure of almost $5 billion on highways in metropolitan areas in 1975.

 

Finally, the Administration's proposed highway legislation would extend the Highway Trust Fund indefinitely and restrict the use of it to funding for completion of the Interstate System, expected to take 15 to 18 years. The department considers the Interstate as its main priority and after completing the system, DOT plans extensive Interstate rehabilitation and reconstruction.

All other highway programs would compete for general funds. However, the states would have the option of picking up one cent in motor fuel taxes (about $1.3 to $1.4 billion annually), which could be used for highway or transit purposes.

 

Airports – The proposed airport legislation would increase flexibility in the use of funds, extend eligibility to public use portions of terminal areas and allow acquisition of land for environmental compatibility, but it would also make certain Federal Aviation Administration (FAA) operations eligible for payment from user taxes currently restricted to planning and construction grants.

 

The League and Conference have opposed any diversion of these taxes to fund FAA operations, so long as cities continue to have planning and construction requirements. The Airport Operators Council International (AOCI) has estimated that just to keep pace with inflation over the past five years would require a funding level of approximately $600 million annually.

 

In addition, there is a surplus of almost $600 million in the Airport and Airway Trust Fund, which, it appears, the Administration may want to use for maintenance. Cities believe that this surplus could be used for the creation of a revolving land banking program to acquire land for future airport expansion and for environmental purposes.

 

VETERANS EDUCATION AND JOB OPPORTUNITIES

 

Overall Veteran's Administration FY 76 expenditures are expected to climb from the $13.6 billion projected in the FY 75 budget to $15.6 billion outlays. This reflects 22.3 percent GI Bill and 12 per cent pension increases voted by Congress in 1974. The GI Bill is the nation's largest scholarship program. FY 75 expenditures are expected to total $4 billion, an increase of almost $1.1 billion over last year's estimate. The administration calls for the repeal of the extension of the benefits expiration date from 8 to 10 years, and on the assumption that happens, projects FY 76 benefits at $3.6 billion.

 

Rescission requests are made to wipe out the FY 75 appropriation of $23,750,000 for the veterans cost of instruction program which enabled more than 1,000 colleges, junior colleges and technical schools to start Veterans Service's offices in July, 1973. No money is requested for this program for FY 76. With soaring unemployment among younger veterans, who were among the last hired because of the 70-72 recessions, no new federally-funded employment programs targeted to veterans are recommended. No legislation is recommended to correct geographical inequities in GI Bill use, which turn on the great state variance in costs and availability of post-secondary education. States in the West and the South, generally, have greater numbers of lower cost education institutions, especially junior colleges and technical schools, and, as a result, higher GI Bill usage.

 

Comment

 

Increased GI Bill expenditures represent an important anti-recessionary tool, since the more people who sign up for education and training the more money Congress appropriates under its open-ended commitment to veterans. More jobless veterans may turn to the GI Bill as an income supplement, as well during unemployment, with the hope that subsequent to completion of their education and training, they will become more competitive on the job market.

 

Additional spending on the GI Bill represents the increased attractiveness of the benefits resulting from the 1972 and 1974 increases. But, additional impact must be attributed to the veterans cost of instruction and supported by the League and Conference which gave educational institutions these staff to deal with veterans. A failure to continue this program indicates a continued emphasis on the so-called "income strategy" of funding the consumer and not the institution that serves him. This income strategy emphasis disregards the fact that unless the institution provides the consumer with services and is in a financial position to continue to do so, there may be no services to buy. There is national evidence that these programs for the first time opened up significant educational opportunities for low income and minority veterans.

 

Unemployment for veterans 20-24 has soared, rising to 15% overall and 25% for black veterans. Continued increases in veterans' unemployment can be expected because of their lack of seniority. Congress wrote specific provisions into the 1974 Emergency Job legislation, as well as the GI Bill amendments, providing for concerted efforts by the Veterans Administration, HEW and the Labor Department to work together in obtaining veterans' education, training and job opportunities. No specific funds are earmarked by the budget for this, but it is hoped that the GI Bill, emergency public jobs and where necessary, unemployment compensation, will be viewed as complementary means to create long-term opportunities for individuals who served the country.

 

GLOSSARY

 

Appropriation – Congressional action to allow a Federal program or agency to incur obligations to spend or to lend money.

 

Authorization – Basic substantive legislation that sets up a Federal program or agency. Such legislation sometimes sets limits on the amount that can subsequently be appropriated, but does not usually provide budget authority.

 

Budget Authority – Authority provided by the Congress – mainly in the form of appropriations – which allows Federal agencies to incur obligations to spend or lend money. While most authority is voted each year, some becomes available automatically under permanent laws – for example, interest on the public debt. Budget authority is composed of–

 

New Obligational Authority – Authority to incur obligations for programs in the expenditure account; plus–

 

Loan Authority – Authority to incur obligations for loans made under programs classified in the loan account.

 

Contract Authority – Some budget authority is in the form of contract authority, which permits obligations, but requires an appropriation or receipts to liquidate or pay these obligations.

 

Budget Surplus or Deficit – The difference between budget receipts and outlays, representing the expenditure account surplus or deficit plus net lending.

 

Deferral – An Executive Branch action or inaction which delays the availability of budget authority for obligation. Under the new Congressional Budget Reform and Impoundment Control Act, the President must send a special deferral message to Congress stating his reasons. A deferral means that spending will be delayed until later in the same fiscal year. Deferrals take effect automatically unless at least one House of Congress disapproves.

 

Federal Funds – Funds collected and used by the Federal government, as owner. The major federally-owned fund is the general fund, which is derived from general taxes and borrowing and is used for the general purposes of the government. Federal funds also include certain earmarked receipts, such as those generated by and used for the operations of government-owned enterprises.

 

Fiscal Year (FY) – Year running from July 1 to June 30 for fiscal year 1975 and earlier fiscal years. FY 76 will have a fifth or Transitional Quarter, ending September 30, 1976 (see "Transition Quarter"). All subsequent fiscal years will begin October 1 and end September 30. The fiscal year is designated by the calendar year in which it ends.

 

Impoundments (Budgetary Reserves) – A general term that refers to the withholding of budgetary authority from obligation – that is, rescissions or deferrals.

 

Obligations – Commitments made by Federal agencies to pay out money for products, services, loans, or other purposes – as distinct from the actual payments. Obligations incurred may not be larger than the budget authority.

 

Outlays – Checks issued, interest accrued on the public debt, or other payments made, net of refunds and reimbursements.

 

Rescission – Enacted legislation canceling budget authority previously granted by Congress. Under the Congressional Budget Reform and Impoundment Control Act of 1974, the President must send a message to Congress stating his reasons for the proposed rescission. Congress must approve the rescission within 45 Congressional working days, or the money must be spent.

 

Reserves – See "Impoundments".

 

Transition Quarter – Due to change in the fiscal year (See "Fiscal Year") FY 76 will cover a fifteen-month, rather than a twelvemonth, period. The months of July, August, and September 1976 are the transition quarter.

 

Trust Funds – Funds collected and used by the Federal government, as trustee, for specified purposes, such as social security and highway construction. Receipts held in trust are not available for the general purposes of the government. Surplus trust fund receipts are invested in government securities and earn interest.