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STATEMENT OF GEORGE D. FISCHER, PRESIDENT NATIONAL EDUCATION ASSOCIATION Mr. Chairman and members of the Committee:

On behalf of the two million members of the National Education Association and its state and local affiliates, I appreciate the opportunity to present this testimony on revenue sharing to the Subcommittee.

The main concerns of the NEA, as defined by the Charter, are to promote the cause of education in the United States and to elevate the character and advance the interests of the profession of teaching. Obviously, adequate financial support for education is basic to the achievement of these goals.

The traditional source of financial support for public education, the local property tax, has been unable for several decades to meet the costs of education. State sources of income, which have provided broader assistance to local districts under a variety of formulas, are now also inadequate to the challenge. The last remaining source of financial support is the Federal Government. Despite notable progress in this respect since 1965, the Federal contribution provides only about an average of 6.6% of the financing of public schools with a range of 25.7% in Alaska down to 3.2% in Wisconsin. Thirty states receive less than the 6.6% national average Federal share. The attached table from the NEA Research Report Estimates of School Statistics 1969-70 shows the percentage of local, state, and Federal support by states.

The National Education Association has taken no official position on revenue sharing. However, there has been a great deal of interest in the concept. We prefer to discuss the two major parts of S 2483 separately because while NEA's policy-making bodies have been silent on revenue sharing, they have consistently opposed tax credits as a gimmick to aid education. The Association takes no relevant position on Titles III, IV, and V of S 2483.

Revenue Sharing

The central fact in establishing the need for increased aid to state and local governments is simple: the Federal Government collects 60% of the revenue and, excluding defense, 60% of the domestic civilian services are provided by state and local governments. The state and local tax base is just simply not up to supporting the quantity and quality of services needed if the nation is to solve its pressing social and economic problems.

What this has meant is an ever-increasing backlog of unmet needs in education, health, welfare, police, justice, urban transportation, and public air and water pollution control. On the other hand, for the Federal government it has meant leeway to finance an increasingly destructive system of weaponry. We have the capability of destroying whole nations instantaneously while we lack the will to use our capability to solve our acute domestic problems.

We compliment Senator Muskie and Senator Goodell and other co-sponsors of S. 2483 for this effort to devise a means of sharing the Federal individual income tax revenue with state and local governments.

We also appreciate that S 2483 extends revenue sharing to local school districts.

We have a general concern with the amount involved in the proposal. Compared to the size of state and local government needs to fulfill the demands for increased domestic expenditures, $2.8 billion is a drop in the bucket. Although every drop is important, the amount involved in this proposal alone is too small to cover even the annual added costs of inflation. If 1970 is like 1969, it will take more than $5.5 billion in increased state and local expenditures just to meet the costs of inflation.

We would advise that proponents of S. 2483 be extremely modest in claims of how much added government service this $2.8 billion alone will purchase. The year 1969 was an all-time-high year of state tax increase. The states added almost $5 billion through new and increased taxes. If S. 2483 is passed and becomes effective during 1970, the combination of new revenue from Federal and state sources would likely afford some visible improvement in statelocal government services.

We also have several specific concerns with S 2483.

The allocation formula for local school districts is determined from the ratio of each school district's taxes to the total state and total school district taxes. The district which can and does afford more money for education will get still more under this proposal. S. 2483 will not direct the money within a state to the most needy districts.

The Boston and New York City school systems, which are fiscally dependent on the municipal government, will share in the weighted formula for cities and counties wherein the tax effort is multiplied by 2 in order to double its weight. The school systems of Chicago and Detroit, which are independent, will get only their own unweighted share. Because the large independent school systems share the property tax base with the municipal and county governments, they also share the impact of the municipal overburden and should be treated accordingly.

• In allocating funds to the states, the formula is based on population and tax effort. The formula does not recognize the great disparity of personal income among the states except as a factor in tax effort. New York state, with per-capita personal income 20% above the national average, gets $20.04 per capita. Mississippi, at 40% below the national average percapita income, gets $15.73. State-local tax collections for all states in 1966-67 averaged 9.8% of personal income. The figures were 12.2% for New York and 10.4% for Mississippi. This formula is geared to an oversimplified view of effort to pay taxes without recognition that taxes are easier to pay at higher income levels. When per-capita state and local taxes are subtracted from per-capita income the differential in the remaining per-capita income between New York and Mississippi is reduced only slightly, from 1.98 to 1.94.

Tax Rebates

As stated above, the NEA has consistently opposed proposals for increased tax credits to offset educational expenditures in lieu of Federal aid. Credits to taxpayers in lieu of grants-in-aid tend to aid the taxpayer more than the state and local governments which are hard pressed to supply educational services. Congress has just passed the Tax Reform Act of 1969 which gave substantial income tax relief to low and middle income families. The standard deduction of $1,000 in 1970 will double in 1973, making the standard deduction attractive to many more middle income families and individuals. The proposed tax credit of 40% of the Federal income tax in lieu of itemizing deductions would be an additional erosion of the Federal tax base.

We would also like to direct your attention to a comparison of the amount involved in revenue sharing and the estimated loss in Federal income tax because of the tax credit. In the first year, the shared revenue is estimated at $2.8 billion and the loss to the Federal government because of the tax credit is estimated at $2.6 billion. By the third year, the revenue shared rises to $3.9 billion and the tax credit loss rises to $5.5 billion.

We do not believe that the 40% tax credit for state and local income taxes will make taxpayers less resistant to new or increased state and local income taxes. Persons now in the over 40% tax bracket are not especially supportive of new and increased state and local taxes merely because they are allowed deductions from income for Federal tax purposes. The carrot is less than compelling. We do not wish to appear negative to the idea of revenue sharing between the Federal government and the state and local governments. However, we believe that the wide diversity among the states as to available state revenue resources and the wide diversity within states as to local revenue resources cannot be solved by a simple revenue sharing device.

Our approach to this proposal is qualified and cautious. We do not believe that the revenue-sharing plan as proposed in S 2483 would do the job alone. What is also required is a substantial complementary set of general and special Federal aids for the major state and local government responsibilities such as education, health services, pollution control, etc.

Again, we appreciate this opportunity to present our views on the legislation before this subcommittee. We commend you for your concern for more adequate Federal funding of domestic programs through the proper Federal-statelocal partnership which is essential if all of the people are to be served.

TABLE 10.-ESTIMATED REVENUE AND NONREVENUE RECEIPTS, 1969-70

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TABLE 10.-ESTIMATED REVENUE AND NONREVENUE RECEIPTS, 1969-70-Continued

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IMPACT AID REFORM ACT OF 1970

WEDNESDAY, MARCH 25, 1970

HOUSE OF REPRESENTATIVES,

GENERAL SUBCOMMITTEE ON EDUCATION OF THE
COMMITTEE ON EDUCATION AND LABOR,
Washington, D.C.

The subcommittee met at 10 a.m., pursuant to notice, in room 2175, Rayburn House Office Building, Hon. Roman C. Pucinski (chairman of the subcommittee) presiding.

Present: Representatives Pucinski, Mink, Meeds, Quie, Dellenback, and Ruth.

Staff Members Present: John F. Jennings, majority counsel; Alexandra Kisla, clerk; and Charles Radcliffe, minority counsel for education.

Mr. PUCINSKI. We will proceed with our hearings this morning on the Impact Aid Reform Act of 1970. The other members of the committee are on their way but I know that some of our witnesses must get away early. We will start and the other members will catch up with us as we proceed.

We are very pleased and privileged this morning to have with us a distinguished Member of the Congress and colleague who is one of the most highly respected Members of the House of Representatives.

We are pleased that Congressman Pettis is here with us this morning to introduce Dr. Gordon Harrison from Sunnymead, Calif. Congressman Pettis, why don't you proceed.

STATEMENT OF THE HONORABLE JERRY L. PETTIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. PETTIS. Thank you, Mr. Chairman, you are most generous and I appreciate this opportunity to appear before the committee this morning and to introduce my very good friend and fellow Californian, Dr. Harrison.

I would like to observe that I think I am scheduled to appear personally in a couple of weeks with my own testimony on this general subject.

But this morning I would like to limit myself to introducing Dr. Harrison who is Assistant Superintendent of the Moreno Valley Unified Schools District at Sunnymead, Calif.

He is the legislative representative of all the school districts in the 33rd, which is my own Congressional District, and 38th Congressional District of California which is represented by Congressman Tunney.

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