February 2, 1976
Page 1883
THE CITIES VIEW THE PRESIDENT’S BUDGET
Mr. MUSKIE. Mr. President, each year at this time; the National League of Cities and the U.S. Conference of Mayors jointly publish a review of the urban perspective This year is no exception.
Entitled "The Federal Budget and the Cities," this document is a useful contribution to the ongoing national debate on the 1977 budget. Although one may take issue with specific conclusions of this report; it should be of great interest to each Senator. I ask unanimous consent that "The Federal Budget and the Cities" be printed in its entirety in the RECORD.
There being no objection, the document was ordered to be printed in the RECORD, as follows:
THE FEDERAL BUDGET AND THE CITES
(A review of the President's fiscal year 1977 budget in light of urban needs and national priorities, January 1976.)
PREFACE
This report,"The Federal Budget And The Cities," examines the budget from an urban perspective. The first chapter offers a general overview of the budget and the implications the budget contains for urban America. The final chapter offers a glossary of terms. Other chapters deal with specific topics such as transportation, education, and environment and examine these major national concerns from an urban perspective. There is a new section this year reflecting the change in the important new congressional budget process and another chapter dealing with the major highlights of the budget.
Too often the public does not pay sufficient attention to the implications contained in the budget. The reasons for this public inattention are clear enough. The budget is not one document but four, with the budget appendix containing more than a thousand pages and literally hundreds of charts with numbers whose meaning is often elusive.
This study is the fifth edition of an annual series. It is prepared by the staff of the National League of Cities and the United States Conference of Mayors. The League, founded in 1924, and the Conference, founded in 1933, maintain joint offices in Washington, D.C. However, each organization retains its own president, officers, policy committees, members, and staff.
The Federal Budget, submitted to Congress by President Ford on January 21, 1976, represents the President's proposed financial plan for the federal government for the year beginning October 1, 1976. It not only takes into account economic and other factors, it also sets forth the priorities that the President deems essential to carry out his plan.
The budget is a political statement expressed in accounting terms. It is the single most important federal document published each year. It is the vehicle for the most significant and comprehensive collection of priority decisions that the United States government makes in the course of a year.
That is why the League and the Conference staff each year analyze the budget from an urban perspective. Judgments that are made in this document are based on policies adopted by locally elected officials at the annual meetings of the two organizations.
ALAN BEALS,
Executive Vice President, National League of Cities.
JOHN J. GUNTHER,
Executive Director, U.S. Conference of Mayors.
OVERVIEW
The Budget of the United States is a good roadmap of where we have been, where we are now, and where we should be going as a people. The Budget reflects the President's sense of priorities. It reflects his best judgment of how we must choose among competing interests. And it reveals his philosophy of how the public and private spheres should be related — President Ford, Budget Message to Congress; January 21, 1976.
The President's $394 billion Budget for the fiscal year that will begin — for the first time on October 1, rather than July 1, indeed draws his political, economic, fiscal, and philosophical roadmap through a year that will continue to see high inflation, unemployment, and a municipal fiscal drought.
Here are some landmarks on the President's roadmap:
The overall theme is to restrain federal spending.
The program priorities are essentially unchanged: more money for defense, less for domestic needs.
The Administration accepts an unemployment rate of 7.7 percent this year, yet offers no stimulus for job creation through either extended public service jobs programs or full employment goals set by the Employment Act of 1946.
It supports reenactment of General Revenue Sharing.
The Budget does not include anti-recessionary (countercyclical) aid to cities based on local economic conditions.
The Budget would raise Social Security taxes and some Medical payments in a way that pinches most of the pocketbooks of lower-income people.
The Budget proposes to redirect responsibility and authority for many health, education, social services, and child nutrition programs to state and local government.
The Administration wants Congress to hold the line on funding state and local governments while asking these jurisdictions to do at least as much, if not more, than they have been accustomed to doing in management, planning, public works, public safety, human services, and other areas.
The Administration generally believes in stimulating the economy by tax benefits to individuals and corporations, and not by federal supports to local programs and institutions.
An evaluation of the Budget must take account of two points:
First, the 94th Congress, under a new law, will assert its own priorities in a more orderly way than it did before it reformed its budget processes. In a "dry run" of the new approach. the same Congress last year cut the Administration's defense and international affairs budgets and increased the domestic budgets.
Second, the time frame of the Budget begins next October, and the actual impacts of its fiscal and economic policies will not be felt for months thereafter. But the time frame of the political discussion of the Budget has already begun and will continue until the Presidential and congressional elections next November.
The analysis that follows will attempt to assess the Budget as seen from the windows of America's city halls. We shall examine the programmatic, fiscal and economic impacts and compare the President's sense of priorities with our own. We do this with the knowledge that we have different perspectives and that both of them are based on honest conviction and legitimate interest.
The budget and the economy
As the President notes in his Budget message, one important dimension of the budget is as an element of our economic policy. The total size of the Budget and the deficit or surplus that results can substantially affect the general health of our economy — in a good way or in a bad way. Let us consider then the proposed FY 77 Budget as an element of national economic policy, and the implications of that policy for the nation's cities.
Where we've been
The Administration's FY 76 national economic policy consisted of:
"Gentle" stimulation of the economy through tax rebates and across-the-board business tax investment credits, while the costs of the worst recession since World War II were disproportionately placed on urban. communities through higher unemployment, local budget cuts, layoffs, service reductions, greater welfare costs, and tax increases.
Restrained economic recovery through expenditure controls backed up by vetoes to avoid a recurrence of double-digit inflation, while tolerating long-term high unemployment, disproportionately concentrated in the nation's cities.
Stimulation of the economy in traditional "trickle-down" fashion by reducing corporate and individual taxes, and running a large deficit, while not targeting assistance to the hard-hit urban communities.
Providing temporary amelioration through extended unemployment compensation and expanded public service employment.
The results of this policy for the nation's cities were grim:
Last year the government projected the 1975 national unemployment rate at 8.7 percent The actual 1975 unemployment rate was 8.5 percent. Unemployment figures were generally much higher in the nation's cities, and extraordinarily high among the urban young, poor, and minority populations. Inflation proceeded at an annual rate of 9.1 percent.
The whipsaw of inflation and recession compounded the chronic economic problems of many of the nation's older cities; service reductions, layoffs, tax increases, and fiscal crisis were the "road" that many of the nation's cities traveled in 1976.
Where we are now
The President's proposed FY 77 budget, as a national economic policy document travels the same road as last year, and with grim determination. In his own words:
"If we try to stimulate the economy beyond its capacity to respond, it will lead only to a future whirlwind of inflation and unemployment.
"This is not a policy of the quick fix; it does not hold out the hollow promise that we can wipe out inflation and unemployment overnight. Instead, it is an honest, realistic policy — a policy that says we can steadily reduce inflation and unemployment if we maintain a prudent, balanced approach."
The elements of the policy are:
A reduction. in the recent rate of growth of federal spending by more than half, to 5.5 percent.
"Restrained" stimulation of the economy by an additional $10 billion cut in income taxes, and a tax incentive for stock investment.
Continued focus on inflation rather than unemployment as the major nemesis of national well-being.
Restrained recovery through controlled government spending and modest across-the-board tax cuts; acceptance of continued high unemployment;"trickle-down" economics and the search for a balanced budget — these are the components of the Administration's economic policy.
The Budget makes little attempt to target assistance to compensate if not stimulate the cities hard hit by recession and inflation. The Budget does not offer even a sustained Public Service Employment program — it seeks to terminate that program by the end of FY 77.
A potentially useful exception is a tax proposal to provide accelerated depreciation on investments made in high unemployment areas. Meanwhile, with the other hand, the Budget proposes severe cuts in federal economic development programs for cities and other communities. Increased Social Security Medicare benefits be paid for by higher taxes or charges falling regressively on the poor, the disabled, and the elderly, major population groups in the nation's cities. And social service expenditures, which aid the urban poor, near-poor, and elderly, are the target of the President's strict budget controls.
Where we are going
The Budget projects a 7.7 percent unemployment rate for 1978. Thus, cities can look to continued unemployment, higher than the national average. With the reduction of Public Service Employment programs and the end of accelerated public works programs, the urban unemployment picture may even worsen.
Inflation, the Budget forecasts, will proceed at an annual rate of 6.3 percent in 1976.
Continuing between the pincers of high unemployment and inflation, many cities can look forward to more fiscal problems, further reductions in. service, and increased citizen dissatisfaction.
Higher Social Security and unemployment compensation taxes will fall hard on the urban taxpayer.
Reduced federal social service expenditures will disproportionately affect certain urban populations.
The benefits of moderate national economic recovery may not reach many people in our nation's cities.
Thus the President's roadmap shows that the cities of the nation, provided with little assistance to confront their chronic economic difficulties, are to continue to bear the brunt of recession and inflation and to trail the nation back to economic recovery.
The nation's cities, therefore, must take a hard look at the Budget and question its priorities in light of their own needs.
Budget Priorities
Within an overall spending ceiling a debate naturally is joined over how the available dollars are to be allocated. One spending priority issue has been federal defense programs versus federal aid to state and local governments. The National League of Cities, and the US Conference of mayors in past budget analyses have reiterated the same statement: the Administration’s national defense budget allows increases commensurate with both future inflation and real growth, while the budget for cities does not.
The President said in his state of the Union Address, "The Defense Budget for FY77 will show an essential increase over last year. It provides for a real growth in purchasing power over last year's Defense Budget."
Table Overview 1 compares outlays and budget authority for FY 75, 76, and 77 for both national defense and federal grants to state and local governments. It clearly reflects that national defense is the Administration's number one priority. Furthermore, an analysis of this table reflects some trends that should be of grave concern to state and local governments. We find, for example:
A significant tapering off of outlays to state and local governments;
More crucially, a decrease in budget authority for state and local governments of approximately 20 percent since FY 75 — in dollars, down from $90.3 billion in FY 75 to $63.4 billion in FY 77;
Outlays for national defense show a trend of growth increasing seven percent between FY 75 and 76 and nine percent between FY 76 and 77;
This is coupled with a similar trend in budget authority — an increase of 11 percent between FY 75 and FY 76, and 12 percent between FY 76 and 77.
National defense thus enjoys a continued increase in budget authority, guaranteeing a commensurate trend in outlays, thereby minimizing its revenue/expenditure gap. On the other hand, federal assistance to state and local governments in the crucial areas of budget authority is decreasing in real dollars, thereby mandating a continued downward trend in outlays for this portion of the public sector. In the aggregate, Table Overview 1 shows that federal aid to state and local governments has not kept up with inflation.
[Tables omitted]
Table Overview 2 breaks down federal assistance to state and local governments by function and examines the outlay figures in even greater detail.
Using FY 76 dollars as a base (deflating FY 77 dollars by six percent), the analysis shows these facts:
Outlays over the total category are down 4.5 percent;
Only four functional areas show any real growth in outlays:
Natural resources, environment, and energy;
Agriculture;
Commerce and transportation; and
Veterans' benefits and services.
The two tables show that state and local jurisdictions must continue to find non-federal revenue sources to combat the twin economic crisis of inflation and unemployment which besets both their governments and their people.
Income Security Priorities — It is also important to analyze the budget as an income security policy document. This year's Budget sets several priorities in the area, chiefly:
To reduce spending and wherever possible control the "uncontrollables";
To target income security program eligibility to the poor as defined by the official poverty level ($5,050 for a non-farm family of four).
One device for reducing spending, namely lowering income eligibility levels, would particularly hurt those, especially the unemployed, whose income is too high to qualify them for assistance but too low to guarantee them the amount needed to maintain the minimum standard of living in urban areas. For example, in the food stamp program, there is no justification for reducing the income eligibility criteria below current levels ($6,480 in net income for a family of four) , as Department of Agriculture statistics show that, based on these eligibility levels, participants are all poor or nearly poor. Virtually all participants are in households with after-tax incomes of under $10,000. Only 13 percent of participants have after-tax incomes over $6,000, and almost 90 percent of those households have more than four members.
The National League of Cities and the United States Conference of Mayors take exception to the goal of the Administration to target a number of these programs only to those below the official poverty line. It is true that a number of people below that line are not receiving the benefits due them, and we strongly favor providing such benefits. However, it is important to examine the validity of the official poverty line as the "magic" income level above which Americans need no assistance at all to assure them an adequate subsistence. It should be noted that the U.S. Bureau of Labor Statistics (BLS) has concluded that an average urban family now requires $9,198 to live at BLS's lowest living standard.
All of these priority issues will now be debated in Congress.
Congress and the Budget — Congress now has a mechanism for reviewing the President's total budget and formulating an alternative congressional spending plan. Under the Congressional Budget and Impoundment Control Act of 1974, newly created budget committees in both houses of Congress are setting target figures for federal spending, revenues, and the corresponding deficit and public debt. This process is discussed in the chapter "Congress and the Budget." The two budget committees have become forums for debate on budget priorities, and the spending targets in functional areas such as health, education, and defense that are finally adopted reflect Congress's own sense of national priorities.
Although the new congressional budget reform process became law only recently, Congress went through a "dry run", last year on the FY 76 Budget. It is important to compare the Administration's priorities as contained in the FY 76 Budget with Congress's priorities by examining the values each assigned to some of the functional areas, as in Table Overview 3 on the next page.
As one can see, the priorities reflected in the second budget resolution adopted by Congress in December, 1975, were significantly different from those proposed by the Administration in its February, 1975, budget submission. Congress assigned greater value to human resource and economic stimulus programs and less to defense and international relations than the Administration did.
Although one cannot necessarily expect the relationship demonstrated above to hold this year as the FY 77 Budget proceeds through Congress, it is important to realize that Congress again has an opportunity to reorder national priorities in a way that is different from those proposed by the Administration. In this election year, it is likely that pressures on members of the House and Senate Budget Committees as well as other members of Congress to be "fiscally responsible" will translate into votes to tightly limit spending for all programs. But the opportunity still exists that within whatever spending ceiling is established, a different ordering of priorities can occur.
The President's Budget attempts to define a "more appropriate balance" between the public and private sectors, between the federal government and state and local government, between domestic and defense expenditures, and between vexing inflationary pressures and persistently high levels of unemployment.
These policy thrusts are clearly reflected in the programmatic decisions in the Budget.
For cities, the result is a widening of the revenue/expenditure gap at the local level. A number of national and/or local initiatives will have to be taken to resolve this gap, including:
At the local level
A major increase in local, usually regressive, taxes;
A substantive cutback in essential municipal services;
A delay and/or postponement of necessary capital improvements;
A reduction in municipal employees.
At the national level
Tax reform;
A shift in responsibilities (with commensurate funding assistance and authority) throughout the federal-state local system;
A stimulation of the public sector by an anti-recessionary package.
A failure to close such a gap would have a devastating impact on the condition of our nation's cities and the general public welfare. There is little movement discernible in the FY 77 Budget toward these more positive national policies which ameliorate detrimental impacts on localities.
While significant reductions occur in most programmatic areas of the FY 77 Budget, there are two critical exceptions to this trend:
General Revenue Sharing
First, the Administration continues its strong support of General Revenue Sharing. We commend it for this. The Budget reflects the Administration's legislative proposal for a 5¾ year extension of the revenue sharing program. With the current program expiring on December 13, 1976, it is imperative that the Congress act immediately to insure the continuity of this vital domestic assistance program. Revenue sharing funds, however, have been subject to the same inflationary erosion that has occurred throughout the local sector. The Budget calls for continuation of General Revenue Sharing through October of 1982, with an annual funding increase of $150 million, or slightly below 2.5 percent. By 1982, it is estimated the real dollar value of General Revenue Sharing funds will be 24 percent below the 1972 allocations. To compensate for this inflationary erosion, the nation's cities are asking Congress to increase the revenue sharing trust fund by a minimum of $500 million a year.
Community Development
Second, the Administration is honoring its commitment to fund fully the Community Development (CD) Block Grant program. We commend it for this, too. This program, which is now operational throughout the country, provides flexible assistance to local governments. Under CD, seven categorical programs have been consolidated into a block grant, with funds being distributed directly to cities.
The simplification and decentralization that have occurred under revenue sharing and CD block grants have succeeded. However, while cities will continue to press for simplification and decentralization of federal domestic assistance programs, the FY 77 Budget raises some serious questions about the direction of the Administration.
Block Grants — The Budget extends the block grant approach to four new areas: education, health, social services, and nutrition, all of them mired in myriad individual categorical grants. While the nation's cities welcome these initiatives to reform domestic assistance programs, serious questions need answering before the existing categorical system is abandoned.
Cities are deeply concerned that the latest block grant initiative contained in the FY 77 Budget will lead to reduced funding to the local level. With the elimination of state matching requirement and the total reliance upon the state to decide whether to receive the federal block grants, and how to spend them, cities need statutory assurance that they will not only receive their fair share but also will be involved in the state's planning, policy making, resource allocating, program designing, and evaluating processes. Decentralization, simplification, and administrative efficiency must not become the rationalization for a reduced federal commitment to urban America.
Given these concerns, the nation's cities cannot give blanket endorsement to the President's proposals to fold 58 categoricals into four new block grant programs. We are optimistic, however, that when the actual legislative proposals are introduced, our concerns can be addressed and Congress and the President can approve an effective block grant approach.
Other Major Urban Programs — The rest of the Budget for direct grants to cities is characterized by restraint and phase outs. Here are some major examples:
Public Employment — phase-out of 260,000 emergency Public Service jobs between January, 1977, and October, 1977, and, in addition, a 100,000 summer youth job reduction.
Mass Transit — 50 percent ceiling on Urban Mass Transportation Administration (AMA) grants for operating assistance for mass transit. Currently, 90 percent of the formula funds are used for operating costs.
Law Enforcement — decrease of 12.7 percent from FY 76 appropriations.
Construction Grants for Waste Water Treatment Works — no new funding requested to meet existing federal standards.
Economic Development — 35.4 percent reduction in Economic Development Administration (EDA) appropriations from FY 76 levels.
Small Cities — elimination of the community facilities grant program under the Rural Development Act.
Planning and Management Assistance — 14 percent reduction from FY 76 appropriation.
Education — cutback of more than $1.8 billion below funding level appropriated by Congress for FY 76.
These proposals would only add to the already substantial fiscal woes of City governments.
Fiscal impacts on city governments.
During the past year, recession and inflation had devastating fiscal impacts on governments as well as on economic conditions in cities. The President's Budget offers mayors and city councils little solace. On the contrary, they are now being told that they must bear an additional burden to assure economic improvement.
Inflation and recession have cut deeply into public budgets. Cities face a variety of steadily rising costs — inflated payrolls, more costly supplies, equipment, and energy, and capital improvements financing at high interest rates. Revenues, provided mainly through taxes that tend to fall short in times of recession, are inadequate to meet costs. And federal assistance to local government has not kept pace with inflation.
In today's economic conditions, the daily dilemma in more and more city governments is making the difficult choices among raising taxes, laying off personnel, cutting public services, and/or delaying sorely needed capital improvements. The irony of it all, of course, is that the more cities succeed in achieving a balanced budget, by either raising local taxes or laying off local governmental personnel, or both, the more they counter the national thrust to stimulate the economy through decreased taxes and increased employment.
Paradoxically, as economic activity declines and unemployment rises in cities, greater and greater social, political, economic, and fiscal demands are placed on the public sector and especially on local governments. At the very time that public needs are increasing, fiscal capacity is declining. For example, according to the Congressional Joint Economic Committee, state and local governments lost over $20 billion in revenues during 1975 due to the recession. This precipitated significant budget adjustments by local government. Cities enacted an estimated $1.5 billion in new taxes and reduced expenditures by approximately $1.4 billion in the same year. That is a total of approximately $3 billion taken out of the economy by local government alone, right in the middle of the worst recession since World War II.
The Administration's determination to provide anti-recessionary economic stimulus through the private sector, as detailed in its Budget, will serve only to widen the local budget gaps between revenues and expenditures.
The FY 77 Budget and related Administration policies will cause additional hardship to the governments and the people of cities in three important ways:
1. By accepting a high rate of unemployment and a relatively slow rate of recovery from the recession;
2. By restraining federal grants-in-aid to state and local governments; and
3. By mandating greater spending obligations on local governments.
The first two points are examined in detail elsewhere in this analysis. The third point bears further examination here.
Over the years, the federal government, by executive, legislative, and judicial action, has set forth a number of requirements for local government that have had a negative, and often severe, impact upon local budgets. As the economic status of cities is analyzed, the impact of these mandated costs, without the commensurate federal revenues to assist in assuming the burden, must be taken into account. Such personnel-related requirements as the minimum wage, workmen's compensation, Old Age Survivors and Disability Insurance, as well as the costs associated with the attainment and maintenance of air and water quality standards, and the impact of the Brooke Amendment on public housing costs are but a few examples of existing federally- imposed burdens.
The FY 77 Budget contains proposals that would add to these burdens — once again, without the commensurate federal revenues to carry out the mandated responsibilities. For example, proposed:
Social Security reforms would make it necessary for local governments whose employees are in the system to increase their contributions to the trust fund.
Reductions in federal support for water pollution abatement would require local government to increase spending vastly to meet federal standards, unless the standards are relaxed.
Cutbacks in federal mass transit operating subsidies would virtually compel compensating outlays by local governments.
Unemployment compensation changes would displace the responsibility for 26 weeks of benefits presently funded fully by the federal government, leaving local government the option of either providing these benefits or increasing their welfare load.
Cuts in federal funds for water quality and health planning, regulation, or management without any change in elaborate federal requirements for carrying on such activities on an areawide basis probably would oblige local governments to pick up the costs.
Additionally, lack of direct federal funding to local governments, implicit in the Budget's proposed block grants for health, social services, and child nutrition, places the future of existing local direct service programs in jeopardy. If funds are not forthcoming, local government will have to either assume the costs of these programs themselves or suffer the political consequences of eliminating them.
These depressive features of the Federal Budget could have several adverse impacts locally and nationally. Among them could be a halt or a delay in the economic growth of cities, a distortion of their own sense of priorities, and a cutback in their fiscal outlays. Should state and local governments be forced to curtail spending, which represents 16 percent of the gross national product, the negative effect on economic recovery would be severe.
The Budget makes little attempt to assess the financial consequences of these impacts on other levels of government, but it is clear that the net effect is that city and county governments become unwilling agents of fiscal drag at the local level.
Tax Expenditures — Apparently the Administration does not view local government as a resource in stimulating the economy and playing a vigorous role in solving the national problem of recession which is highly concentrated in cities.
The Budget, rather, proposes to stimulate the economy by providing incentives through the "tax expenditure" approach. Rather than appropriating funds for certain identifiable purposes, the Budget provides tax incentives for private investment. The sharp reductions in appropriations for the public works and economic development area illustrate this shift in approach. State and local government have a role in shaping economic expansion through the public works and economic development programs. The tax expenditure approach does not contemplate local government participation.
The weakening effects of this Budget on local government is most significant because of the social and economic impact it would have on the people living in cities: workers would be unemployed longer. They would have extended unemployment benefits rather than jobs, while the local government would have to cut back on essential services, lay off employees, and contribute added sums to unemployment cheeks.
The effect of all of this would be to add to public disenchantment with government at all levels.
Epilogue
In assessing the Budget, we have examined the economic, social, fiscal, and programmatic implications. It is necessary to add one more dimension: the public's confidence in its leaders to provide for basic human needs, whether those leaders are in the White House, the Congress, the state capitol, the county court house, or the city hall.
If the economic recovery is too slow or too limited, if unemployment and inflation remain at a high level, and the federal government's most common response is discontinuity of support for the people and the institutions that serve them, then they will ask whether the government is truly doing its job.
By "the government," the people mean all elected officials: the President, the Congress, the governors, the state legislators, the county officials, the mayors, and the city councils.
BUDGET HIGHLIGHTS'
Aging
Senior citizens living in cities will feel the pinch of Federal Budget reductions in several ways. The $10 million cut in funds to the Administration on Aging (AoA),will force city-designated . Area Agencies on Aging (AAA) to compete for funds in light of AoA's plans to designate 100 more AAA's.
Phase out of Title VI of the Comprehensive Employment and Training Act , (CETA) , which employs seniors, coupled with no budget request for Title IX (the Older Americans Community Service Employment Act) will result in serious unemployment among the urban elderly.
Cost-of-living increases in social security; congressional interest in maintaining Title VII nutrition programs; and requests for ACTION and Community Services Administration (CSA) programs are the only Administration indications of the plight of the urban elderly.
Alcohol and drug abuse
Alcohol abuse programs will be folded into the Administration's Financial Assistance for Health Care Act, which consolidates 16 categorical health care programs into a single block grant to the states. Community programs are most affected, as local project grants will be cut from $45.5 million to $33.4 million while grants to states will remain at the same level.
Drug abuse programs fared much better than other HEW programs by remaining at approximately the same funding level as FY 76 — $482 million. An increase in treatment grants will be used to test treatment of drugs most harmful to society, not including marijuana. Drug programs will not be included in the health block grant proposal.
Community action programs
The Headstart, Economic Opportunity and Community Partnership Act of 1974 established the Community Services Administration (CSA) and provided that all Office of Economic Opportunity (OEO) programs be transferred to CSA. The core of CSA activity is carried out by local Community Action Agencies (CAA) and $267.3 million has been requested for "local initiative" programs — an increase over last year. However, local governments will be financially challenged to provide a 40 percent match for their CAA's in 1977.
No funds were requested for nutrition, summer youth recreation, and research and development programs while $10 million was requested for the Senior Opportunity Services (S.O.S.) outreach program.
Criminal justice
Although the President stated that the Law Enforcement Assistance Administration (LEAA) block grants to state and local governments were working very well, the FY 77 budget requests for the popular Part C (Safe Streets Act Amendments) is $60 million short of last year's totals. However, a new $50 million item is requested for the High Crime Area Program which will directly benefit cities.
Other reductions in the criminal justice budget are the phasing out of the Law Enforcement Education Program (LEEP) and the Juvenile Justice and Delinquency Prevention Program.
Defense
For the second year, the Administration proposes to increase the military budget in real terms.
After inflation on pay and purchases has been taken into account, the request of $114.9 billion in budget authority and $101.1 billion in outlays represents a constant dollar increase of $6.7 billion (6.6 percent) in budget authority and $3.0 billion (3.3 percent) in outlays. The growth in the military budget is caused principally by tremendous expansion in procurement, research and development efforts and the outfitting of two Army divisions.
Economic development
Although the Administration has decided to continue the life of the Economic Development Administration (EDA) for three years, it will live on a closely cropped budget of $248.9 million.
The two-thirds drop from FY 76 all-time high levels of $760 million is attributable to expiration of the acclaimed Title X Job Opportunities Program in December, 1975. The Public Works Program of EDA-designated communities is cut by the largest dollar amount.
Only $50 million is requested for the Office of Minority Business Enterprise (OMBE) and there is no item for the "City OMBE" program proposal in the FY 76 budget.
Education
Two Administration strategies are evident in the lowered requests for education financing: a push to rescind $1 billion of the $7.4 billion FY 76 appropriation (which has been resisted by Congress); and a conversion savings by proposing an education block grant to states.
Funds under Aid to Impacted Areas are requested at the same level as FY 76 only for "A" children whose parents live and work on federal property. No request is made for "B" children whose parents work but do not live on federal property; or "C" children who live in public housing.
Requests remain constant for both handicapped education and vocational education programs.
Desegregation aid was slightly increased.
Employment
Programs funded under the Comprehensive Employment and Training Act (CETA) would receive $2.8 billion in FY 77 which is slightly less than the FY 76 appropriations. Based on an assumption of declining unemployment, 260,000 public service jobs (Title VI) will be completely phased out between January and October 1977. A ceiling of $7,000 will be placed on the federal contribution of CETA salaries.
Supplemental appropriations of $400 million will be made later this year to fund 672,000 summer youth jobs, a reduction of 100,000 slots from the anticipated 1976 level.
Legislation will be introduced to merge the training part of the Work Incentive Program(WIN) under CETA.
Energy
Energy budget proposals reflect the Administration's interest for energy independence by 1985 through expanding research and development (particularly nuclear research), increasing production of fossil fuels and encouraging energy conservation. To support these activities, the FY 77 Budget request is $10.4 billion — a healthy increase of 30 percent over last year. It is further anticipated that the Administration will request additional funding to implement the Energy Policy and Conservation Act of 1975, which was passed too late to be included in this budget.
Environment
The Environmental Protection Agency will suffer a loss of $53 million in budget authority and the hardest hit program is water pollution control. Only previously impounded unobligated funds, amounting to $10 billion, are available to the wastewater treatment works program in FY 77; and the Section 208 areawide planning program will be phased out.
Local governments will be expected to pick up the bulk of the national water pollution cleanup effort under the Administration's program to strike a more "appropriate" balance between federal and non-federal responsibilities.
Funding for air pollution, solid waste and noise programs remains essentially the same as in FY 76. Deadlines for compliance with standards established under air and water pollution laws are now only one year away.
Food stamps and nutrition programs
In the food and nutrition area, the Administration has three objectives: to reduce income security costs; to consolidate child nutrition programs into a block grant; and to target programs to those below the poverty level. The FY 77 Budget for food stamps and child nutrition is 25 percent lower. By reducing the number of food stamp recipients to 5.3 million people, a $1.2 billion savings will be realized and by consolidating nutrition programs another $1.2 billion is saved.
Health
The Administration proposes a health consolidation composed of Medicaid and 15 other categorical health care programs. The emergent block grant amounting to $19 million would be given to states and would consist of: less total federal funds; no state matching requirement; and no assured role for cities and counties. The recently created Health Systems Agencies (HSA's) will be threatened, while money for block grants to local health departments (under Section 314(d) of the Public Health Service Act) would be folded into the state pot.
It was felt that National Health Insurance was too costly so a limited catastrophic insurance under Medicare — coupled with higher payments by beneficiaries — is proposed instead.
Housing and community development
Unlike other departmental requests, the budget for the Department of Housing and Urban Development (HUD) has increased by one-third and totals $9.1 billion. Most significant to cities is the FY 77 request for full funding of the Housing and Community Development Act of 1974 at the level of $3.25 billion.
The Administration has requested $850 million in contract authority for the Section 8 Housing Assistance Payments program and will use this vehicle to reduce the inventory of foreclosed properties.
Management assistance
Significant cutbacks in most of the planning and management grant programs will touch cities directly
and indirectly as members of regional planning agencies. Some constant favorites have been cut: HUD's
Comprehensive Planning. Assistance (Section 701) is cut from $75 million to $25 million;
Intergovernmental Personnel Act (IPA) funds are reduced by $5 million; and EPA's
Areawide Wastewater Planning (Section 208) is being phased out with $15 million answering a $300
million needs requirement.
Research and development
A mixture of gains and losses appear in the various research budgets with HUD being the winner of an $8 million (13 percent) increase in FY 77. The other large increases are found in the defense budget and the energy budget (nuclear and solar research).
The Research Applied to National Needs (RANK) program of the National Science Foundation's (NSF) budget will drop by nine percent to $8.5 million. The Justice Department's research efforts will be curtailed by 37 percent. For cities the increases are a matter of catching up on urban research which continues to have a low priority in the federal government.
Social services
In the 1974 amendments to the Social Security Act was a new Title XX which was a forerunner to the social services block grant mentioned in the Administration budget. By keeping the budget at a level of $2.5 billion, several modifications will leave states with fewer restrictions, no matching requirements and greater emphasis on welfare recipients (those receiving AFDC, SSI, or Medicaid) or people below the poverty level. Local governments have very little voice in state Title II expenditures but are being encouraged to participate in needs assessment and resource identification.
Small cities
Programs authorized by the Rural Development Act are plowed under in the Department of Agriculture budget for FY 77. All community facilities grant programs (water and sewer, fire protection and industrial development) benefitting communities of 50,000 and less are being abandoned and small cities encouraged to take advantage of HUD's community development block grant funds. Counterpart rural loan programs are funded at a constant level of $1.02 billion, as in FY 76.
Transportation
While there are no significant reductions in transportation programs, a major policy decision will have a serious impact on cities operating budgets. The Administration proposes a ceiling of 50 percent on the use of Urban Mass Transportation Administration (UMTA) grant funds for operating assistance. To date, local communities have spent approximately 90 percent of UMTA Sec. 5 monies for subsidizing public transit operating costs. The full authorization level of $650 million (a $150 million increase) has been request for FY 77.
Requests for airport planning and construction grants for FY 77 remain unchanged from last year at $350 million. All non-interstate highway programs are combined into a single category making it difficult to discover funds available for urban extension programs.
Veterans
The Veterans Administration budget anticipates a decline from $19 billion to $17.2 billion in FY 77. The major cutbacks are found in GI Bill education outlays because three million veterans will lose eligibility in June, 1976. Although unemployment among veterans, particularly of the Vietnam era, is at an all-time high, no provisions are made to operate service centers or extend the GI Bill.
BUDGET PROCESS
This year in the formulation of the 1977 Budget, the Congress will be fully using the new budget procedures required by the Congressional Budget and Impoundment Control Act of 1974. Under the new procedures, Budget Committees in both houses of Congress will set target figures for budget outlays and authority, revenues, and the corresponding deficit and public debt.
In addition to setting government-wide spending targets, the Budget Committees will also break down the totals among 16 program or "functional"areas — health, veterans' benefits, community development, etc. A "concurrent resolution" containing the total and functional targets must be passed by the Congress in the Spring before the House and Senate can proceed to consider individual appropriation bills.
In September, after action on all appropriation measures is complete, Congress must pass a second budget resolution — either maintaining the original targets or revising them. If necessary, the Budget Committees direct other legislative committees to take action to cut spending authority or entitlements or to raise taxes. After enactment of the final reconciliation bill, Congress may not consider any spending or revenue legislation, including supplemental appropriations, that raises spending or cuts revenues, without adopting a new budget resolution.
Therefore, Congress will address federal fiscal policy explicitly. It will be deciding whether the federal budget will serve to expand or contract economic activity. This year, Congress will be forced to vote a large deficit because the current recession has caused a loss of revenues and greater outlays for unemployment compensation, welfare and like programs. However, the issue will be "how much deficit", and the determination of how much stimulus is needed to achieve economic recovery. Aside from a debate on the relative priorities of government, the budget resolutions provide a major opportunity for Congress to debate the future course of the economy.
The new budget timetable partially followed in 1975 and mandated for 1976 — calls for the following action:
On or before
November 10 — submission of President's "current services" budget estimating the spending required during the next fiscal year to maintain current programs at existing levels.
15th day after Congress convenes — submission by the President of the next year's Executive Budget.
February (not required by law until April 1) — preparation and submission of Congressional Budget Office report, articulating alternative fiscal policies and budget priorities.
March 15 — submission of committee reports, estimating the budget authority and outlays necessary to fund programs within their jurisdictions.
April 15 — reporting of the first concurrent budget resolution by the Budget Committees.
May 15 — deadline for adoption by Congress of first resolution. All authorization bills for FY 77 must be reported as well.
7th day after Labor Day — completion of action on all appropriations bills.
September 15 — adoption by the Congress of second budget resolution setting a final ceiling on spending and a floor on revenues.
September 25 — completion of reconciliation action, if necessary, making legislative adjustments required by the second resolution.
October 1 — start of new fiscal year.
The Budget Act establishes a new October 1 — September 30 fiscal year for the federal government. The shift to the new time-table will take place this year, i.e., fiscal 1977 will begin on October 1, 1976. The three-month transition quarter between FY 76 and 77 (July 1-September 80, 1976) was handled separately in the President's FY 76 Budget and is accounted for in the FY 77 Budget. This change to a new fiscal timetable is intended to give Congress adequate time to formulate its budget prior to the start of the new fiscal year. In the past, Congress has rarely passed all 13 of its appropriation bills by the start of the fiscal year, forcing many agencies into the uncertainty of relying on continuing appropriations for a part, if not all, of the year.
It as important to note that the new schedule does not allow — unless Congress agrees to waive this requirement — any action by either the House or Senate on appropriation bills until after passage of the first budget resolution in May. As a result many programs important to cities may not be funded until relatively late in the year. This delay is particularly critical for general revenue sharing, since the program, which expires in December, may not be renewed before the late summer. This could result in payment lapses and certainly this would cause local governing bodies extreme problems in orderly budgeting for their own coming fiscal year. In some instances, mayors and city councils would have to raise property taxes and/or cut back services to compensate for this lack of commitment.
Although the new budget process is intended to give Congress greater control over fiscal policy, it could possibly affect the level of funding of urban programs. If the implementation of the process in 1975 is any guide, the priorities reflected in the first concurrent budget resolution, once passed by Congress, will be difficult to change through subsequent appropriations.
Although intended to be flexible "targets" for federal spending, the budget numbers of the first resolution quickly become cast in concrete as "ceilings" or caps on congressional spending.
The two Budget Committees offer, for the first time, a congressional forum for debate on national priorities. In addition to setting functional and total spending levels, the Budget Committees will also make longer-range, five year, projections of federal budget needs and directions, and study the fiscal impact of "tax expenditures" — those tax credits, deferrals and deductions that benefit certain groups or subsidize certain activities.
The fact that there is now a priorities vote in the Congress on the entire Federal Budget offers urban interests the opportunity, as well as the responsibility, to articulate their priorities. This year, for example, city officials concerned about reinstating the Administration's proposed cuts in CETA programs, education funds, LEAA grants or other programs have another mechanism to change the Administration's Budget.
It is likely to be difficult, however, in an election year for the House and Senate Budget Committees to formulate and approve a budget resolution that adequately meets social and urban needs. Pressures on members of Congress to be "fiscally responsible" and to vote against a deficit may very well translate into votes to limit overall federal spending.
Four other features of the new process have significance for city programs:
1. An important section of the new Budget Act requires that any bill providing new budget authority, or new or increased tax expenditures, be accompanied by an analysis of its probable impact on state and local governments. Moreover, the first concurrent resolution must include a statement of significant changes in the proposed level of federal assistance to state and local governments.
2. The new Budget Act attempts to bring backdoor spending (legislation, like veterans' benefits, that bypasses the regular appropriations process) under tighter congressional scrutiny. Beginning this year, funds for new contract or loan authority require annual appropriations, and new entitlement programs, with few exceptions, must be approved by the Appropriations Committees.
3. The Budget Act limits the President's ability to "impound" funds made available by the Congress. A special message must be sent to the Congress if the President wishes to "rescind" or "defer" the spending of appropriated funds, stating the amounts and reasons for his request. Unless Congress approves a proposed rescission within 45 legislative days the money must be spent. Deferrals automatically take effect unless Congress acts to disapprove them.
However, the impoundment statute has not always worked the way it was intended. Rescissions proposed by the President have continued in effect up to 90 calendar days, due to congressional recesses and end-of-year adjournments, despite Congress' refusal to approve the proposals. The long delays in the expenditure of funds have served to disrupt several federal programs.
The President's 1977 Budget further clouds the rescission/deferral problem by including proposed rescissions in the "estimated" 1976 outlay and budget authority figures for the Departments of Labor and Health, Education and Welfare. The inclusion of proposed impoundments, given the remote likelihood of congressional approval, results in an understatement of 1976 spending and an illusory 1977 spending "increase".
4. As of November 1975, the President is required to submit an annual current services budget estimating the spending necessary to maintain federal programs at existing levels. This year, the FY 77 current services budget projected that outlays of $414.5 billion and budget authority of $450.4 billion would be necessary to maintain ongoing programs. In contrast, the President's FY 77 Budget proposes to actually spend $394.2 billion in outlays and $433.4 billion in budget authority, substantially below current service levels.
AGING
The Older Americans Act of 1965 created the Administration on Aging in HEW to "secure independence and dignity in a home environment for older persons with appropriate social services ..." such as transportation, homemaker assistance, legal advice, home repair, health care, employment and nutrition. The budget request for the Administration on Aging (AoA) is $192.6 million, $10 million less than FY 75 and FY 76.
Authorities in the Old American Act that impact city governments are:
Title III — State and community programs. The lion's share of Older Americans Act monies are distributed to 50 states and more than 450 multi-jurisdictional Area Agencies on Aging (AAA). While only 12 cities are designated as AAAs, (Boston, New York City, Baltimore, Washington, D.C., Cleveland, Chicago, St. Louis, Los Angeles, San Francisco, Portland, Seattle and San Juan), 75 percent of the nation's elderly live in urban areas and receive assistance from a variety of federal programs.
The FY 77 request for state and community programs — $97 million — is less than half that authorized by Congress — $231 million — in FY 76:
Title IV — Training. There is no request for funds in FY 77 by comparison to $8 million provided in FY 76.
Title VII — Nutrition. Most visible to Congress is the hot meals program for the elderly. The budget request of $88 million anticipates a $62 million carry-over totaling $150 million although Congress has authorized $250 million. Many city governments operate the popular Title VII programs and will be hard pressed to make ends meet due to escalating food prices. In the FY 76 HEW-Labor appropriations bill, Congress, specified that the nutrition program should reach a $187.5 million level by FY 76.
Title IX — Older Americans Community Service Employment Act is administered by the Department of Labor (DOL). The budget requests no funds although the Congress has authorized $15.0 million for FY 77.
Social security
For the nearly 83.8 million beneficiaries of the Old Age, Survivors and Disability Insurance (OASDI) program, the most significant impact of the numerous amendments to the Social Security Act relates to cost of living increases and reforms designed to reduce outlays in FY 77.
Responding to the overwhelming Congressional rejection of a 5 percent cost of living ceiling on Social Security payments, the Administration has requested an additional $11 million to cover the additional benefits and the cost of living increase. This will affect local governments who must administer a .3 percent increase (from 5.85 to 6.15) on the wage tax base which will be raised from $4200 to $6000 effective January 1, 1977.
Food stamps
Among the reforms in the food stamp which affect the elderly is a proposal to increase from $100 to $125 the standard deduction for a person over 65 who lives in a family.
Further, amendments to the Older Americans Act require the Department of Agriculture (DOA) to raise commodity support from 10 cents to 25 cents per hot meal in FY 77. The budget requests $22 million, twice as much as in FY 76.
Health
The impact of catastrophic insurance placing a $500 per year ceiling on hospital insurance coupled with a 10 percent charge for all in-patient, hospital, extensive care, home and hospital physician services above the deductible (increased from $15 to $77 in FY 77) will be more expensive to the majority of older persons. City hospitals may experience increased costs as a result.
While catastrophic insurance is desperately needed by some elderly to prevent financial ruin, it would benefit as few as 25,000. Therefore this proposal, if accepted, could place a harsh burden on the majority of the present 25 million aged and disabled covered by Medicare.
Housing
Section 202 of the Housing Act of 1959 established a program of housing assistance to lower income persons who are elderly or handicapped. No request was made for funds in FY 74 and FY 75 by the Administration. However, the FY 76 HUD appropriations stipulated a release of $375 million used for loans to private, non-profit sponsors for new construction or rehabilitated housing. The FY 77 budget continues this program at the $375 million level which should finance 16,000 units in each of these fiscal years.
Employment
Again, for the fourth consecutive year, the Administration has refused to seek funding for Title IX of the Older Americans Act despite the repeated endorsement of Congress.
The Title IX program will provide approximately 12,400 part-time job opportunities in 1976 to low income unemployed persons over 55 years of age. It currently operates under a joint continuing resolution at $30 million. Incorporated into Title IX of the Older Americans Act Amendments of 1975 as the Older Americans Community Service Employment Act, this program is authorized to spend $100 million in FY 76; $37.5 million for transitional quarter and $150 million for FY 77. Title IX is administered by the Department of Labor through the national aging interest groups which contract with many local governments.
Action
The budget request for provisions of the Older Americans Volunteer programs (Senior Companion, Foster Grandparent and Retired Senior Volunteer Program) administered by the Action agency is nearly $10 million less than authorized for FY 77 (in the Older American Amendments) , however, it is almost a $10 million increase over FY 76 request.
Comprehensive Employment and Training Act (CETA)
The Budget proposes the same level of funding for this popular public service employment program, but plans to phase it out by September 1977. While not specifically designed for the elderly, many older persons are employed in CETA slots.
Community action operations
For the first time in four years, the Administration has decided to anticipate Congressional action by requesting $10 million for the Senior Opportunities and Service Program (S.O.S.). This program provides outreach and referral activities to more than a million elderly in over 800 S.O.S. programs and is administered by the Community Services Administration (formerly OEO).
Social services
Under Title XX, Social Services Amendments of 1974, the federal government reimburses states up to a maximum of $2.5 billion for state and local social service programs, many of which serve the elderly. Reimbursements are also made for state and local training activities related to the delivery of services. These programs would be consolidated under new legislation (see Social Services chapter).
Comment
The urban elderly were accorded budgetary attention in certain areas and not in others. The $97 million request for funding the 50 State and 462 Area Agencies on Aging (Title III of the Older Americans Act) is $1 million more than last year's request; however the Administration on Aging plans to designate 100 more AAA's in the next year which will create intense competition for funds.
While only 12 cities have been designated AAA's (Boston, New York City, Baltimore, Washington, D.C., Cleveland, Chicago, St. Louis, Los Angeles, San Francisco, Portland, Seattle and San Juan), this expansion is an opportunity for other cities to petition their state agency for designation.
The catastrophic insurance proposal would benefit 25,000 poor elderly but might place a burden on the majority of the 25 million aged and disabled covered by Medicare.
The increase in the standard deduction of $100 to $125 for food stamps for those over 65 would benefit only the older person living in a family.
The request for $375 million to finance Section 202 senior housing is very encouraging after no request for funds in the last two years.
The phase-out of CETA, Title VI accompanied by no request under Title IX of the Older Americans Community Service Employment Act will result in massive unemployment for the elderly who must then rely on social security or pensions as their only income.
The Title VII nutrition program budget request of $88 million will probably be increased by Congress as it is the most visible program for seniors.
ALCOHOL AND DRUG ABUSE
Alcohol abuse
Alcohol abuse would be one of 16 health programs consolidated under the Administration's proposed Financial Assistance for Health Care Act into a single health block grant to the states. The alcohol programs affected are:
Community programs: Millions
Project grants and contracts $33.4
Grants to States 45.6
Management and information1.6
Total $80.7
The total FY 77 Budget proposed for the National Institute on Alcohol Abuse and Alcoholism (NIAAA) , which controls the vast majority of federal funds spent on alcohol abuse, is $98 million, a decrease of $17 million from estimated FY 76 appropriations.
Approximately $12 million of the $17 million decrease comes from community programs — $45.5 million in FY 76 to $33.4 million in FY 77. Grants to states remain at the FY 76 level. The FY 77 Budget request for training has been reduced from $7 million for FY 76 to $2 million. This will reduce the amount of continuation grants by 40 percent.
As with most health programs in the Alcohol, Drug and Mental Health Administration, the request for research has been increased to $10 million, a $1.3 million increase over FY 76. These additional funds will make available approximately $1 million for new and competing grants.
Alcohol programs for Indian populations, a priority of the NIAAA, are proposed for transfer to the Indian Health Administration(IHA). This transfer, which amounts to $12 million, accounts for 151 different programs. They would be included under IHA's preventive health and ambulatory care services.
Comment
Except for research, the Budget request does not allow for any expansion of alcohol programs. Reductions in community programs are the most severe. NIAAA officials indicate that at least $119 million, $21 million more than the Budget request in FY 77 funds, would be needed for community programs to continue at their present level of operation. According to .NIAAA officials, the Budget request will support programs only for the second and third year of operation. More than 200 other programs will be discontinued. If block grants are given to states at the levels recommended, they will have insufficient funds to maintain the current level of effort since the amount proposed is far less than that currently available from the federal government.
In addition to the FY 77 reductions for alcohol programs, it is possible that the Administration may propose rescissions in the FY 76 expenditures, reducing appropriations about $25 million. As with the FY 77 Budget, most of the anticipated reductions are in community programs, especially program grants and contracts.
Drug abuse
Funds for drug abuse were not included in the Administration's proposed Financial Assistance for Health Care Act which is to consolidate 16 separate and categorical health planning, construction and service delivery programs into a single block grant to the States.
The $778.4 million requested for federal drug abuse efforts for FY 77 is an increase of about $15 million over FY 76. It represents a greater emphasis on prevention programs. While less is requested for enforcement in selected programs, the Drug Enforcement Administration would receive $6 million more.
The $482 million requested for drug abuse prevention — which includes treatment, rehabilitation, education and research efforts — is an increase of $27 million over FY 76. Most of this increase will be used to fund 7,000 new treatment slots which will bring the total of federally-funded slots to 102,000.
The National Institute on Drug Abuse (NIDA) would administer the major portion of these funds with a budget request of $247.8 million, an increase of $25.6 million. However, the transition quarter would be funded at only 9 percent of the estimated FY 76 NIDA Budget.
Following is a breakdown on NIDA's community programs through which most federal efforts in cities are supported:
[Table omitted]
Twelve million dollars of the additional $20 million for treatment grants and contracts would be used to support the 7,000 new treatment slots. The remaining $8 million would be used to absorb costs due to inflation. The new slots would be used for a mix of treatment models but priority would be given to treatment of drugs which are most costly to society. These include heroin, barbiturates, and amphetamines, but not marijuana.
Within demonstration grants, $2 million would be allocated for treatment demonstrations for the abuse of amphetamines and barbiturates.
The federal match rate is to continue to decline but is not to drop below 60 percent. However, for those programs which already have a federal match rate of less than 60 percent, there will be no adjustment.
No funds will be requested for the Office of Education to administer the program to develop drug education leadership teams at the state and local levels.
The $296 million requested for enforcement is $12.7 million less than FY 76. The major decreases are in the State Department and Bureau of Customs.
The bulk of domestic drug enforcement activities are administered by the Drug Enforcement Administration for which increases have been requested since its inception. The FY 77 request of $159 million represents $6 million more than the FY 76 level. Conspiracy investigations would be stressed in 1977 as would regulatory and compliance activities to prevent diversion of amphetamines and barbiturates into the illicit market. This would mean increased scrutiny of retail pharmacies and physicians.
Comment
NIDA's increase of $25.6 million in FY 77 seems significant, but two aspects must be taken into consideration: the funds requested for the transition quarter represent only 9 percent of the FY 76 Budget and from 13,000 to 26,000 additional slots, as estimated by NIDA, are needed to keep up with the growing demand for treatment.
The commitment not to let the federal match for drug abuse grants drop below 60 percent, if it is firm, should allow cities and states to conduct long range planning more effectively. Nevertheless, it means that cities will have to seek additional sources for their share of an increased local match.
If the increase recommended for FY 77 can not be applied fully because the transition quarter is inadequately funded, consequences will be serious. The League and the Conference, and other organizations, have documented that many local programs are strained to the breaking point in responding to increased treatment demand. A sample survey of representative cities found that treatment programs were operating at capacity or over, and that waiting lists had started to form in some communities.
There is wide concern that lack of adequate funds to assist drug abusers seeking treatment could result in the drug abuse problem again assuming epidemic proportions.
COMMUNITY ACTION PROGRAMS
The Community Services Administration (CSA), the successor agency to the Office of Economic Opportunity (OEO), is to receive $292.3 million, a one-third cut from FY 76.
The Headstart, Economic Opportunity and Community Partnership Act of 1974 established CSA and transferred all OEO responsibilities to CSA. However, many former OEO programs — such as Job Corps and Headstart — were spun off to cabinet-level agencies in previous years. In addition, the Legal Services Corporation was organized as a completely independent entity.
Community Action Operations
The heart of the present CSA funding remains Community Action Operations, which receive an appropriation of $267 million to continue funding Community Action Agencies (CAA). This reflects a rise in the non-federal share from 20 percent in FY 75 to 40 percent in FY 77 for "local initiative" programs required in the legislation.
However, with one exception, all categorical and remaining programs of CSA which were funded through "local initiative" funds, have not been requested.
These programs include community food and nutrition, national youth sports, summer youth recreation, and research and demonstration. A comprehensive winterization program of the Federal Energy Administration (FEA) would replace the energy conservation services in FY 77.
The exception to the categorical program phase-out is the Senior Opportunity Services program which provides outreach and referral activities for the elderly poor. A request of $10 million is made for this program.
Comment
The "wind-down" of the OEO programs, carried on by two successive administrations, continues. With little fanfare, the Administration's FY 77 budget attempts to cut the remaining "local initiative" categorical programs with one exception: a relatively small (in national terms) program for the rural and urban elderly in areas serviced by existing Community Action Agencies. All that is left of the former Office of Economic Opportunity is funding for the CAA's to continue project grants.
The gradual increase in local shares called for in recent legislation will return much of the funding for continuing Community Action Program operations to local communities. Because of fiscal uncertainties at the local level, such a shift in responsibility may very well mean a decrease of vital services being delivered to the urban disadvantaged.
CRIMINAL JUSTICE
Law Enforcement Assistance Administration
The Law Enforcement Assistance Administration (LEAA) FY 77 Budget is $707.9 million, a 12.7 percent decrease from the FY 76 appropriation. This represents a 20 percent cutback from the $880 million level of FY 75. Table CJ-1 shows that well over half ($60 million) of the $103 million reduction will come from Part C formula block grants to state and local governments. An additional $10 million will be cut from Part C discretionary totals. The Law Enforcement Education Program (LEEP) and the Juvenile Justice and Delinquency Prevention Program also were severely reduced. Although not discussed in the Budget, the $7 billion figure mentioned by President Ford in his State of the Union Message refers to an anticipated five-year total authorization for LEAA, assuming it is renewed by Congress.
Actual expenditures for FY 77 are expected to total about $839 million. While this figure exceeds the requested budget authority because of LEAA's pipeline effect — which provides for the expenditure of funds appropriated in previous years — the amount for expenditures is down 10 percent from FY 76. Most funds carried over in this manner are obligated and cannot be used for new programs.
This year's Budget also details requests for the transition quarter (TQ) covering the three-month period resulting from the new fiscal year calendar change. The quarter will cover July 1, 1976, through September 30, 1976. LEAA's request during this interim is $205 million, distributed as follows (in millions of dollars) :
1. Planning grants (Part B) 12 0
2. Matching grants (Part C) :
a. formula 84.7
b. discretionary 14.9
c. high-crime area program 0.0
3. Corrections (Part E) 21.0
4. Technical assistance.. 2.5
5. Research, evaluation, and technology transfer 7.0
6. LEEP 40.6
7. Data systems and statistical assistance 6.1
8. Juvenile Justice and Delinquency Prevention Program 9. 7
9. Management and operations 6.8
For FY 77, many of LEAA's budget categories remain fairly stable. Category 1 planning grants remains at $60 million. Technical assistance, category 4, remains at $13 million. According to the Budget narrative, evaluation is to be emphasized in FY 77; but appropriations for category 6, research, evaluation, and technology transfer, are slightly reduced. Category 7, data systems and statistical assistance, which also affects evaluation efforts, is being decreased by 6 percent.
The only category showing an increase for FY 77 is category 9, management and operations, which is increased by $1.2 million. While total LEAA appropriations have dropped by 18.7 percent since FY 74, the cost of administering the program has risen by 41.7 percent.
Two programs reduced so severely that their very survival is questioned are LEEP, category 6, and the Juvenile Justice and Delinquency Program, category 8. A requested decrease of $39.3 million in FY 77 spells the virtual elimination of LEEP. A $40 million appropriation during the TQ will ensure support for current participants through the 1976-77 academic year. A $29.3 million decrease for the Juvenile Justice Program represents a 75 percent cut from the FY 76 level. This requested level is only 7 percent of the total $150 million authorized by Congress for FY 77. The Administration hopes Congress will approve a deferral (or subtraction) of $15 million from the FY 76 appropriation to be added to the $10 million request. This would provide a $25 million total for both FY 76 and 77.
The only new program proposed for FY 77 is the $50 million high crime area program, category 2(c). This program area still requires Congressional approval in the 1976 amendments renewing LEAA's authorization. At this time, there is no definition of what a high-crime area will include or to what extent cities and local governments will be involved.
Other Federal agencies
While the Administration is taking "a more cautious and selective approach" to state and local assistance grants through LEAA, additional emphasis is being placed at the federal level on apprehension, prosecution, and detention of criminals. An additional 291 positions are requested for the 118 Attorneys' offices and an increase is provided for 89 more U.S. Marshal positions.
Three federal correctional institutions are to be activated, and construction is to begin on four new facilities. The FBI is being cut by $15 million. In FY 77, state and local governments will be asked to bear one-half of the costs of law enforcement training programs conducted by the FBI. To curb crimes of violence committed with firearms, the Administration proposes to expand activities of the Bureau of Alcohol, Tobacco and Firearms in curtailing illegal commerce in firearms, initiating mandatory sentences for felons convicted of using weapons, and placing prohibitions on the manufacture and sale of "Saturday Night. Specials." The Health, Education, and Welfare runaway youth program, authorized by the Juvenile Justice Act of 1974, has a budget authority of $5 million for FY 77, maintaining its FY 76 level.
Comment
The severe impact of crime is felt most keenly at the local level. Its steadily increasing incidence has
given it national significance requiring federal leadership and assistance. It seems ironic that the FY 77
Budget can ignore the necessity to increase local assistance and participation. The 1974 Uniform Crime
Reports (UCR) points out that nearly half (46.7 percent) of all offenses
known to police in 1974, occurred within cities with populations of over 100,000; and that over 80
percent of this nation's total crime index is reflected in urban areas. Yet the FY 77 Budget ignores the
need for increased crime control funding at the local level, while federal justice agencies are not only
kept largely intact, but are expanded.
Although planning funds (Part B) remain at $60 million, inflation will certainly require a pullback in state and local planning efforts. Moreover, only 40 percent of those funds provided actually reach localities. Part C "action funds" used to implement projects planned with Part B appropriations have been cut substantially for the second year in a row, as have Part C discretionary monies. Even if the high-crime area program is authorized by Congress at its full amount, there will still be a net loss of $20 million in Part C funds for FY 77.
The high-crime area program itself remains largely undefined. It cannot yet be assumed to address the needs of cities and local governments. The program must first be approved by Congress. There is no definition of "high crime area"and consequently no assurance of the number of cities that will be involved. Within the last few months, estimates of the number of projects to be funded have fallen from thirty-five or forty to between eight and twenty. Rather than granting local governments more planning autonomy, LEAA officials have reported that participation will be limited to those cities obtaining state planning agency approval.
The League and the Conference believe that the Juvenile Justice and Delinquency Prevention Program should be given a fair chance to prove itself before being evaluated for its effectiveness. The Juvenile Justice and Delinquency Prevention Act was passed overwhelmingly by Congress for the purpose of addressing the growing problem of juvenile crime. The 1974 UCR reports that nearly half (45.1 percent) of all serious crime is committed by youth under 18 years of age and that juvenile crime rates are rising nine times faster than adult crime rates. Even including Administration estimates that about $100 million is currently being spent by LEAA in delinquency-related projects, the percentage of total funds expended on juvenile justice will be only about 13 percent ($110 million ÷ $839 million) for FY '77. During the three-year existence of the Juvenile Justice Program, only $10 million (2.8 percent) of the $350 million total authorization has ever been requested by the Administration. Last year's appropriation of $39.3 million was appropriated by Congress over Administration protest.
In summary, the League and the Conference believe that crime is a problem of national significance occurring in and impacting localities. While the League and the Conference realize that "throwing money after problems"does not necessarily provide solutions, the two organizations do believe that crime control and criminal justice is a national priority that demands federal leadership and assistance. State and local governments already bear the brunt of law enforcement and justice expenses. According to the Budget, last year state and local governments expended $15 to $17 billion on criminal justice services. Federal assistance was small in comparison. If the problem of crime is to be substantially addressed, federal assistance must have an impact on localities in the most direct manner possible, and local governments must be allowed more input to determine how such assistance can be applied most effectively.
DEFENSE
For the second year, the Administration proposes to increase the military budget in real terms, reversing the trend of modest reductions the previous seven years. Compared to the FY 76 military budget approved by the Congress in the second budget resolution, the Administration is requesting an increase of $13.9 billion (13.8 percent) in budget authority and an increase of $9.2 billion (10 percent) in outlays requiring legislative approval for the most part. If Congress does not act on these recommendations, the military budget could increase as much as $16.7 billion (16.5 percent) in budget authority and $12 billion (13.1 percent) in outlays.
After taking into account the effect of inflation on pay and purchases, the proposed military budget increases in real or constant dollar terms by $6.7 billion (6.6 percent) in budget authority and $3.0 billion (3.3 percent) in outlays. The growth slated for the military budget is caused principally by tremendous expansion in procurement (38.2 percent) and research and development (14.7 percent); active duty military personnel costs are to decline.
The increase in the military budget could be even greater. The President assumes Congress will enact legislation to implement his $28 billion "budget restraint" proposal which includes a $2.8 billion reduction in the military budget, primarily in personnel accounts, requiring legislative approval for the most part. If Congress does not act on these recommendations, the military budget could increase as much as $16.7 billion (16.5 percent) in budget authority and $12 billion (13.1 percent) in outlays.
Specifically, the military budget will:
retain the capability to project power anywhere in the world;
launch full-scale production of the B-1 bomber, Trident submarine and Trident missile;
maintain an extensive military ground force presence in Asia.
FY 1976 estimates and the congressional budget process
In 1975, Congress began to implement a new budgetary process with adoption of budget resolutions setting forth spending limits. The FY 76 budget levels for the military cited in the President's budget message exceed the congressional limits by $1.3 billion in budget authority and $900 million in outlays. This difference is based on a set of assumptions about action on pending measures which differ from the position taken by the Congress when it adopted the second concurrent budget resolution. If the Administration's view prevails, the military budget ceiling set by Congress will be breached thereby forcing the Congress to shift funding from other programs or revise the spending ceiling upward by means of a third budget resolution.
Procurement
The item in the military budget getting the largest increase is procurement — up $8.1 billion (38.2 percent). All major new systems are to proceed, e.g., Trident submarine ($1.3 billion), B-1 bomber ($1.5 billion), F-16 fighter aircraft ($.6 billion) and Trident missiles ($1.7 billion). Many ongoing procurement programs will be expanded quite significantly. Navy ship-building is to increase 60 percent — a necessary increment if the Navy's goal of a 600 ship fleet is to be achieved. Army procurement is up 40 percent. The procurement request also includes $1.6 billion to cover prior year cost overruns in shipbuilding. Clearly, the increase in the military budget is influenced most significantly by the Administration's weapons procurement proposals.
Research and Development — Programs are proposed to increase 15.4 percent to $10.4 billion. Some of the major items contributing to this increase are advanced helicopters, F-18 fighter aircraft, cruise missiles, advanced ICBM technology and the space shuttle.
Personnel — Total military personnel will remain at about the same level in FY 77 — 2,101,000. Civilian personnel will be reduced from FY '76 level by 26,000 to 1,036,000. In terms of constant dollar funding, FY 77 budget authority for military personnel will decline by three percent.
Force Structure — The Administration proposes to continue expanding the Army by adding two divisions for a total of 16. Accompanying the increase in Army structure is a 40 percent increase in Army procurement to help equip the new divisions. In addition, four Air Force wings previously existing only on paper will be fully staffed and equipped. Naval forces will be expanded by a net of six ships (16 new ships will be procured). Consequently, Navy personnel will be increased by 12,000 to 544,000.
Inflation — The military budget request represents real growth in program. That is, budget increases exceed the rate of inflation anticipated for pay and purchases. The inflation rates projected by the military for FY 77 are 7.7 percent for outlays and 7.2 percent for total obligational authority. These rates reflect a 15 month period to cover the transitional quarter. If 12-month rates were applied, the figures for real growth would be even higher.
When the Budget was released, Defense Department officials announced that the FY 76 Budget included an additional $2 billion in real growth than estimated earlier. This developed when the inflation rates originally presented to Congress were revised downward to be consistent with actual economic conditions.
Budget Protections — The administration proposes real dollar increases in the military budget of two percent a year over the next five years. Within this "top line" military purchases will increase four percent annually. Budget authority for FY 81 is projected to be about $150 billion.
Last year, the Administration said the real increase for FY 77 would be two percent. To support the larger increase actually requested, they argue that since Congress did not grant their full request last year, the difference must be made up so they can meet their "top line" projections.
Comment
In contrast with many domestic programs, the military budget will be increased in real dollars quite substantially.
The Administration grants generous inflation allowances to the military — 7.2 percent for total obligational authority and 7.7 percent for outlays. By revising inflation estimates for FY 76, the Administration has claimed real growth in that budget year of an additional $2 billion.
In the President's budget message, he cited FY 76 budget levels which exceed the Congressional limits — as established by the second budget resolution — by $1.3 billion in budget authority and $900 million in outlays. If the Administration's view prevails, the military budget ceiling set by Congress will be unenforceable. If this trend continues, defense expenditures could escalate beyond current budget forecast and could create additional pressures on federal domestic programs.
ECONOMIC DEVELOPMENT
The Administration is seeking a straight three-year extension for the Economic Development Administration (EDA), but has requested only $248.9 million in the FY 77 budget, 35 percent below the FY 76 appropriations request. This dramatic drop of $511.5 million from the FY 76 appropriations high of $760 million is in large part attributable to defunding the $375 million Title X Job Opportunities Program for which the legislative authority expired on December 31,1975.
The FY 77 Budget request has been characterized by EDA as a return to normalcy, following unusually large provisions in the FY 76 budget. EDA refers to the fact that the Congress not only added $375 million for the anti recessionary Job Opportunities Program to the Budget request but an additional $92 million for other programs as well. It is a much more positive approach than the tack taken by the Nixon Administration several years ago, which sought to replace EDA and its categorical programs with an economic development block grant directed at the states.
Largely because of the appropriations spurt in FY 76 coupled with sharp reductions for FY 77, the agency is expected to spend almost twice its FY 77 authorizations. The FY 77 appropriation is forecast at $490 million while its authorization is only $249 million. EDA officials explain that this situation does not result from underspending (In fact the agency obligates all but about $1 million of its appropriated funds each fiscal year) but from the nature of many EDA programs, such as public works which expend only 5 percent of the project costs in the first year.
Public works grants and loans
Public works absorbs the largest dollar cut of any program category, with a FY 77 request of $113 million, 32 percent lower than the FY 76 appropriation of $167 million. Although the Administration does not strongly support the Public Works Impact Program (PWIP) which provides for short term labor-intensive public work projects in high unemployment EDA- designated communities, it will spend the legally required minimum of 10 percent of the Title I appropriation on the program. The public works programs have provided important assistance for local governments to install support facilities for business development , such as utilities and transportation improvements.
Business development
This program of business loans, loan guarantees, and lease guarantees will be cut by 31 percent from the FY 76 appropriation of $58 million to $40 million for FY 77. This reduction occurs at a time when Congress is considering legislation to extend EDA's program and funding authorities under Title II. One-third of the funds are authorized by the Trade Act of 1974 and, where possible, must be used to assist firm adversely affected by imports.
Planning
The planning program as a whole is slated to receive $19 million, a l9 percent reduction from $23 million.(which reflects a $3 million recession request). However, Section 302 planning funds for states and cities is being maintained at the FY 76 levels with $2.5 million requested for cities.
Technical assistance
EDA's technical assistance program is dealt one of the heaviest blows suffering a 57 percent cut. Of the FY 77 budgeted level of $6 million, $1 million comes from the Trade Act of 1974 and must, therefore, go to firms impacted by trade policy. This reduction is of special significance to cities since many of them have used EDA technical assistance funds to support core economic development program staff.
Grants to States
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 (Section 304). Even though funds for the Sec. 304 program were increased in FY 76 to $20 million, few states received enough funds to make a difference in EDA programs. As a result, no new appropriations are requested in FY 77.
Economic adjustment
Funding for the Economic Adjustment program is reduced by 42 percent from the FY 76 appropriation level of $77 million to the FY 77 request of $45 million. This program, begun in 1975, provides special assistance to states and local areas to assist them in meeting actual or threatened unemployment arising from increased competition from imports, natural disasters, environmental industry closures, defense base closures, and other impacts of federal action as well as other economic adjustment problems resulting from severe changes in economic conditions.
Job opportunities program (title X)
This new anti-recessionary program enacted in late 1974 received $500 million in appropriations during calendar 1975; $125 million in FY 75 and $375 million in FT 76. Even though legislation is currently pending in the Congress to extend this program, its authority expired on December 31, 1975. Therefore, there are no requests for additional funds.
Comment
The Ford Administration continues to support proposition that stimulation of private sector employment is the correct path to economic recovery. Yet EDA, the already underfunded agency charged with assisting economically distressed communities to build or rejuvenate their private sector economic base, will undergo severe cutbacks in FY 77.
The cuts among EDA's ongoing programs are across the board indicating that the Administration may have abandoned some of the priorities implied in the FY 76 budget request. The sharp reduction in Title IX economic adjustment funding and the complete elimination of the Sec. 304 state grant program suggest that the state emphasis evident last year may be diminishing. The curtailment of Title IX funds may also reveal a disenchantment with the quasi-block grant approach in economic development although Title IX was never given a fair trial by EDA on that score.
An analysis of how the cuts in EDA funds would affect various recipient groups also leads to no clear cut pattern of priorities. In general, the economic development districts and growth centers (usually rural) and Indian groups funds are not cut as sharply as funding to urban areas.
Contradicting that general trend, however, is the fact that planning funds for cities have been maintained, some planning funds for districts have been dropped, and counties (usually rural) lying outside districts will be cut more severely than any other recipient group. There is no indication that EDA intends to direct a larger proportion of its reduced funding to urban areas in FY 77, and subtle indication that the urban share may be reduced.
Office of minority business enterprise
The FY 77 budget request for the Office of Majority Business Enterprise (OMBE) is $50 million, representing a $2.6 million decrease from the FY 76 request and $100,000 less than the actual FY 76 program level which included supplemental appropriations for pay raises.
Among other losers: Indian education, from $57 million to $42 million; bilingual education, from $98 million to $90 million; drug abuse education, from $2 million to zero; environmental education, from $3 million to zero; and ethnic heritage education, from $1.8 million to zero.
Comment
Once again the proposed education budget presages a major political confrontation between the administration and the education interest groups. The administration advances an education block grant program, likely, in principle, to draw support from governors, but the proposal suffers from a sharp reduction in total funding level. The protraction of this debate, with the Congress probably not disposed to approve the block grant, can only create uncertainty about the availability of federal funds at the local level with a situation unsettling for local government and local school systems alike.
In matters of more traditional city interest, the FY 77 Budget for education proposes the following: Aid to Impacted Areas; Desegregation Assistance; and programs benefitting special populations such as handicapped, disadvantaged adults, Indians, other than English-speaking and ethnic peoples.
EMPLOYMENT
Employment and training programs
Comprehensive Employment and Training Act (CETA) programs are funded at $2.8 billion in the FY 77 Budget. Job training programs funded under Title I of CETA would continue at their FY 76 level of $1.6 billion. Traditional public service jobs funded under Title II of CETA would receive $400 million in FY 77, sustaining 50,000 such jobs now in place. Public service employment programs established by Title VI of CETA would be phased-out by October 1977. A $1.7 billion FY 76 supplemental appropriation for Title II of CETA is requested to sustain current public service job levels through January 1977 and provide for a complete phase-out of the 260,000 TitleVI job slots over the following nine months. In order to achieve this schedule, a $7,000 limit on the federal contribution to salaries paid to participants is proposed. Use of CETA Title II for the $1.7 billion public service employment supplemental would restrict the distribution of such funds to areas with unemployment rates of at least 6.5 percent. According to Department of Labor (DOL) spokesmen, about $150 million of the supplemental public service jobs money would be used to avert layoffs between now and June 30, when existing funding is slated to run out. About $450 million would be used during the transition quarter and the balance of $1.1 billion during FY 77.
A two-pronged effort of staff reduction and internal program revisions is proposed to meet the FT 77 Budget level.
Comment
There is no allowance in the FY 77, budget request for funding of the $1.1 million "City OMBE" program proposed in the FY 76 budget request. "City OMBE" was the major victim of the $2.6 million budget in FY 76. What appeared last year as a slowly growing federal recognition of minority-owned businesses as a vital part of the local economy which should be entitled to systematic local government involvement, turned out to be an illusion.
Also missing in the FY 77 budget are plans to expand management and technical assistance for Business Development Organizations (BDO) and establish six additional Construction Contractor Assistance Centers. In addition, the FY 77 budget reduces the scope of assistance under the contracted support services program, and terminates OMBE-funded Business Management Development Program.
While the President has requested a budget for OMBE, its future place in the federal government structure is not certain. A report of an investigative group from the House Appropriations Committee suggests some major program shifts and alternatives. The Office of Management and Budget has also been studying ways of improving the effectiveness and efficiency of the agency through reorganization. The item of greatest importance and certainty to OMBE now is that the President has requested a $50 million FY 77 budget for it.
EDUCATION
As in other Administration proposals for FY 77, many categorical education programs will be consolidated into a block grant package involving $6.5 billion. However against the background of congressional refusal to lessen the $7.4 billion FY 76 appropriation, the success of the block grant to states seems questionable.
Further, urban-oriented education organizations traditionally oppose the block grant concept in practice by arguing that categorical aid provides money to those who need it most (the disadvantaged or under-educated in city school systems); and that state education departments give preference to rural and suburban school districts when apportioning funds.
Although it is true that city governments are usually not responsible for public education, they often must be the tax assessor and/or collector of revenues directed to education. Thus, they are vitally interested in several of the categorical education programs which face reduction or are terminated in the FY 77 Budget.
Aid to impacted areas
Cities which have a high proportion of military or other federal employees, particularly living on federal property, which is not taxable, have relied on the three categories of payments to offset the costs of public education. In two of the three categories ("B"and "C") no funds are requested, while one category ("A") $250 million is requested for areas where children whose parents both live and work on federal property ("A") plus a few minor special situations. All payments (amounting to $342 million in FY 76) would be dropped for children whose parents work but do not live on federal property ("B") and there would also be no payments for children living in public housing ("C"), as now required by law. The rationale is that if the parents live in the community, they pay local taxes which are used to support local school systems. Lack of funds for the "C" category communities will stretch encumbered local budgets and create further competition for general purpose revenues.
Desegregation assistance
City governments and their elected officials are held personally accountable for implementing federal desegregation orders. Local police, fire and public works personnel were required to spend many duty hours supervising integration in Boston and Louisville last year. This may account for a slight increase from $242 million to $250 million in the Emergency School Aid for Desegregation account.
Special population programs
Education for the handicapped, an increasingly important area following court decisions requiring school districts to provide the special education these students need, holds the line at $220 million, the FY 76 level. Programs for disadvantaged students — particularly an urban problem — have been reduced by $150 million while other special populations lose all funding.
Another major change proposed in the Budget is reorganization of the WIN program. Legislation will be introduced to emphasize direct placement services and limit the availability of child care and supportive services. WIN would no longer finance its own training program surrendering such services to CETA. Anticipated appropriations of $235 million for WIN in FY76 would be reduced to $206 million. However, no additional funding will be made available for CETA prime sponsors to serve WIN clients.
Funding for the nationally operated Job Corps program is requested at $1'75 million, the same as in FY 76.
Summer jobs employment program
The Budget calls for a program providing jobs for economically disadvantaged 14- to 21-year old youths during 1976 and 1977 summers. A preliminary estimate of $440.3 million for the 1976 program will support approximately 740,000 nine-week, part-time summer jobs. With youth employment remaining at approximately the same levels as in 1975, this proposed program, represents a reduction of 100,000 jobs when compared with the FY 75 summer jobs program. Similarly, the preliminary estimate for the 1977 summer jobs programs is $400 million, further reducing the authorization levels to 672,000 jobs. These reductions are being proposed in the face of unemployment projections for FY 77 which indicate youth unemployment among minorities will remain constant (30 - 40 percent) until FY 78.
Supplemental funding requests for the summer jobs program will be submitted to Congress as the data on the projected youth unemployment level and other relevant economic factors for the summers of 1976 and 1977 becomes available. These funds will be distributed to some 430 state, county and other local CETA prime sponsors. The Administration also has indicated that it is exploring the possibility of distributing the funds according to a formula that takes into account unemployment rates and need. The impact on individual prime sponsor funding levels is, at this time, unclear.
Other Department of Labor programming
FY 77 appropriations are expected to be $7.2 billion, about $1.8 billion less that FY 76. The proposed decline in spending is primarily due to the proposed phase-out of temporary public service jobs and FY 76 expenditure levels inflated by a large carry-over of FY 75 funds.
The Budget includes $11.1 billion in appropriations for DOL and its programs. This amount includes $206 million appropriated to the Department of Health, Education and Welfare (HEW) but transferred to DOL for the Work Incentive Program. It does not include, however, $9.8 billion in authorizations for the Unemployment Trust Fund, which does not require action by the Congress.
The appropriation requested for FY 77 is $2.9 billion lower than the FY 76 estimate, primarily because the funds needed to phase-out the temporary public service jobs program through FY'77 will be appropriated in FY 76.
An increase of $450 million is requested for federal unemployment benefits and allowances, bringing the FY 77 figure to $800 million. This program provides unemployment benefits to persons affected by foreign trade agreements and who are qualified but not otherwise eligible under any other federal or state unemployment compensation program. A $5 billion advance to the Unemployment Trust Fund is also requested to continue support for unemployment trust funds that have exhausted their reserves. The $5 billion request is the same as in FY 76.
The Budget requests $1.436 billion, a decline of $16.1 million over the FY 76 level for the state and local operations of the United States Employment Service and Unemployment Insurance system.
Other DOL requests include: $128 million to continue the present level of Occupational Safety and Health (OSHA) activities and strengthen occupational health efforts, a $4 7 million increase in funding to expand statistical programs, a $10.9 million increase to accelerate automation of the Unemployment Insurance system, and elimination of public jobs funded under Title IX of the Older Americans Act.
Comment
The President's Budget reflects a fair degree of skepticism regarding the value of employment; and training programs as a mechanism for improving basic economic conditions. It cites substitution effects in public service employment programs, the emphasis placed individual needs rather than labor market conditions in training programs, and the inability to match program designs more precisely to local conditions as examples of factors which tend to reduce the effectiveness of manpower programs. It emphasizes, however, the importance of a decentralized block grant system in addressing some of these constraints.
The current CETA program is still operating under a continuing resolution because of the President's veto of the Labor/HEW appropriation for FY 76. The Budget rests on the assumption of significantly improving economic conditions despite predictions by Administration economic analysis that high levels of unemployment will not be easy to reduce and that the need for substantial public service employment and job training programs can be expected to persist for several more years.
The Administration uses this assumption of rapidly declining unemployment to propose a radical and disruptive phase-out of public service employment between January 1, 1977, and September 30, 1977. At the heart of this plan is the proposed imposition of a $7,000 salary ceiling on public service jobs. Such an act would force local governments to make substantial salary supplements for their public service workers in order to comply with comparability of wages requirements — a difficult prospect during a period of fiscal calamity at the local level. Use of the $7,000 figure to calculate the number of potentially available jobs also masks the speed of the phase-out since most current job level calculations use a $9,000 average. The effect of the President's $1.7 billion proposal is dramatic and unrealistic in light of the state of local finances and anticipated economic conditions.
For the first time in recent years, the Budget does request funding for summer youth employment in 1976 and 1977. However, while the level of funding for 1976 remains about the same as in 1975, it will support 100,000 fewer jobs in 1976. Further cuts in 1977 will result in 168,000 fewer slots. These projected reductions are based upon unrealistic assumptions about improvements in youth employment and suggest that cities will have to bear the burden of increased unemployment among their youth.
A significant and disturbing trend for manpower block grants is represented by the proposed amendments to the WIN program. These amendments would strip WIN of its training capacity and limit supportive services. The proposed Budget would shift the responsibility for providing these services to the local CETA programs without any new funding. A similar action was taken by DOL earlier this year when CETA prime sponsors were forced to revise their programs to provide recipients of Federal Supplemental Benefits (FSB) with training services. This trend of program consolidation without appropriate funding adjustments violates the principles of the block grant manpower system.
The Administration bases its budget policies for Unemployment Insurance (UI) programs on the assumption that the unemployment rate will decrease and there will be less strain on the state and federal unemployment funds. The Department of Labor estimates that approximately 11.5 million workers will receive unemployment assistance in FY 76 and 9.6 million in FY 77. Average benefits are estimated to increase from an average of $69 per week in FY 76 to an average of $75 per week in FY 77.
The Administration, as part of its budget proposal, also assumes that legislation introduced in 1975 will be enacted by Congress during this session. That proposal, awaiting floor action by the House, would:
Expand coverage under the regular Unemployment Insurance program to 92 percent of the work force;
Increase benefit levels to at least 50 percent of the pre-tax average wage;
Strengthen the financing of the UI system by increasing the wage base subject to tax.
Establish a National Commission on Unemployment Compensation.
The temporary program of special unemployment assistance for workers not covered under the regular program will expire in early 1977. The Administration is not asking for renewal of that program, on the assumption that the new legislation will meet the needs of these individuals. In addition, the Administration is not asking in the Budget for extension of the temporary program of extended benefits for covered workers who have received their full benefits. That program will pay benefits through March 31, 1977. Failure to extend or renew the temporary programs and proposed legislation (if enacted) to broaden coverage of the regular program to include certain categories of local government workers can be expected to have significant financial implications for cities.
ENERGY
President Ford is proposing a $10.4 billion energy budget for FY 77, an increase of 30 percent over last year. The $10.4 billion figure will increase further when additional funding is requested to cover the costs of implementing the Energy Policy and Conservation Act, legislation that was approved too late for incorporation in this Budget.
In this year's energy package, the President is requesting a substantial increase in research and development funds and is urging congressional approval of remaining sections of his FY 76 energy proposals. For the most part, these proposals are designed to increase domestic energy production and promote energy conservation and together they comprise the bulk of the proposed energy budget.
As in FY 76, this year's energy proposals are designed to develop the United States' capability for energy independence by 1985. The President proposes to achieve this goal by expanding research and development of alternative energy sources, promoting increased production of domestic fossil fuels, and encouraging energy conservation.
The Administration hopes to stimulate increased domestic production of fossil fuels by:
Deregulating the price of new natural gas;
Accelerating leasing of federal oil and gas resources both onshore and the outer continental shelf;
Providing tax, incentives for' oil and. gas producers; and
Expanding the use of naval petroleum reserves.
Proposed conservation efforts include :
Financial assistance to help elderly and low-income people insulate their homes; and
Establishment of thermal efficiency standards for new residential and commercial buildings.
Other efforts aimed at achieving energy independence involve:
Streamlining procedures for licensing nuclear power plants;
Providing tax assistance to utilities with special benefits for facilities using alternatives to petroleum products;
Modifying regulatory practices to ensure that utilities can continue to attract special capital;
Establishing an Energy Independence Authority to assist the private sector in development of domestic energy resources;
Initiating a strategic petroleum reserve to minimize the impact of disruptions in foreign oil supplies; and,
Stimulating creation of a new .private industry to supplement the federal government's uranium enrichment capacity, a process necessary to convert uranium ore into usable fuel for nuclear power plants.
The $2.8 billion earmarked for research and development programs represents a 30 percent increase over research and development funding for FY 76 and an 85 percent increase over FY 75 expenditures;
Comment
The brightest note in the President’s energy budget is the 30 percent increase in funding of research and development. Commendable increases have been requested for funding research in such vital areas as conservation, solar, and geothermal energy, nuclear fusion, and gasification and liquefaction of coal.
However, money for nuclear fission (especially the liquid metal fast breeder reactor) continues to dominate the research and development budget despite persistent questions on the efficiency and safety of the process and the unsolved problems of hazardous nuclear wastes disposal. This trend threatens to commit the nation to irrevocable dependence on nuclear fission. Most citizens' groups believe the Administration should seek funding for intensive research and development of safer energy alternatives, until the many troubling questions on nuclear fission are answered.
The energy budget and the events of the past year make it clear that cities will continue to face rising energy costs with little direct help from the federal government in meeting these increased expenditures. According to FEA sources, oil prices will begin to rise later this year because of the recent oil pride ,decontrol compromise. And we can expect yet another round of substantial price increases if the price deregulation on new natural gas is approved by the Congress.
The cities' only tool in combating these higher energy expenditures is energy conservation. The Energy Policy and Conservation Act authorizes $50 million to develop and implement energy conservation plans in the states. The League and the Conference also will continue to urge that conservation technology development be a top priority item in the energy budget.
ENVIRONMENT
The FY 77 Budget provides for a decrease of $53 million in authority for the Environmental Protection Agency (EPA), reducing the total of its operating budget to $718 million.
Water pollution control.
The Budget requests no new money for the construction of water pollution control facilities, but provides $10 billion in previously impounded and presently unobligated funds to support the, treatment works program for the upcoming fiscal year. The Ford Administration estimates that these funds will be sufficient to meet grant needs through September 1977. However, a list released by EPA indicated that 21 states will run out of money in four to 14 months under the Administration's plan. These states include: Maine, Delaware, Virginia, Alabama, Florida, Mississippi, North Carolina, Texas, Missouri, North Dakota, Wyoming, Montana, South Dakota, Utah, Colorado, Hawaii, Nevada, Arizona, Alaska, Idaho, and Oregon. EPA previously recommended a multi-year construction grant program totaling $42 billion.
The Budget also contemplates a reduction in the federal share of future pollution control projects. While federal funding would remain at the 75 percent level for treatment plants and associated interceptor units, it would be reduced from 75 percent to 60 percent for the construction of combined sewers. Further, all funding would be eliminated for separate storm sewers, collector sewers, and sewer replacement and rehabilitation. Also eliminated as eligible for federal assistance would be that portion of each project designed to reserve capacity for future population growth.
Outlay levels will be substantially higher this year, reflecting a major public works program which finally has begun to reach the construction stage. Outlays are projected at $2.85 billion for FY 76, $8.8 billion for FY 77 and $4.6 billion for FY 78.
The Section 208 Water Quality Management Planning Grants are included in the budget at a $15 million level, $38 million below the FY 76 appropriation. The budget document indicates that this level of funding will provide for "completing the funding of areawide planning and for support for Statewide planning." Federal funding for Section 208 grants will reach $235.4 million by the end of FY 77. According to EPA sources, almost 125 areas remain to be designated and funded in addition to the 153 agencies already operating. Under a recent court decision, states will be required to conduct 208 planning in "non-designated" areas within their boundaries. EPA estimates that the cost of funding these additional 125 areas plus the state non-designated activity could total over $400 million.
EPA operating programs
The EPA's operating budget will be decreased by $53 million, from $771 million for FY 76 to $718 million for FY 77. Phasing out support for the Section 208 areawide water planning program accounts for over half this decrease. Other significant decreases are in the pesticides program (down $4.4 million), and in environmental monitoring of energy research and development efforts (down $3.5 million) . One notable increase is an additional $10 million requested for the Water Supply program to help states gain certification to carry out enforcement requirements of the Safe Drinking Water Act.
Air pollution
The proposed $143 million air pollution budget represents a decrease of $2.3 million from last year's commitment. The decrease includes cutbacks in pollution control grants to some agencies and limited decreases in air pollution research and development. Grants to pollution control agencies will remain at the FY 76 level of $51.5 million. Funding for regional air pollution personnel will be increased by $1.3 million. The air program will also be a major recipient of the 100 positions EPA will reprogram over the next year from headquarters to regional offices.
Solid waste
The Agency's solid waste budget request essentially is the same as last year's with the addition of $51,000 for inflation. This budget is expected to support program components similar to FY 76. As in FY 76, no new resource or energy recovery demonstration grants are planned despite a continued emphasis on technical assistance to cities, counties, and states beginning resource recovery programs. Further, the Administration did not request funds for planning demonstrations and construction grants for conventional solid waste systems.
Water supply
The Water Supply Program will be increased by $10.6 million for FY 77 to a total of $42.7 million. This doubles the FY 76 level of grant funding to states to assist them in assuming primary enforcement responsibility for state drinking-water supply and underground pollution control program. About 41states are expected to assume this responsibility by the end of FY 77.The Administration has requested less than one fourth of the $40 million for technical assistance and training to local government agencies authorized under the Safe Drinking Water Act.
Noise abatement and control
The Noise Pollution budget request of $10.2 million represents a decrease of $288,000, reflecting the phasing out of one research project after completion late this year.
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.
Comment
From the standpoint of urban environmental conditions nationwide, the FY 77 environmental budget represents a commitment which falls below what is necessary to meet the most basic of urban problems.
Overall, the amount of new money available for environmental protection during the upcoming fiscal year is $10.8 billion less than that provided one year ago — although the deadlines municipalities are required to meet under air and water pollution laws are now one year closer.
In 1972, Congress twice overrode Presidential vetoes and enacted the long overdue Water Pollution Control Act Amendments of 1972. Two major components of the law were of great interest and potential assistance to cities. First, it was to provide money to area-wide entities controlled by elected local officials to conduct water planning and investigations on pollution characteristics unique to their jurisdiction. Second, 75 percent federal grant support was to assist communities building treatment works to achieve nationally established water quality standards in a manner consistent with the local plans.
Unfortunately, the intentions of Congress never were fully realized. The previous Administration, faced with implementing a program with which it didn't agree, withheld over half of the funds earmarked for cities. The resulting delay in setting water cleanup efforts created a situation where only within the last year has the water pollution program begun to move. More than 150 locally controlled areawide planning agencies are now in the process of developing wastewater plans for communities across the country. Grants for the construction of wastewater treatment works are being obligated at the rate of almost a half billion dollars each month.
Now the Administration has decided to strike a "more appropriate balance between federal and non-federal responsibilities" to meet the goals of the Water Pollution Control Act. In order to accomplish this objective the Budget proposes: no new funding authorizations for wastewater construction grants — even though at least 21 states may run out of money within the year; a phasing-out of financial support but not legal requirements of the Section 208 areawide planning program; legislative amendments to the Water Act which will reduce the federal share for some treatment works and eliminate others from eligibility altogether.
The level of funding proposed by the Administration for Section 208 planning is small compared with EPA's estimates of the needs for this activity. The $15 million requested is in the form of 75 percent federal support not 100 percent as previously existed. The previous Administration impounded, through administrative delay, $137 million in 100 per-cent funding. The major portion of the water cleanup price tag estimated by EPA at $342 billion, is to take care of storm water discharges and various "non-point" sources of pollution — factors which can be dealt with effectively only through areawide water planning.
By proposing legislative amendments to the Water Act the Administration would shift most of the $290 billion cost of meeting federal water standards to state and local governments.
FOOD STAMPS AND NUTRITION PROGRAMS
The Department of Agriculture's (USDA) Food Stamp and Nutrition Program's FY 77 Budget proposal represents a clear example of three Administration objectives; namely, a significant reduction in expenditures in the social service/income security area; program reform by replacing the categorical nutrition programs with a block grant mechanism; and an attempt to target all such programs only to those below the poverty level ($5,050 income for a family of four).
Overall, the Budget request is reduced by approximately $2.4 billion from an estimated level for FY 77 of $9.8 billion to $6.9 billion — or a cut of more than 25 percent.
Furthermore, the Budget also requires that the special milk program and the food service equipment assistance program be terminated.
Food stamps
The FY 77 Budget for the food stamp program accommodates the legislative package to alter eligibility standards which is pending before Congress. The estimated cost of the program without any major changes would be approximately $5.85 billion in FY 76 and would increase to approximately $6 billion in FY 77, serving approximately 18 million people. The impact of this proposal would reduce expenditures by $1.2 billion and the number of recipients by 5.3 million by lowering the eligible income standard (from $6480 to $5,050).
Nutrition
The budget for child nutrition programs and supplemental feeding programs shows a reduction of approximately $1.2 billion predicated upon the Administration's block grant proposal. The $2 billion calls for combining the school lunch, school breakfast, special milk, equipment assistance, child care, summer feeding, Women, Infant and Children (WIC), and the commodity supplemental food programs. Funded categorically, these programs would cost approximately $3.2 billion in FY 77.
The FY 77 Budget is adequate for most of the child nutrition programs if Congress rejects the block grant proposal.
Of the allied programs, the Administration is proposing to terminate the special milk program by March 4, 1976 by "rescinding" the $40 million already appropriated.
The FY 77 Budget requests that no monies be made available for the school equipment assistance program, which in the last fiscal year had appropriated $21 million.
The FY 77 Budget poses major difficulties for state nutritional administrators. In spite of an enormously increased workload imposed by new USDA auditing requirements and by the new child nutrition law, the Budget contains a request for $7.7 million in both FY 76 and FY 77. This is an increase of only $1 million over the FY 75 funding level although the Food and Nutrition Service of USDA requested from OMB $11.15 million for FY 76.
Comment
The Budget request to reduce the Food Stamp and Nutrition Programs by approximately $2.4 billion is predicated upon legislative proposals in each of these areas. The food stamp proposal is one of several now pending before Congress (lengthy and heated debate is expected with the outcome impossible to predict at this time). The block grant proposal in the child nutrition area has yet to be finalized; however, a similar proposal was advanced last year and met with little receptivity in Congress. Should these proposals be rejected by Congress, levels of funding will continue at roughly FY 76 levels.
The other issue worth identifying is the stated objective to only target these programs to recipients below the official poverty line. Reducing income eligibility levels would cause severe hardship on the near poor, working poor and the unemployed particularly in the urban areas. In fact, the Bureau of Labor Statistics (BLS) has concluded that an average urban family now requires $9,198 to live at BLS's lowest living standard.
HEALTH
The President proposes to combine Medicaid (health care for the poor) and 15 categorical programs — many of them run by local agencies — into a single block grant to the states, with less federal money, no required state match, and no assured role for city and county governments.
The areawide Health Systems Agencies (HSAs) now aborning would be financially threatened, and funding of block grants to state and local health departments under Section 314(d) of the Public Health Service Act would be ended. The President says, "We cannot realistically afford" National Health Insurance. He proposes instead a limited "catastrophic" insurance plan under Medicare (health insurance for the elderly and disabled) coupled with higher payments by most beneficiaries to save the government money in the face of soaring health costs.
The President's health proposals for FY 77 may best be characterized as cautious.
The overwhelming size of the Medicare-Medicaid programs has dictated the nature of the proposals and the priorities for the Department of Health, Education, and Welfare (HEW).
There are major cost control elements in the President's proposals to convert Medicaid to an annually appropriated block grant and to modify Medicare with increased cost sharing and "catastrophic" coverage. Medicare-Medicaid together represent $32 billion of a total health budget of $37 billion. (Medicare = $23 billion; Medicaid = $9 billion.) Because these programs are essentially uncontrollable, major legislative changes must be made if the President is to hold down Federal Budget costs.
The principal change proposed would combine Medicaid with 15 other health programs into a block grant of $10 billion to states. It would accomplish two basic purposes: first, the size of the Medicaid budget would be determined not by the ability of states to match federal dollars, but by a congressional appropriation. Second, the block grant would essentially end the project grant system through which the federal government has encouraged categorical efforts in health areas of national concern.
From the perspective of local government. the elimination of a project grant system and the reliance on the state as the principal federal beneficiary are significant: Local health departments would no longer have direct access to federal program funds for community health and public health activities. The block grant proposal also could replace, to a large extent, the fledgling health planning program which emphasizes local non-profit agencies.
Under the block grant proposal (the Federal Assistance for Health Care Act) $10 billion would be distributed to the states under a formula including number of low-income families, relative tax effort, and per capita income. The states would develop a two-part health plan — part A for all the people of the state and part B for the target population within the state. At least 90 percent of the block grant would have to be spent for personal health services. Five percent would be for public and community health activities and 5 percent for planning and regulation.
The proposal is not accompanied by any substantial increase in federal funds. Indeed, compared to the recently vetoed HEW appropriation, the block grant shows a reduction in federal funding. The following table reflects the FY 75, the revised FY 76, and the proposed FY77 health budget. A more realistic version would add the proposed rescissions to the revised FY 76 figures, which would then exceed the proposed budget by several hundred million dollars.
Local agencies
Three features of the proposal are of special interest to cities, as follows:
1. The health programs that in the past have been directed specifically to cities and administered by local health departments (e.g. rat control and lead paint) as project grants would be folded into the state block grant. No required pass-through of funds to local health departments is proposed, except for a transitional. provision for a declining percentage of support for existing projects.
2. The elaborate planning mechanism of the National Health Planning and Resource Development Act (PL 93-841) would be continued only if the state agency chose to do so.
3. The Administration is persisting in its efforts to abolish the comprehensive health block grants to state and local governments under Section 314(d) of the Public Health Services Act. While announcing it is "folding in" these grants among the 16 programs proposed for consolidation under the Federal Assistance for Health Care Act, it is actually trying to fold them up.
Other provisions of the block grant proposal include the following:
1. States matching of federal funds would not be required.
2: A hold harmless provision would ensure that no state would receive less in the first year then in FY 76; nor would any state receive more than a 10 percent increase.
3. Target populations would be defined by the state; federal eligibility requirements would not be imposed.
4. An open and public planning process similar to the Title XX (social services) process would be required.
It should be noted that Medicaid funds constitute the greatest portion of the $10 billion — the FY 76 estimate slightly exceeds 90 percent. Developmental disabilities not previously in the health budget, are also included as a block grant program.
Medicare and national health insurance
The Budget proposes the following significant revisions of the Medicare (Title XVIII) program:
1. A "catastrophic" insurance proposal would put a cost sharing cap of $500 for hospital costs and $250 for physician fees for all beneficiaries. Costs above these caps would be fully insured.
2. Offsetting this, a 10 percent coinsurance would be applied to all costs incurred below the caps.
3. Cost increases that would be reimbursed would be limited to 7 percent for hospitals and 4 percent for physicians' fees.
While the catastrophic coverage would cost an additional $500 million, the imposition of additional cost sharing and limitation of cost increases would result in overall savings to the Medicare program of $2.2 billion. This limited health insurance program is along the path of the Long-Ribicoff proposals and away from either the old Administration Comprehensive Health Insurance Plan (CHIP), or the approaches by Massachusetts Senator Edward M. Kennedy.
While thus proposing "catastrophic health insurance for everybody covered by Medicare," the President said in his State of the Union Message on January 19, "We cannot realistically afford federally dictated national health insurance providing full coverage for all 215 million Americans."
Other health programs
Drug abuse community programs were not included in the block grant proposal and would be increased from $138 to $160 million(see separate chapter on drug abuse).
The Indian health program would receive a $40 million increase, and the National Health Service Corps would go from $15 million to $25 million.
Again, the Budget proposes closing the eight Public Health Service hospitals (in Boston, Staten Island, Baltimore, Norfolk, New Orleans, Galveston, San Francisco and Seattle).
Small increases were provided for occupational health, laboratory improvement, and food and drug programs.
A 20 percent increase is proposed to support the continued development of Professional Standards Review Organizations (PSROs) which still have a high priority.
The health professions education budget would be shifted to emphasize the training of primarye care physicians rather than medical students preparing for other specialities.
The National Institutes of Health (NIH) are budgeted for small increases for biomedical research.
Comment
The FY 77 health budget reflects the President's Budget in that it attempts to restrain costs in the health area. The block grant proposal would significantly change the federal role in health policy and reduce its financial contribution to programs run by local health departments. The proposed Federal Assistance for Health Care Act represents the Administration's determination to shift responsibility and authority — but not necessarily resources — to state and local governments. It suffers from several major flaws: it is seriously underfunded, particularly from the standpoint of states that are seeking additional support; it assures no direct role for cities and counties, where much of the innovative effort has been focused; and it does not require any state matching, which in some states could result in a further substantial reduction in support to local health programs.
The Medicare proposals seek to shift more of the cost burden to the beneficiaries of the program while providing catastrophic health insurance only to the tiny portion of the 24 million Medicare eligibles that would require an unusual amount of physician in-patient hospital, post hospital home health, or post hospital skilled nursing services — but not to the other, far larger portion of disabled and elderly infirm patients who need long-term nursing care.
The again-proposed elimination of 314(d) block grants to state and local governments may well foretell the future federal commitment to the, larger block grant concept advanced under the Federal Assistance for Health Care Act. These grants are essential to the already strained budgets of local health departments.
It is doubtful that any of these proposal will be enacted in the current Congress. At best, agreement on health spending under current legislation will be achieved. At worst, the long impasse that has resulted in vetoes of HEW appropriations and some other health legislation will continue the uncertainty and program delays of the past several years.
HOUSING AND COMMUNITY DEVELOPMENT
The FY 77 Budget proposes a 89 percent increase in funding for the Department of Housing and Urban Development (HUD), requesting $9.1 billion in appropriations.
For the first time since enactment of the Housing and Community Development Act of 1974, the Budget requests the full amount authorized for community development, $9.15 billion, a 15 percent increase. If appropriated, it will bring the total three-year funding up to the $8.4 billion authorized by law. In addition, the full $100 million is requested for transition funding to cover hardship cases and special needs, bringing the total for community development to $3.25 billion.
The Budget includes $850 million of new contract authority for assisted housing and use of $264 million of contract authority released in FY 76 for the Section 235 home-ownership program for moderate income families. It calls for 400,000 units of lower income housing under the Section 8 program, 100,000 units under the Section 235 program, and 6,000 units of Indian housing for a tom) of 406,000 assisted units in FY 77.
Community development
Different versions of the Administration’s legislation approved by the House and Senate would adjust the allocation formula of the community development block grant due to unanticipated demands from urban counties. It would set aside $200 million of the amount requested and guarantee that $100 million of the amount appropriated be available to cities in metropolitan areas which are not automatically allocated funds by the block grant formula. The proposal also would authorize up to $100 million to close the gaps between the amount required by cities which are to be "held harmless"and the amount available after allocation or appropriated funds in accordance with the law.
There will be no adverse effect on either entitlement or discretionary communities if Congress approves the $3.25 billion appropriation package.
"Housing programs" in the FY 77 Budget cover HUD's major housing subsidy programs as well as the mortgage insurance activities of the Federal Housing Administration (FHA). Other functions included under this heading are loan management, property disposition, program liquidation, and provision of temporary housing for persons displaced by disasters.
For FY 77, HUD will continue to rely on the Section 8 Housing Assistance Payments program for the provision of nearly all low-income housing. It requests $850 million of new contract authority which would bring the FY 77 total to $1.147 billion in authority if Congress approves. HUD is projecting reservations of 400,000 units under Section 8 for the fiscal year, divided as follows: 125,000 units in new construction and substantial rehabilitation, 165,000 units in existing housing, and 110,000 units in property disposition and loan management (near-defaults and HUD inventory properties).
HUD will use Section 8 funds in a major effort to reduce its inventory of foreclosed properties. During the remainder of FY 76, the transition quarter, and FY 77, HUD hopes to save $1.9 billion by lowering defaults on FHA-insured mortgages by use of Section 8 subsidies.
The $264 million of Section 235 contract authority is to be used for housing reservations of 75,000 units in FY 76, 100,000 in FY '77, and 100,000 in FY 78. Significant administrative changes in the program limit the interest subsidy to 5 percent rather than the1 percent permitted by law and require home purchasers to make a down payment greater than the minimum $200 permitted by law. These changes are HUD's efforts to avoid the defaults and foreclosures which were part of the reason for suspending the program before it was reinstituted pursuant to a court order.
The Budget proposes a lending level of $375 million for permanent financing of 14,800 housing units for the elderly or handicapped under the Section 202 program. Direct federal loans at the Department of the Treasury's borrowing rates plus administrative costs will be used to finance this construction. The Section 8 rental subsidy will be used to assist low income individuals.
For the existing inventory of public housing projects, the Budget proposes a decrease in HUD operating subsidies from $535 million in FT 76 to $463.6 million in FY 77. A performance- funding system which incorporates revenue and expense standards will be used to determine levels of funding for local housing authorities. Approximately $215 million is requested for public housing modernization, about the same as the level for FY 76.
The Budget does not anticipate any additional mortgage purchase commitments for FY 77 under the emergency mortgage purchase program or under the special assistance functions of the Government National Mortgage Association (GNMA). It is expected that purchase commitments of $600 million for previously approved subsidized housing mortgages will be completed in 1976. In addition, $3 billion in GNMA purchase authority has been approved by the Secretary of HUD based on a finding of housing emergency in accordance with the Emergency Housing Act of 1975. In FY 76, this authority is expected to cover mortgage commitments for 100,000 multifamily units.
No new authorization is requested for conventional public housing, Section 238 multi-family rental program, Section 312 direct rehabilitation program, or Section 802 interest reduction grants to state housing finance and development agencies. During FY 77, approximately 5,000 units of Section 236 housing will be added by special deep subsidies to cover increased taxes and utilities since the project was approved. Rescissions of the available funds for the Section 802 program and the 312 rehabilitation program have been submitted to the Congress by the Administration.
Comment
The Budget request for full funding of the community development block grant is good news. It would also have been desirable to meet the increased demands of urban counties by proposing to increase authorizations and funding. But the fact that this approach was not taken is understandable in view. of the general budget posture and especially in light of. the 15 percent increase for block grant funding.
The 1974 Housing and Community Development Act directs the Secretary to submit to Congress timely requests for additional authorizations for the fiscal years ,1978 through 1980. This provision is based on the notion that the community development program should give cities a reasonably predictable level of future funding to enable realistic multi-year planning and programing. In meeting the Congressional Budget Act requirement to submit authorization levels to Congress for FY 78 by May 15, it would be desirable for HUD to make recommendations for FY 78-80.
The principal concern about the FY 77 Budget proposal is the relationship between housing and community development. In a recently released HUD first annual report on the community development block grant program, cities cited improvement or expansion of housing stock more frequently than any other item as a high priority need. HUD has approved 1,321 housing assistance plans.
The issue in the FY 77 Budget is whether the pattern of funding will result in the production of housing in accordance with the locally approved housing assistance plans. Despite approved contract authority of over $1.8 billion for Section 8 and past budget estimates of several hundred thousand units a year, no accepted means exists now for obtaining the flow of private mortgage money needed to finance Section 8 housing. Financing has not been made available for the new and rehabilitated units whose tenants would receive Section 8 rental assistance. It is as critical for the cities that funds be made available for this financial assistance as it is for funding Section 8. Since the recent HUD report shows that 71 percent of the block grant funds are targeted to areas where low and moderate income families predominate, it is reasonable to assume that a significant proportion of the housing called for in their plans is in neighborhoods considered to be medium or high risk areas. Special financial assistance may, therefore, be required to make the Section 8 program work in accordance with housing assistance plans. The same principle should apply to the Section 202, Section 235, program and any other housing assisted by HUD in cities with a plan approved by the local community
The FY 77 Budget suggests that the Federal guarantee of taxable bonds and interest rate subsidies authorized in Section 802 of the 1974 Act are not needed. GNMA, which provided assistance to federally subsidized or assisted housing programs, is not to continue this function in FY 77. It is not likely that a HUD-state housing agency co-insurance program will provide substantial help to the financing of assisted housing in medium to high risk areas. The approved community development programs, which include the housing assistance plans, reflect city priorities and planned expenditures to improve physical and economic conditions as part of a long-term, comprehensive, city-wide effort. However, without the necessary special assistance, the critical investment in housing will not occur where needed, and the community development program will not work.
It is therefore essential to achieve the housing production goals in the budget. It is equally important to locate housing in a decent environment which will minimize the risk of foreclosure and help to support the locally-approved community development program. One approach would be to establish a GNMA tandem-plan for Section 8, Section 235, Section 202 and other assisted housing which is part of a locally-approved housing plan. Since the housing plan has been approved by HUD and each of these programs involves HUD approval on a project-by-project basis, there will be ample opportunity for careful review by the federal government.
Another concern about the FY 77 Budget is the lack of support for the 312 low interest rate rehabilitation program indicated by the rescission sent to Congress by the Administration. This program works. Community development block grant funds do not substitute for a direct rehabilitation loan program. The problem of obtaining long-term financing for housing improvements should be handled by a housing program. While the ability to use block grant funds to support rehabilitation is desirable, many communities refuse to support rehab if it means tying up scarce flexible block grant funds in long-term mortgages. Instead, they make grants or establish escrow funds for security to obtain loans for rehabilitation from private lending institutions at less than market rates. While the problems of Section 8 and the innovative uses of block grant funds to support rehabilitation are being tested, the Section 312 program should continue.
Parks and recreation
In spite of speculation earlier in the year regarding the status of the Bureau of Outdoor Recreation’s (BOR) budget, the Administration has requested full funding in FY 77 for this program.
MANAGEMENT ASSISTANCE
Cities face continuing cutbacks management, and planning assistance in the Administration’s FY 77 budget. In 10 major planning and management assistance programs, funds have decreased by approximately 30 percent over the past two years with a 14 percent drop between FY 76 and FY 77. Programs scheduled for major reductions include the Intergovernmental Personnel Act (IPA)
(Civil Service Commission), Comprehensive Planning Assistance (Housing and Urban Development 701), and Areawide Wastewater Planning (Environmental Protection Agency 208).
IPA
The FY 77 budget offers no explanation for the $5 million cut ($15 million to $10 million); proposed for, the IPA program. IPA is a general-purpose management assistance program that provides grants and other assistance to cities to help them improve their personnel, management and training systems through an exchange of personnel. Continued favorable evaluations of the program and extensive and innovative uses of IPA resources by local ,governments apparently have had little impact on the Administration. The 33 percent cut in IPA represents a severe reduction in an already limited program. The most noticeable initial impact of the proposed reduction would be a disruption in the state planning processes for IPA fund allocation and increased competition (fundable requests now total three times the amount of available funds) for scarce IPA resources.
Housing and Urban Development (HUD) 701
The 67 percent cut in 701 funds represents a drastic retrenchment of federal government support for Comprehensive Planning and Management in city and state government. The rationale offered for the reduction is that cities are now able to use community development block grant funds for general planning and management purposes. The fact is that Community Development block grants funding is not sufficient to finance redevelopment and other related activities as well as comprehensive planning and management improvement at the local level. The only effective means for providing sufficient planning resources to metropolitan and non-metropolitan cities is to fund the 701 program at a minimum of $100 million. The current FY 77 Budget proposal not only cuts funding back to $25 million but also contemplates a policy of planning only sub-state regional planning agencies (primarily COGs). Therefore, if the Administration’s proposal is adopted, cities will receive no 701 program support in FY 77 whatever.
Areawide wastewater planning (208)
The Administrations proposed $15 million program for the Environmental Protection Agency’s (EPA) Section 208 (areawide wastewater planning) is a drastic and unrealistic reduction for several reasons, as follows:
Funding for existing 208 agencies is inadequate, and a recent League and Conference survey indicates that 90 percent of these agencies would be incapable of picking up this activity if the federal share were reduced;
The need for 208 funding has increased because 125 areawide agencies remain to be designated, and recent court decisions require 208 planning to be done in nondesignated areas of the state also (the estimated cost of this latter activity alone is $50 million);
An assumption underlying the $15 million request seems to be that 208 planning is a one-time cost by which a plan will be developed and put on a shelf for future reference; in reality, 208 is similar to all other planning activities, it is a continuing ongoing process that requires monitoring, reevaluation, and updating on a regular basis; and
In broad terms, EPA is attempting to do a $300 million job with $15 million; this situation is exacerbated by the reduction in federal share funding from 100 percent to 75 percent over the last two years.
Law Enforcement Assistance Administration
(LEAA) planning
No increase is requested for FY 77 LEAA planning grants. The decision to request $60 million for next year, which is the same appropriation as that of FT 76, apparently results from the Administration’s rationale that an increased demand for planning money will not occur because direct aid will decline.
Health planning
The proposed $90 million for FY 77 health planning will be insufficient to meet documented needs at the local level. Recent health legislation has eliminated gaps in areawide health service agency coverage, mandated staff levels for Health Services Areas (HSAs) and increased the number of functions that HSAs are required to perform. Unless changes are made in the legislation during this session of Congress, $90 million will not meet local health care planning needs. Under the Administration’s proposed block grant health program, health planning assistance would be one of 15 categorical programs included and, thus, would become a discretionary item.
Transportation planning
The Federal Highway Administration (FHWA) and the Urban Mass Transportation Administration (UMTA) recently issued new joint regional planning requirements necessary for funding that place greater responsibilities on local governments and Metropolitan Planning Organizations (MPOs). These include Transportation Improvement Programs (TIPs) and Transportation Systems Management (TSM) projects. Funds for transportation planning in urbanized areas are derived from two main sources: (1) UMTA’s Section 9 technical studies grants and (2) one-half percent of a state’s federal-aid highway apportionment. Since the A-95 agency does the transportation planning in many urbanized areas, 701 funds have also been used.
The Administration proposes an increase for UMTA Section 9 in its FY 77 Budget, up from $38.7 million in FY 76 to $45 million. However, since these funds must also be used for a variety of technical studies, including those to support applications for new transit projects (such as "alternatives analysis"), only part of the $45 million would be available for transportation planning in the 279 urbanized areas. The planning funds derived from the highway program would amount to approximately $32 million in FY 77. This would be a reduction over FY 75 and FY 76, since total highway obligations are lower. Furthermore, these funds are also used by the states because they have a role in the urban transportation planning process under Section 134 of Title 23 (highways). Therefore, it appears that the increase in Section 9 funds will not improve regional transportation planning capabilities.
Comment
The FY 77 budget represents a continuation of the trend towards increased reliance on the block grant approach. At the same time, there is an ongoing reduction in the availability of general and special-purpose planning and management funds that are essential if cities are to implement effectively their block grant programs. While shifting greater responsibility to local governments and putting more decision-making power in the hands of local elected officials, the FY 77 budget reduces those programs that will give cities the ability to plan, implement, monitor, and evaluate programs. It is clear that despite recent Administration rhetoric about the need for "capacity building" in local government, there is little dollar commitment to this effort.
RESEARCH AND DEVELOPMENT
The President proposes $24.7 billion in obligations for research and development in FY 77. Approximately $23.5 billion of that is devoted to research and development (R & D) and the remainder to facilities. This is an increase of more than $4 billion or 11 percent for research over the estimated FY 76 obligations. In the broadest categories the changes would amount to increases of 18 percent for defense research and development, 10 percent for civilian programs and a constant amount for space R&D.
According to the Administration, the leading research priorities for the coming year are defense, energy, and basic research. The Budget contains increases of over 33 percent for direct energy R&D, with significant increases in solar and geo-thermal research as well as conservation (see Energy section for details) . The National Science Foundation (NSF) which in FY 75 and FY 76 allocated 83 percent of its R&D funds to basic research, is slated to receive a 16 percent budget increase, with 86 percent to be devoted to basic research in FY 77.
The division of R&D funds by agencies shows both significant increases and decreases: +13 percent for Defense, +17 percent for Energy Research and Development Administration (ERDA), +8 percent for Department of Health, Education and Welfare (HEW), +16 percent for NSF, +13 percent for Department of Housing and Urban Development (HUD), but -6 percent for Department of Transportation (DOT) , -21 percent for Environmental Protection Agency (EPA) and -37 percent for Department of Justice (DOJ). Beneath and beyond the numbers and the signs there are shifts in responsibilities. A large part of the decrease in the EPA R&D budget results from a transfer of energy research to ERDA. Within NSF, Research Applied to National Needs (RANN) is scheduled for an 8.7 percent decrease, but this represents shifts of projects to other agencies where there are increased expenditures proposed.
Comment
On the face of it, R&D fares well in the proposed FY 77 Budget. An 11 percent increase in a tight budget is significant. But how do cities fare?
The HUD R&D budget is to be increased 13 percent, $8 million, and this is a decision to be applauded by cities. Put in context, however, the applause must be muted. That increase is from $62 million estimated obligations for FY 76, which was up from $57 million in FY 75 obligations, which in turn was down from $65 million in FY 74. Taking FY 74 as a base year, therefore, shows an increase of only $5 million or about 7.5 percent over three years of high inflation. This increase, therefore, for FY 77 HUD R&D is significant and needed but really represents catching up rather than a long-term dependable commitment to urban research.
At the same time it must be remembered that the HUD R&D budget still ranks above only Justice among the major federal agencies. Further, the cuts in the RANN R&D budget must raise questions about the federal government’s capacity to continue to innovate in areas of practical concern to cities and to communicate the results of research undertaken.
In two respects the Administration’s continued advocacy of consolidating categorical programs makes the R&D effort look less adequate. With devolution of authority, greater burdens are placed upon local government administrations. At the same time cuts in funds for planning subtract funds available to local governments for program management. It is imperative that the federal government realize that greater responsibility at the local level for program administration means greater responsibility at the Federal level for supporting the production of usable knowledge and techniques which can be put to work by cities.
Furthermore, movement toward block grants based on distribution formulas makes the production of adequate data even more important. A formula is only as good as the data that fills it and the development of an appropriate formula depends on the availability of dependable data.
Further, for years, persons both in and outside of the federal government have advocated the development of social or urban indicators that would give better answers to questions related to need and program effectiveness. Recent major shifts in population distribution make such information even more important for the development of effective urban policy. But in its broad outlines the President’s budget, which proposes a budget virtually unchanged for statistical programs does not seem to respond to these data needs.
The R & D budget represents the thinking of the federal government. It is a rough prediction of what it can do and do well. The President’s budget proposal shows some evidence that city concerns have risen in the federal consciousness, but also demonstrates they are still buried far deeper than they should be.
SMALL CITIES
The FY 77 Budget requests no new money for grant programs provided under the Rural Development Act and has maintained counterpart loan programs at the same level as FY 76, $1,020 million.
In past years, grants have been made to rural areas and to small cities for water and waste treatment programs, business and industrial development, and community fire protection. (See Table SC-1, page 83).
[Table omitted]
Housing assistance
The United States Department of Agriculture (USDA) Farmers Home Administration (FHMA) oversees a group of housing programs that will provide a total of $2.7 billion indirect and guaranteed loans to individuals, up only slightly from last year. One hundred twenty six thousand units will be involved, over 11,000 fewer than FY 76. The programs target low and moderate-income groups and will emphasize purchase and rehabilitation of existing housing stock, as will almost half of FY 77 home ownership assistance. An experimental mortgage loan program to builders will also test the viability of attracting private capital to the rural housing market.
Several smaller housing programs will not be funded this year, including Self Help Site Development loan and grant program which allows aid for housing site assembly and preparation by public and non-profit agencies.
Total dollar commitment to rural housing has not changed significantly in recent fiscal years. While these programs have helped many individuals in rural areas, their biggest weakness lies in the kind of shot-gun assistance they provide which permits rural housing and subdivision construction outside the control of rural communities. The demand for small city services and the subsequent strain the provision of services places on the small city totally frustrates orderly growth and development. The fact that these ill-placed housing units may also lie outside small city boundaries exacerbates fiscal resource problems of the communities.
Comment
It would not be hard to conclude that in FY 77, the U.S. Department of Agriculture and the Office of Management and Budget are trying to plow the Rural Development Act under once and for all. All of the community facilities grant programs, which provide funds for water and waste treatment programs, industrial development, community fire protection and other community facilities, will be abandoned. The USDA claims that the grant programs of the Rural Development Act are unnecessary because rural communities are eligible to receive federal assistance under the Department of Housing and Urban Development (HUD) Community Development program, as well as other federal programs. In theory this may be true, but in practice the case is otherwise since community development funds are limited and eligibility requirements of other programs severely inhibit small city participation. A good indication of need is the $488 million backlog of applications for Water and Sewer Grants now held by USDA. Counterpart loan programs, which are not as beneficial to small communities because of the debt burdens they impose show no increase in outlays over previous years.
The ability of the Administration to continue its year by year assault on Rural Development Act funding may be hampered as a result of exhaustive Congressional oversight hearings that will soon begin on FHMA’s administration of the Act. Major new initiatives by the Senate and House Agriculture Committees to assure adequate funding and improve administration are expected.
SOCIAL SERVICES
Income security
Over 97 percent of the $140 billion Health, Education and Welfare (HEW) budget provides payments which are mandated by law — the so-called non-controllables. Seventy percent of HEW’s budget for FY 77 will be for income security programs, an estimated $12 billion increase over FY 76.
Old age, survivors and disability insurance
(social security programs)
These two social security programs will pay an estimated $33.5 billion to 33.3 million beneficiaries in FY 77, or one million more recipients than in FY 76 and 13.5 million more than in 1965.
This year the budget supports 8.7 percent cost-of-living increases payable in July, 1976 and 5.9 percent in July, 1977, for social security and supplementary security income beneficiaries.
Throughout 1976 there was increasing public concern about the financial soundness of the social security program and speculation that there will be insufficient funds in the trust account in the long term to pay for benefits as authorized by current law. The Administration will submit a series of legislative proposals to improve the financial soundness of the system, both in the short run and in the long term.
The most important proposal is an increase in the tax rate by .3 percent for both employers and employees, beginning January 1, 1977. This increase is designed to assure the integrity of the fund through the mid-1980s. Another proposal would change the way future benefits are computed in order to lessen the inflationary impact on future benefit costs.
Supplemental security income program (SSI)
Beginning January 1, 1974, the SSI program federalized the programs of assistance for the aged, blind and disabled through provision of a minimum basic payment. States may continue to provide supplementary payments above the federal floor. There has been a steady growth in the program since the beginning of federal administration — about 4.1 million federal and state beneficiaries in FY 75 to a projected 5.2 million beneficiaries in FY 77. (See Table 88-1)
[Table omitted]
This program has come under public criticism (1) upon implementation when many former state recipients did not receive checks on time or at all from the Social Security Administration; (2) in recent months from the excessively high error rates which were publicized in the press. As a result, HEW is proposing a number of management improvements in the SSI program designed to reduce error rates, to increase the accuracy of benefit payments, to improve the computer systems involved in payment of claims, and to implement the recommendations of an SSI study group appointed by the secretary. That report is being released almost concurrently with the budget. Finally, a number of new positions are being planned for the program to improve local servicing at social security district offices.
Aid to families with dependent children program (AFDC)
Under this federally matched, state administered public assistance program, HEW is projecting a decrease in recipients for FY 77 of about 200,000 individuals. At the same time the average benefit is expected to increase.
The Administration has made two recommendations to reduce federal costs in the AFDC program. The first would withhold up to $240 million from states failing to meet quality control performance measures. Such a sanction has been threatened for almost two years, but no money has been actually withheld largely due to political pressure from the states and the Congress.
The second initiative, still indefinite at this point, would introduce legislation allowing HEW to implement program standardization provisions. In order to stop the implementation of new rules, Congress would have to act to disapprove them. The functional budget refers to this new proposal as the Income Assistance Simplification Act. Its purposes are to promote equity, effectiveness and consistency in the welfare program and to remove work disincentives.
Disabled coal miners benefits
The "Black Lung"program benefits show a slight decrease from the FY 76 level, reflecting a decline in number of beneficiaries. There are no new beneficiaries since the administration has been shifted from HEW to the Department of Labor.
Comment
Cities are not directly involved in the administration of the income security programs. However, the dollar level of benefits greatly impacts the economy of cities since a large proportion of the recipients live in urban areas. The impact is even greater in times of economic downturn because unemployed persons often seek benefits from these programs.
The budget policies in income security in the FY 77 Budget which will affect cities most directly will include the following:
The decision not to seek a legislative ceiling on social security and SSI payments will mean more money for disabled, retired and needy individuals as a result of cost-of-living increases.
Beneficiaries in urban areas will be less likely to turn to city hall for local assistance in meeting temporary, or emergency needs.
Improvement in the administration of the SSI program should assist needy, disabled and elderly persons in getting prompter payments when they become eligible for the program. The inability of the Social Security Administration to provide payments on short notice frequently has forced individuals to seek locally funded general assistance or other types of payments while awaiting SSI payments.
The threatened sanctions on the AFDC program are intended to be an incentive to a better managed, streamlined program. However, AFDC administrative regulations have been changing almost continually since 1973, a situation bound to result in confusion and error at the local level. To impose such a sanction while continuing to make changes puts state and local governments at an unfair disadvantage.
Social services
Two new legislative proposals in the social services programs are significant. The Administration recommends (1) establishing financial assistance for community services legislation, one of four major block grant proposals included in the federal budget; (2) modifying existing Title XX (of the Social Security Act) social service and training programs. This new $2.5 billion social services block grant program with fewer restrictive provisions, greater focus on the needy, and no mandatory state matching requirements will be submitted to the Congress this spring.
Under this latter proposal, the goals of Title XX would be essentially retained. However, the new legislation would require that at least 75 percent of the funds be spent on welfare recipients (those receiving Aid to Families with Dependent Children (AFDC),Supplemental Security Income, and Medicaid) and those below the poverty line — around $5,050 for a family of four.
The funding level for the new program, scheduled to begin during FY 77, is somewhat higher than the estimated amounts for social services and training expenditures by the states for FY 76 (around $200 million more) and for FY 77 (around $40 million more).
There are few other outstanding features of the budget for the social services programs in HEW.
Most of the programs are maintained at the same levels (in constant dollars) in FY 77 as in FY 76,as shown in Table SS-2 (next page), representing those programs in the Office of Human Development.
The only sizeable increase is in the vocational rehabilitation program where there is a $40 million increase in the state grants title. An apparent decrease in the aging program is based on carryover funding; considering these funds the department is proposing a level comparable to that of last year.
The Administration will also propose legislation to redirect the WIN program. At the same time, it has proposed budget cuts in both the training and employment portions and in the services portions amounting to $85 million. The proposed legislation would change the program to:
concentrate on direct placement of participants into jobs; increase the referral of participants to the Comprehensive Employment and Training Program; and limit services funded by WIN after job placement to 30 days.
Comment
The block grant programs are intended to greatly simplify program administration, to eliminate some of the red tape related to categorical programs, and "(give) state and local governments much greater opportunity to make their own choices as to how best to meet the needs of their people." In social services only one program is involved in the block grant; that one had been criticized as having overly detailed regulations. Those services programs listed in Table SS-2 remain outside the block grant.
While the Administration stresses the involvement of state and local governments in the block grant programs, all the money and authority goes to the state government, as is currently the case with Title XX. The role, if, any, of local governments in, operation of the program and the means of local government participation in planning and policy development are not yet clear.
TRANSPORTATION
The Administration’s FY 77 Budget for transportation assistance reflects the President’s number one priority, to hold the line on spending. While needs studies show the necessity for greater assistance in each functional area, the Budget for the most part does not decrease funding levels.
However, it must be emphasized that cities in transportation programs, as in so many other functional areas, squarely face the impact of inflation which is not accounted for in any major function except railroads.
Two policy decisions found within the Budget proposal could have serious impact on cities if accepted by Congress. First, the Administration proposed a ceiling on the use of Urban Mass Transportation Administration (UMTA) Section 5 formula grant monies for operating assistance.
Second, the Administration, in presenting the highway portion of the FY 77 Budget, combines all non-Interstate Highway programs into a single category. Therefore, the Administration gives no indication to local governments of the amount it is willing to agree on for either authorization or obligation in the present urban system and urban extension programs.
Highway funds
As mentioned previously, the Administration has presented its highway budget proposal for FY 77, in a single category containing all non-Interstate Highway pros grams. However, the Administration in its highway legislation set a level of $800 million for the urban system. The Administration is supporting authorization levels for all non-Interstate programs at the level of FY 75 and 76. This of course, represents a significant impact on cities, as it exacerbates the capital shortage by neither representing need nor meeting inflation — particularly severe in the highway construction industry.
The administration of the current urban systems program has been so poor to date that obligations of only 30 percent of available monies are shown through the first half of FY 76. The record of the program has caused the League and the Conference to suggest improvements emphasizing increased local control in the ongoing highway legislative debate. However Congressional response has so far been minimal, thereby holding little hope for much improvement in the near future.
Airports
The Administration’s proposed funding level for airport planning and construction grants remains at $350 million, despite Department of, Transportation (DOT) data that show a program increase of at least $500 million would be required merely to reflect inflation since enactment of the legislation in 1970.
Last year the Administration proposed major new highway, airport, and railroad legislation. These initiatives are before Congress in various stages of final action. The FY Budget reflects the Administration’s proposed authorization levels, rather than the higher levels suggested in current Congressional discussions.
Urban mass transportation
Capital Facilities — The Administration has proposed capital grant obligations of $1,125 million under the Section 3 discretionary grant program. This represents a $25 million increase over FY 76 for assistance in the acquisition of new bus and rail stock and continued construction support for new rapid transit systems and extensions.
In addition, the Administration anticipates that $575 million transferred from withdrawn Interstate highway segments will be available for obligation for mass transit projects in FY 77. This compares to $66 million provided in FY 75 and an estimated $632 million in FY 76.
However, the largest portion of the transferred funds will be for the Washington, D.C. Metrorail system which is not funded out of Section 8. UMTA also expects urban system highway funds to be transferred to transit projects, but declined to estimate a dollar level.
Formula Grants — The National Mass Transportation Assistance (NMTA) Act of 1974 provided a formula grant program for capital and operating costs at local discretion. While the Administration has requested the full authorization level of $650 million for FY 77 (up from $648 million in FY 76), it proposes to place a 50 percent limit on the use of formula funds for operating costs. UMTA has expressed concern that to date, over 90 percent or the funds have been used for operating subsidies which perpetuate high cost transit operations and archaic fare structures. Besides encouraging the use of formula funds for capital replacements and transit system improvements, that proposal was to replace FY 77 federal outlays. Such a limit on the use of formula grants will require legislation.
Technical Studies — The Budget proposes an increase from $38.7 million to $45 million for technical studies grants to state and local public agencies. These funds are available for a variety of studies, including development of regional transportation plans.
Research, Development and Demonstrations (R.D&D) — The R.D&D program will be increased by $14 million to $67.5 million.
Most of the increase is intended for service and methods demonstrations that focus on better use of existing facilities, automation, and new systems development.
Highway programs
Interstate System — The revised 1975 cost estimate to complete the Interstate system was $23 billion. The Budget proposes obligations of $3.24 billion for FY 77. This compares to more than $4 billion and $4.5 billion in FY 75 and 76, respectively, when unusually large sums of impounded monies were released for obligation to stimulate employment.
Other Federal-Aid Systems — The Budget combines into one category the proposed spending for construction on all non-Interstate federal-aid systems. The Administration has proposed a total of $2.6 billion for FY 77. Planned obligations for urban highway projects are not listed separately.
The programs covered are rural primary and secondary, priority primary urban system, urban extensions of primary and secondary roads, forest highways and public lands highways, the urban high-density traffic program, and construction on the other federally aided highway programs.
Railroads
A section on federal financial assistance for rail transportation has been added to this year’s analysis because of major executive and legislative initiatives to improve both passenger and freight service. While most of the initial monies will be concentrated in the Northeast, the Administration has expressed a commitment to embark on a program of nationwide improvements to the rail system that could, over time, be of significant concern to cities.
Passenger Service — Grants to Amtrak for FY 77 would total $483.7 million. Of that amount, $378 million for operating subsidies, an increase of $49 million. According to DOT, the increase will allow the more economical, significantly patronized routes to be continued but would require curtailment of inefficient service. The remainder, $105.7 million, is for new capital improvement initiatives.
Northeast Corridor — In addition to the above, the Administration has proposed a six-year, $1.2 billion program to improve railroad passenger service in the Northeast corridor. The request for FY 77 is $125 million.
Freight Service Improvements — The federal government, acting through the U.S. Railway Association, will provide a total of $2.1 billion over five years to Consolidated Rail Corporation (ConRail), the new corporation formed through the reorganization of seven bankrupt railroads in the Northeast and Northwest. The funds will be used for rehabilitation of tracks and other facilities, as well as for initial operating losses, and are to be repaid when ConRail becomes profitable. In addition, the FY 77 Budget contains $70 million for payments to states, or local or regional transportation authorities for continuing local rail service on light-density lines. The federal government plans to provide loan guarantees in the rest of the country to improve track and other fixed facilities, but no dollar levels have been included in the Budget.
Comment
Mass Transit — The significant increases initially enjoyed by the Section 3 capital grants program have not been maintained. The program has not shown any growth since FY 75, when $1.2 billion was reserved for obligations. This year’s budget projections do not reflect commitments made by OMB in the Mid-Session Review of the FY 76 Budget to increase Section 3 contract authority in FY 79 by $13 billion. This year Congress may consider legislation to authorize additional contract authority to meet the ever-increasing capital needs of local governments in this area.
As stated in the introduction, the Administration has reached a policy decision to offer legislation limiting the Section 5 formula grant monies for operating assistance by placing a 50 percent ceiling on expenditures for this activity. As written, Section 5 monies can be used for either operating or capital assistance at the discretion of local governments. To date, approximately 90 percent of these monies have been spent for operating assistance: To restrict arbitrarily the manner in which these funds can be used would place an extreme burden on an already difficult local government financial situation.
VETERANS
The $17.2 billion FY 77 Veterans Administration’s budget is $1.8 billion less than the $19.0 billion estimated for FY 76. An additional $4.4 billion is provided for the transitional quarter.
The reduction reflects projections that GI Bill expenditures will substantially decline from the $6.2 billion figure expected for fiscal 1976 (including a pending $800 million supplemental), and expectations of a smaller pension caseload. The GI Bill remains the nation’s largest scholarship program. Proposals for the repeal of the GI Bill and for reduction in the GI Bill benefits expiration date from 10 to 8 years are crucial to the reductions in the GI Bill cost.
Again, in FY 77 no money has been requested for the Veterans Cost of Instruction Program (administered by the Department of Health, Education, and Welfare) which provides 1,200 colleges with the capacity to operate veterans service centers. The $23.7 million appropriation for FY 76 has already been subjected to a rescission request. Veterans unemployment was at record highs, reaching 575,000 in 1975, with the unemployment rate for younger veterans 20-24 at 22 percent and for minorities 30 percent. The budget proposes no significant veterans job programs to offset these serious increases in unemployment. No recommendations were made for legislation that would correct the inequities in operation of the GI Bill between high cost of education states and low cost of education states. Western and southern states predominantly rely on public education and have extensive systems of junior colleges which offer low cost of education. Eastern states relied on private systems until recently and, therefore, the GI Bill does not go so far in those states.
Comment
Enormous growth in GI Bill expenditures from last year’s $4 billion for FY 76 to this year’s projection for FY 77 of $6.2 billion reflects both the attractiveness of higher GI Bill benefits and the high impact of the recession on Vietnam era veterans. Veterans were the last hired and, often were the first fired in recent recession years. They seized on the GI Bill as a means to obtain education and training skills to be competitive in the employment market while awaiting the improvement of job opportunities.
The GI Bill remains a significant anti-recessionary device and should be looked at as a part of the overall federal effort. of comprehensive local education, training. and manpower programs.
The projected reductions of $700 million in the GI Bill’s expenditures are based on legislation that probably will not pass. The Senate Veterans Committee projects that the budget levels may underestimate expenditures by as much as $1 billion. No cost of living increases are provided in the budget for veterans programs. Because the GI Bill operates under an open-ended appropriation, more federal funds must be made available as more veterans enroll.
The Senate has passed legislation significantly changing the administration of veterans pensions. It was totally revamped to give more money to needy veterans, and at the same time may significantly extend the number of eligible persons. House passage of this legislation could again increase the budget cost substantially above the amounts projected.
No funds are provided explicitly in the budget for city-sponsored efforts to serve Vietnam veterans. However, since 1971 the Office of Economic Opportunity (OEO) /Community Services Administration (CSA) has provided $1 million annually for city-sponsored veterans projects. The FY 76 Labor-Health, Education and Welfare appropriations bill specifically earmarked $2.5 million for this purpose. Unless the Presidents veto is overridden this needed expansion will not occur.
GLOSSARY
(Note: These definitions are based on the booklet "Budgetary Definitions," published by the General Accounting Office in November, 1975.)
Appropriation — An act of Congress that permits federal agencies to incur obligations and to make payments out of the treasury for specified purposes. An appropriation usually follows enactment of authorizing legislation. See definition for "authorization."
Authorization (authorizing legislation) — Basic substantive legislation enacted by Congress which sets up or continues the legal operation of a federal program or agency. Such legislation is normally a prerequisite for subsequent appropriations. It may limit the amount of budget authority to be provided subsequently or may authorize the appropriation of "such sums as may be necessary." In a few instances budget authority may be provided in the authorization.
Budget authority — Authority provided by law which allows federal agencies to enter into obligations to spend or lend money. The basic forms of budget authority are:
Appropriations — See definition for "Appropriation."
Borrowing authority — Statutory authority, not necessarily provided through the appropriations process, that permits federal agencies to incur obligations and make payments from borrowed moneys.
Contract authority — Statutory authority, not necessarily provided through the appropriations process, that permits federal agencies to enter into contracts or incur other obligations in advance of an appropriation.
Budget deficit — The amount by which the government’s budget outlays exceed its budget receipts for any given period. Deficits are financed primarily by borrowing from the
public.
Budget surplus—The amount by which the government’s budget receipts exceed its budget outlays for any given period.
Budget outlays — See Outlays
Concurrent resolution on the budget — A resolution, passed by both houses of Congress, but not requiring the signature of the President, setting forth, reaffirming, or revising the congressional budget for the United States government for the fiscal year. There are two such resolutions required preceding each fiscal year. The first required concurrent resolution, due by May 15, establishes the congressional budget. The second required concurrent resolution, due by September 15, reaffirms or revises it. Other concurrent resolutions may be adopted at any time following the first required Concurrent resolution.
Congressional budget — The budget as set forth by Congress in a concurrent resolution on the budget. These resolutions shall include:
The appropriate level of total budget outlays; of total new budget authority;
An estimate of budget, outlays and new budget authority for each major functional category, for contingencies, and for undistributed intragovernmental transactions based on allocations of the appropriate level of total budget outlays and of total new budget authority;
The amount, if any, of the surplus or deficit in the budget;
The recommended level of federal revenues; and
The appropriate level of the public debt.
Current services budget — A budget that projects estimated budget authority and outlays for the upcoming fiscal year at the same program level and without policy changes as the fiscal year in progress. To the extent mandated by existing law, estimates take into account the budget impact of anticipated changes in economic conditions (such as unemployment or inflation), beneficiary levels, pay increases, and benefit changes. The Congressional Budget and Impoundment Control Act of 1974 requires that the President submit a current services budget to the Congress by November 10 of each year.
Deferral of budget authority — Any action or inaction by any officer or employee of the United States which delays the obligation or expenditure of budget authority. Under the Congressional Budget and Impoundment Control Act of 1974, the President is required to report each proposed deferral to the Congress in a special message. Deferrals may not extend beyond the end of the current fiscal year and may be overturned by the passage of an impoundment resolution by either house of Congress.
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 — Year running from July 1 to June 30 for fiscal year1976 and earlier fiscal years. FY 76 has a fifth or transition quarter, ending September 30, 1976. See definition for "Transition Quarter." Beginning with fiscal year l977, fiscal years for the federal government will begin on October 1 and end on September 30. The fiscal year is designated by the calendar year in which it ends.
Impoundment — Any action or inaction by an officer, or employee of the, United States that precludes the obligation or expenditure of budget; authority provided by the Congress.(See "Deferral of Budget Authority" and"Rescission").
Impoundment resolution — A resolution of the House of Representatives or the Senate disapproving a deferral of budget authority set forth in a special message ordinarily transmitted by the President. Passage of an impoundment resolution by either house of Congress has the effect of overturning the deferral and requires that such budget authority be made available for obligation.
Obligations — Commitments made by federal agencies to pay out money for products, services, loans, or other purposes — 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 — A legislative action which cancels budget authority previously provided by Congress prior to the time when the authority would otherwise have lapsed.
Rescission bill — A bill or joint resolution which provides for cancellation, in whole or in part, of budget authority previously granted by the Congress. Rescissions proposed by the President must be transmitted in a special message to the Congress. Under the Congressional Budget and Impoundment Control Act of 1974, unless Congress approves a rescission bill within 45 days of continuous session, the budget authority must be made available for obligation.
Supplemental appropriation — An appropriation enacted as an addition to a regular annual appropriation act. Supplemental appropriations provide additional budget authority beyond original estimates for programs and activities (including new programs authorized after the date of the original appropriation act) for which the need for funds is too urgent to be postponed until the next regular appropriation.
Tax expenditures — Losses of tax revenue attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, preferential rate of tax, or a deferral of tax liability. The Congressional Budget and Impoundment Control Act of 1974 requires that estimated levels of tax expenditures be presented in the President’s Budget.
Transition quarter — The three-month period (July 1 to September 30, 1976) between FY 76 and FY 77 resulting from the change from a July l through June 30 fiscal year to an October 1 through September 30 fiscal year beginning with FY 77.
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.