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The original documents are located in Box 66, folder "FY 1978 Spring Planning Review -
HEW (2)" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 66 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
EDUCATION
1978 Spring Preview
Department of Health, Education, and Welfare
Education Programs
Overview
There is a general consensus that States have the primary responsibility for education
but that there is a Federal role. There is almost universal disagreement on what that
Federal role should be. Recent actions by the Congress emphasize their view that the
Federal Government should provide essentially basic support, should provide the ser-
vices that States either cannot or will not provide and that the Federal role should
be expanding. The Administration, on the other hand, believes the Federal role should
be to assist States in performing their responsibilities and that the Federal role
should be limited. This basic disagreement is expected to result in "most likely"
appropriations of $1.1 billion in budget authority and nearly $1 billion in outlays
above current policy projections in FY 1978. Within the role envisioned by the
Administration four broad objectives are sought:
1. To assist States in providing equal educational opportunity. These efforts
are targeted by HEW towards those groups or individuals who are educationally
disadvantaged due to socio-economic, racial, geographic or physical and
mentally handicapping conditions.
2. To provide limited general support to certain educational activities and
functions. These areas would include vocational education, impact aid,
libraries, and support for State education agencies.
3. To provide support to efforts aimed at improving the quality and relevance
of education throughout the nation. This objective is carried out through
research, demonstration, dissemination and related activities.
4. To respond to critical national need. This includes programs identified
by the Administration or Congress as priorities, such as easing the
problems of school desegregation, solving the problems related to educa-
FORD
E-1
tion and work, adequate data gathering, achieving national coverage of
educational broadcasting facilities, insuring an adequate teacher supply,
eliminating functional illiteracy and program evaluation. The appro-
priateness of this entire objective or any of its pieces can be debated,
however, it reflects the real world in which HEW believes it must
operate.
The introduction of the education block grant concept (Financial Assistance for
Elementary and Secondary Education Assistance Act) changes the Federal objectives
and the role of the Education Division in significant ways.
The responsibility for providing equal educational opportunity, objective #1, is
returned to the States. Bureaucratic constraints, such as requirements to submit
multiple applications, are lessened and the flexibility of use of Federal funds
is provided the States to accomplish this objective. Safeguards exist within
the legislation to assure that State and local education agencies adequately
address the needs to special groups, such as the disadvantaged and handicapped.
Objective #2 is subsumed under the block grant and the opportunity to decide how
much general support will be provided for these activities, would now be decided
at the State and local level.
Objectives #3 and #4 would be continued as valid objectives for the Education Division
with the primary responsibility for research, demonstration of research and dissemi-
nation of its research product resting with the National Institute of Education and
identification and demonstration of exemplary programs and practices and the dissemi-
nation of these results to State and local education agencies as the main thrusts of
the Office of Education. In addition, the Office of Education would have the respon-
sibility of responding to critical national need in such areas as school desegregation,
eliminating functional illiteracy and data gathering. In most of these areas, there
should be identified specific problems to be addressed, objectives and timetables
for the solution of these problems and long range plans for the termination of
Federal programs when solutions have been realized.
E-2
The staff recommendations for the block grant issue which follow, move the Federal
role further in the directions contemplated by the President when he decided to
propose an education block grant. However, there are no signs that the Education
Division is making serious plans for how they would operate under the block grant.
The Department should be instructed to submit a plan, along with 1978 budget
materials, which shows how they would organize to meet their lessened responsi-
bilities, and what and how many fewer staff positions would be needed.
E-3
1978 Spring Planning Review
Major Education Evaluation Studies
Studies Underway in FY 1976
Programmatic:
-- A study of the sustaining effects of compensatory education -- $2.6 million
administered by the Office of Education.
-- Technical Assistance to States for Title I Evaluation -- $1.6 million
administered by the Office of Education.
-- Analysis of Follow Through Evaluation Data -- $1.1 million administered by
the Office of Education.
-- Evaluation of implementation of project information packages -- $.9 million
administered by the Office of Education.
-- Study of the Emergency School Aid Act television project -- $.7 million
administered by the Office of Education.
-- Study of the student financial aid programs -- $.1 million administered by
the Office of Education.
-- Research into the effects of compensatory education demonstration projects --
$2.8 million administered by the National Institute of Education.
E-4
Management Initiatives:
-- A study to implement a personnel position accounting system.
-- A study of manpower utilization (workload, distribution and manpower
planning).
-- A study to implement an accounting data and error correction system.
-- A study to develop an obligation-based operating plan.
-- A study to implement a property accounting system.
-- A requirements analysis to automate program data for the campus-based student
financial aid programs.
-- A study to automate all data concerning payments in the Impact Aid program.
-- A study to standardize reporting in the 10 regions for the Guaranteed
Student Loan program.
-- A study of procedures to monitor lender activity and loan collections.
Studies Proposed in FY 1977
Programmatic Impact Evaluations and Policy Studies:
-- *A study of the sustaining effects of compensatory education -- $25 million,
to be administered by the Office of Education on basic cognitive skills over
a seven-year period (1975-82). 1977 proposed level -- $2.6 million.
*
Mandated by P.L. 93-380 (the Education Amendments of 1974).
E-5
-- *Evaluation of the Title I, Elementary and Secondary Education Act, as amended
migrant program -- $.93 million: to be administered by the Office of
Education.
-- Technical Assistance to States for Title I Evaluation -- $.825 million to be
administered by the Office of Education.
-- A study of the effectiveness of the Emergency School Aid Act human relations
project -- $1.3 million to be administered by the Office of Education.
-- Evaluation of the implementation of project information packages -- $1.0
million to be administered by the Office of Education.
-- *Research into the effects of compensatory education demonstration projects --
$5.0 million to be administered by the National Institute of Education.
-- *A study of experimental compensatory education demonstration projects -- $.5
million to be administered by the National Institute of Education.
-- *Safe school studies -- $.5 million to be administered by the National Center
for Education Statistics (a data collection survey).
Management Initiatives:
-- An ADP initiative; creation of a successor system for the Guaranteed Student
Loan program which will provide timely data in terms of lender characteristics,
schools and borrowers.
*
Mandated by P.L. 93-380 (the Education Amendments of 1974)
E-6
-- A student validate study for the Basic Educational Opportunity Grant
program to validate student entitlements and determine the nature
of application errors (20,000 case sample).
-- Continuation of the manpower management utilization study, validation of
workload measurements.
Suggested Studies
-- Low cost study to estimate potential personnel/administrative costs savings
as a result of the consolidation of numerous programs under the Financial
Assistance for Elementary and Secondary Education Act (Block Grant). The
result could lead to reduced salaries and expenses requests and concomitant
savings.
-- A study to assess the nature of, magnitude, and utility of the technical assist-
ance and monitoring functions performed by regional office and central office
field representatives.
-- A study to determine the characteristics of those students who claim
"independent" status on their BEOG application forms and the cost implications
for the basic grant program. The results of this study will be used to
determine how to "redefine" (through administrative or legislative steps) for
award purposes "independent students."
E-7
Summary Tabulation
Outlays
1976
1977
1978
1979
Current
Current
Poten.
Low
Current
Poten.
Low
Current
Poten.
Low
Program
Estimate
Policy
Level
Option
Policy
Level
Option
Policy
Level
Option
Block Grants
--
294
--
--
2,351
525
495
3,092
2,548
2,374
Elementary and
Secondary
2,289
2,037
2,269
2,269
577
1,990
1,838
191
812
602
Indian Education
42
45
48
48
42
56
41
40
55
40
Impact Aid
533
458
716
716
366
736
366
330
767
330
Emergency School Aid
235
221
222
222
240
243
240
245
248
245
Education of the
Handicapped
199
191
268
268
84
294
283
6
140
82
Vocational and Adult
Education
674
672
777
777
268
681
667
196
323
297
Higher Education
2,610
2,597
2,959
2,959
2,349
2,673
2,653
2,327
2,640
2,336
Library Resources
141
137
166
166
100
165
142
79
123
63
Educational Development
18
4
4
4
1
1
1
--
--
Special Projects and
Training
6
39
41
41
56
61
59
63
69
64
Educational Activities
Overseas
2
2
2
2
2
2
2
2
2
2
Salaries and Expenses
109
113
115
115
115
116
114
115
117
115
Student Loan Insurance
Fund
107
91
91
91
100
100
100
150
150
150
Higher Education Facil-
ities Loan Insurance
Fund
9
13
13
13
8
8
8
6
6
6
National Institute of
Education
70
88
88
88
90
90
90
90
90
90
Assistant Secretary
of Education
24
32
32
32
33
33
33
33
33
33
Special Institutions
141
136
136
136
130
130
126
121
121
117
Child Development
476
475
475
475
478
478
458
478
478
458
Total
7,685
7,643
8,420
8,420
7,390
8,384
7,718
7,565
8,724
7,406
E-8
Analysis of Changes
(in millions of dollars)
1977
1978
1979
BA
O
BA
O
BA
O
Base estimates
7,870
7,643
7,627
7,390
7,871
7,565
Congressional Actions
Probable 1976 Supplemental Increases
1.
Elementary and Secondary
3
3
3
3
3
3
2.
Emergency School Aid
3
2
3
3
3
3
3.
Education for the Handicapped
--
28
:
19
4.
Higher Education
1
350
1
40
1
1
5.
Office of Education
Salaries and Expenses
2
2
2
2
2
2
Subtotal
9
385
9
67
9
9
Congressional Actions
Probable 1977 Appropriation Increases
1.
Elementary and Secondary
210
32
222
154
240
203
2.
Indian Education
15
2
15
14
15
15
3.
Impact Aid
369
258
418
370
466
437
4.
Education for the Handicapped
90
11
90
58
90
90
5.
Vocational Education
30
14
30
26
30
30
6.
Higher Education
321
12
321
285
321
312
7.
Library Resources
19
3
19
13
19
16
8.
Innovation
7
2
7
5
7
6
Subtotal
1,061
334
1,122
925
1,188
1,109
E-9
1977
1978
1979
BA
O
BA
O
BA
O
Reestimates to support assumption
that Congress will not provide funds
for Block Grant and that passage
will slip until 1978
1. Elementary and Secondary
2,073
197
--
1,257
--
415
2.
Education for the Handicapped
236
38
--
133
--
44
3.
Vocational Education
607
91
--
387
--
97
4.
Libraries
137
26
---
51
--
28
5.
Block Grant
-3,300
-294
--
-1,826
--
-543
Subtotal
-247
58
--
2
--
38
Most likely level
8,693
8,420
8,758
8,384
9,068
8,724
1. Resist likely congressional
increases for certain education
programs
--
-825
-599
-873
-781
2. Phase out the Bilingual
Education program
--
-25
-1
-45
-18
3. Terminate all higher education
institutional assistance programs
except Developing Institutions,
Language and Area Studies and
Cooperative Education
--
-12
-60
-12
-60
-48
4. Eliminate the Cooperative
Education and Language and
Area Studies programs
--
-18
--
-18
-18
E-10
1977
1978
1979
BA
O
BA
O
BA
O
5. Do not continue Special Institutions
non-faculty increases
--
--
-4
-4
-4
-4
High alternative target
8,693
8,420
7,826
7,768
8,068
7,855
1. Do not renew the 1977 Library
budget amendment beyond 1978
--
--
-62
-20
-62
-47
I
2. Reduce College Work Study to
the 1977 request level
--
--
-90
--
-90
-68
Medium alternative target
8,693
8,420
7,674
7,748
7,916
7,740
1. Eliminate NDSL capital
contributions
--
--
-160
--
-160
-160
2. Eliminate the sweetner from
the block grant
--
--
-200
-30
-400
-174
Low alternative target
8,693
8,420
7,314
7,718
7,356
7,406
E-11
Summary of agency totals
(in millions of dollars)
Education Programs
1977
1978
1979
Budget authority
Base estimate
7,870
7,627
7,871
Potential level
(Base & budget threats)
8,693
8,758
9,068
High alternative target
8,693
7,826
8,068
Medium alternative target
8,693
7,674
7,916
Low alternative target
8,693
7,314
7,356
Outlays
Base estimate
7,643
7,390
7,565
Potential level
(Base & Budget threats)
8,420
8,384
8,724
High alternative target
8,420
7,768
7,855
Medium alternative target
8,420
7,748
7,740
Low alternative target
8,420
7,718
7,406
E-12
Attachment
Education Programs
Trends in Outlays FY 1972 - FY 1976 (Millions)
Curr. Est.
FY 1972
FY 1973
FY 1974
FY 1975
FY 1976
Program
Civil Rights Education
22
10
---
Block Grants
Elementary and Secondary
1,888
1,820
1,667
2,277
2,289
Indian Education
16
40
42
Impact Aid
649
580
559
619
533
Emergency School Aid
72
41
205
216
235
Education of the Handicapped
94
106
123
151
199
Vocational and Adult
Education
509
607
570
653
674
Higher Education
1,287
1,376
1,176
1,838
2,610
Library Resources
75
93
150
226
141
Educational Development
204
239
246
175
18
Special Projects and Training
6
Educational Activities Overseas
2
2
2
2
2
Salaries and Expenses
51
66
77
96
109
Student Loan Insurance Fund
27
43
84
111
107
Higher Education Facilities
Loan Insurance Fund
24
9
12
16
9
National Institute of Education
36
97
83
70
Assistance Secretary of Education
1
1
13
24
Special Institutions
76
100
113
124
141
Child Development
216
384
417
429
476
Grant Total
5,196
5,511
5,515
7,069
7,685
E-13
APPROPRIATIONS AND BUDGET REQUESTS
FY 1972-1978
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
1972
1973
1974
1975
1976
1977
1978
Legend
Request
"Current Policy
Low Option
Appropriation
Potential Level
E-14
1978 Spring Planning Review
Department of Health, Education and Welfare
Issue #E-1: Block Grants
Statement of Issue
What should be the components of the Block Grant proposal for education in the
FY 1978 President's Budget?
Background
The Administration has submitted to the Congress a legislative proposal to
consolidate 24 programs into one large block grant with $3.3 billion budgeted for the
first year of operations, FY 1977. The objective of the block grant is to allow the
State and local education agencies greater flexibility in the use of Federal funds
and to reduce Federal requirements for these funds. Two factors lead us to believe
that there will not be action by the Congress on this proposal this year. One of
these factors is the already full schedules the substantive committees have with
higher education and vocational education coming up for action this spring. In
addition, since the Congress reauthorized the elementary and secondary programs in
the Education Amendments of 1974 (P.L. 93-380), the Congress is clearly unwilling to
even consider these issues. Consequently, in the FY 1978 budget the Administration
may want to take additional steps to further these objectives.
The current proposal contains funding planning amounts at the following levels:
1977 - $3.3 billion
1978 - $3.5 billion
1979 - $3.7 billion
1980 - $3.9 billion
1981 - $4.1 billion
E-15
These increments of $200 million are a "sweetener", added in order to induce
favorable congressional action on the proposal. The programs included in the pro-
posal span the areas of elementary and secondary, handicapped, vocational and adult
education and school libraries. In the main, they represent those formula grant
authorities that have flowed through the States to local educational agencies.
Alternatives
#1. Repropose the program in its current state and allow for a 1-year slippage
to 1978 before it becomes effective (Agency preference).
#2. Provide for the inclusion of several discretionary and State formula
authorities in addition to those currently proposed for consolidation.
However, do not provide for the $200 million "sweetener," but only
budget for those amounts for the discretionary activities concerned
that are contained in the FY 1977 President's Budget (HRD recommendation).
#3. Provide for an even more broadly based initiative by additionally including
the Impact Aid program, over and above the authorities described in
alternative #2.
The following table illustrates the current make-up of the proposal (Alternative #1)
and the incremental results of Alternatives #2 and #3. The right hand column illus-
trates the impact of both alternatives over currently budgeted levels, if likely
increases are provided for in order to induce favorable congressional action on the
proposal.
(FY 1976 levels in millions of $)
Alternative #1
Title I
$2,050,000
Title IV
184,522
Handicapped
236,375
E-16
Vocational Education
539,349
Adult Education
71,500
Libraries
147,330
Subtotal
3,229,076
Additional funds
70,924
1/
Total
3,300,000
New programs to be added: (FY 1977 BA request levels) (FY 1977 likely BA levels)
Alternative #2
Public
Libraries
+51,749
+51,749
50% Teacher
Corps In-
service
training
+18,750
+18,750
Follow
Through
+30,000
+59,000
Subtotal
3,400,499
3,429,499
(Increase above FY 77 request level)
(+29,000)
Alternative #3
+325,000
+743,000
Grand Total
3,725,499
4,172,499
(Increase above FY 77 request level)
(+447,000)
1/ Does not reflect an FY 1978 "sweetener" of $200 million.
E-17
Alternative #1
This would be a simple extension of the current legislative strategy. It would
continue this initiative on primarily a State formula grant basis, with support
limited to those areas agreed upon in the FY 1977 budget/legislative process. HEW
is likely to indicate support for the current initiative since it is the result of
substantial negotiations among the Department, the Congress and lobbying and public
interest groups. Movement either from the programmatic or financially agreed upon
bases, without significant prompting by concerned groups, could be viewed as a
breach of good faith.
In supporting the continuation of current policy, the Department would oppose
any diminution of fiscal commitment on the part of the Administration. They argue
that any reduction in budget request levels constitutes a serious obstacle to the
proposal's acceptance by the Congress.
Alternative #2
The HRD recommendation would provide for a minor (+$100.5 million in 1978 BA)
increase to the original 1977 program and funding bases for the block grant. However,
these increases to the block grant would result in no OE overall funding increase,
since no support would be provided for these authorities (or parts of authorities)
as separate entities, as is currently done. In addition, in order to achieve the
goal of a balanced budget, no provision would be made for the previously budgeted
$200 million "sweetener." This total reduction in budgeted levels saves an estimated
$30 million in 1978 and $145 million in 1979. The proposal would allow States, if
they choose, to use block grant funds for inservice training of teachers and admin-
istrators to meet the needs of disadvantaged students.
These proposals are predicated upon the following factors:
-- The public libraries program is a State formula grant activity that,
as the bulk of the other programs in this initiative, goes through
E-18
States to recipients at the local levels. While these recipients are
public libraries rather than school districts, the libraries' inherent
place in the local educational structure leads us to seriously
consider placing them in the proposal. It should be noted that public
libraries was included in the Administration's original block grant
proposal in the 1977 budget but was deleted as a concession to Mr. Quie
for his support.
The President has declared that quality education is the alternative to
forced busing of children to achieve integration. The Council of Chief
State School Officers believe that the best way to achieve better quality
is to improve the level of staff performance. The President, in his
February 16, 1976, speech to the National Association of Secondary
Principals stated: "Education relies on people and on the teachers who
work in the schools, on the administrators who direct them." Recent
initiatives in the areas of inservice teacher training have indicated
that this is increasingly becoming an effective instrument for improving
classroom achievement.
The Council of Chief State School Officers has endorsed a proposal to
have an ESEA Title I set-aside to retrain and upgrade staff. The
Commissioner of Education has proposed, and in 1976 the Administration
approved, a program to provide inservice training for education admin-
istrators.
The authorities currently included in the block grant allow inservice
training only for teachers and administrators relating to specifically
funded projects. This proposal would allow State and local agencies
to spend funds for the upgrading of all staff who serve disadvantaged
children.
There are no firm indications from the Congress that the "sweetener"
will bring about any greater notion of acceptability on the part of
E-19
the Congress. These substantial increments of $200 million annually
will likely, once perceived as a commitment by the Administration,
translate into a base for even greater increases in this area. This
appears as far too high a price to pay in later years. However,
Congress can (and will) say that consolidation is only a ploy to
camouflage budget reductions. Mr. Quie, upon introducing the bill,
specifically cited the $200 million increment as a remedy for the
congressional complaint.
Alternative #3
This alternative, in addition to the new initiatives discussed in alternative #2,
would also include Impact Aid into the block grant in 1978. It must be stated, at
the outset, that this alternative is extremely unrealistic politically and stands
virtually no chance of acceptance by the Congress. This judgment is based upon:
-- Impact Aid is not a State formula grant program. It is a program of
direct, general support to local educational agencies for any sort of
educational activity the agency sees fit.
-- Since it does not currently flow through State educational agencies,
placing it in this proposal would require eligible Impact Aid districts
to "compete" with other local educational agencies for these funds.
The alternative to this would be to earmark these funds for direct
"pass-thru" to eligible districts, which would, in effect, obliterate
the purpose of the initiative. (Issue paper #E-2 goes into greater
detail on the specific issue of Impact Aid.)
FORD
E-20
Budgetary effects (outlays in millions)
1978
1979
1980
1981
Alternative #1 (Agency preference)
525
2,548
3,350
3,745
Alternative #2 (HRD recommendation)
510
2,446
3,086
3,296
Alternative #3
558
2,680
3,417
3,692
2/
Current Policy Level
2,351
3,092
3,488
3,745
Most Likely Level
525
2,548
3,350
3,745
Implementation of HRD Recommendation
The Department should be directed to plan for a 1-year delay in the implementation
of the program into 1978 and to begin planning to fold the three additional authorities
recommended into a new legislative authority.
1/
The HRD recommendation, while providing for an increase of $100 million in
regular program BA (offset by concommitant decreases within OE), provides for
a net decrease in 1978 (-$100 million) and incremental decreases of $200 in
each succeeding year in the elimination of the annual sweetener.
2/
Reflects current policy of enactment in time for the FY 1977 budget.
E-21
1978 Spring Planning Review
Department of Health, Education, and Welfare
Issue #E-2: Impact Aid
Statement of Issue
What should be the Administration's position with regard to the level and type
of support for school districts affected by Federal activities?
Background
The Impact Aid program provides direct, general support to school districts
intended to offset property tax revenue lost due to Federal activities in the
district. Support is authorized for three types of students:
-- "a" category: Those whose parents both live and work on Federal property
(mostly connected with the uniformed military services).
-- "b" category: Those whose parents either live or work on Federal property.
-- "c" category: Those whose parents either live or work in low-rent public
housing. (Authority to provide support for these children has been in
existence for several years, but never funded. However, the Education
Amendments of 1974 required that support for this category be provided,
and funding is provided for the first time.)
In addition, the Amendments of 1974 provided for a three-tiered funding system.
The first level would provide minimal support for all students, irrespective of
category. The second tier provides an incremental, graded funding structure that
has varying levels of support for the different types of students. Thus, military
"a" category students would receive more support than "b" category students whose
parents work on Federal property that is not within the county in which they attend
E-22
school. However, Congress also required that if any funds are provided above the
first tier into this second tier, the second tier must be fully funded. The third
and final tier is another incremental level, but is not mandated at any level. In
addition, there are complex and potentially costly series of "hold-harmless" pro-
visions.
The FY 1976 and FY 1977 President's Budget proposed two distinct initiatives
aimed at reforming this program:
FY 1976: Reform was proposed from the fiscal equity viewpoint. That is,
reforms were based upon the premise that Federal activities are not solely adverse
and that there are certain positive economic benefits that result such as: employ-
ment increases, greater taxes, etc. Payments to school districts would be made
as follows:
-- 100% of entitlement for "a" category children when they comprise 25% or
more of the average daily attendance in the district.
-- 90% of entitlement for "a" category children when they comprise less
than 25% of the average daily attendance in the district.
-- 68% of entitlement for "b" category children, less the amounts provided
for "b" children in States other than the ones in which they attend
school.
Payments were to be made at these rates -- less 5% of the school district's total
operating budget for the previous year.
The Administration requested $266 million for this proposal. The Congress
rejected this new initiative and provided $680 million.
FY 1977: There would be a continued emphasis on the equity aspect. Funding
would be provided as in the FY 1976 initiative, but there would be no funding for "b"
category or "c" category children. In effect, by only funding "a" category children,
the program basically becomes a "tuition subsidy" for military dependents.
E-23
The issues that spawn these reform initiatives revolve around the basic question
of what constitutes a hardship as the result of Federal activities within a school
district. For example, the great majority of "b" category families work on Federal
property but reside on private, taxable land. Further, it may be that both parents
are employed with only one employed by the Federal Government on Federal property.
Nevertheless, the full amount is provided for these children, even though only one
parent is Federally connected.
Another cause for questioning the current level of support for this program is the
indirect economic benefits that accrue to a school jurisdiction as a result of a Federal
presence. These would be such factors as: increase in retail activity, income sales
and real estate taxes, increase in property values, etc. No provision is made to
offset these benefits in determining payments. On the other hand, these benefits are
somewhat diluted by PX and commissary patronage by Federal employees near military
bases.
The current status of the Administration's reform initiative is bleak. It has not
been introduced and it remains likely that it will receive little consideration at all.
Should this hold true, the latest HEW estimate of likely congressional FY 1978 appro-
priations action is approximately $743 million. This represents an increase of $418
million in BA above the current policy estimate of $325 million for FY 1978.
In addition, for 1976, HEW estimates the following minimal amounts will be pro-
vided to the following school districts:
(BA in millions of $)
District of Columbia
$ 6.01
Fairfax County
11.15
Arlington County
1.09
Montgomery County
2.89
Prince George's County
5.60
They do not include as yet uncalculated "hold-harmless" amounts which may be sub-
stantial.
E-24
Finally, to further demonstrate the ballooning growth of the program the
following table shows the amounts of "c" category funds going to several large
urban school districts in 1976, as compared with their Title I, ESEA - education
for the disadvantaged funds for 1976:
(BA in thousands of $)
"c" Category
Title I, ESEA
New York City
$10,512
$117,663
Boston
531
7,591
Detroit
310
19,525
Dallas
412
5,584
Baltimore
1,410
13,099
New Orleans
422
8,149
Los Angeles
1,160
27,533
Atlanta
898
4,836
District of Columbia
2,535
10,691
Philadelphia
2,584
25,366
Alternatives
#1. Given likely congressional action, accept the increase in appropriations
and abandon the reform position. (Agency preference).
#2. Retain the Administration's current reform strategy and continue to press
for acceptance by the Congress. (HRD recommendation).
#3. Readopt, as the Administration's strategy, the reform proposal contained
in the FY 1976 President's Budget. This would provide payments for "a" and
"b" category students, but would require that 5% of the school districts'
previous year's total operating budget be deducted from their payment.
#4. Fold Impact Aid into the Block Grant. A thorough examination of this option
is examined in light of the Block Grant proposal itself in Issue Paper #E-1.
E-25
Analysis
There does not appear to be any programmatic reason to abandon the Administration's
position. The concept of ancillary economic benefits offsetting the adverse effects
of Federal activities in a school district is a sound one. Moreover, the fact that
the bulk of the "b" category students' parents live on private taxable land further
reinforces the soundness of the Administration's initiative. The concept behind this
program is to provide support to school districts due to loss of revenue from Federal
activities on property that otherwise could be subject to tax. Every Administration
since Truman has agreed with this concept. The FY 1977 budget strategy reflects the
Administration's continued commitment to this principle. Abandonment of this legit-
imate aim has led the program to become a broad tuition subsidy for Federal employees'
dependents.
In this regard, we believe some discussion of the factors that are at issue with
the Congress is required. First, as the program stands, the impasse with the Congress
is firm and incrementally widening. However, we do not believe that the Administration
should rule out the acceptability of compromise on the level of support. The basis
for this compromise ought to be the question of devising some means for accurately
determining the true effects on the fiscal life of a community (both positive and
negative) as caused by Federal activities. In other words, add up the ancillary
economic benefits and the detriments and use the difference as a basis for Federal
offsetting payments.
A recent study, funded by HEW, has proposed to examine this very issue. The
proposal includes a broad and thorough range of factors to measure both the "pros" and
"cons" of Federal activity. The Department has only begun to examine this issue. How-
ever, we believe it may form the basis, as yet undetermined, for a new initiative.
Alternative #1
This would abandon the current reform strategy contained in the FY 1977 budget and
fully fund the existing legislation. It would add, as presently estimated, the following
amounts in 1977 and beyond, in both BA and outlays:
E-26
(In millions of dollars)
1977
1978
1979
1980
1981
Budget Authority
+369
+418
+466
+516
+570
Outlays
+258
+370
+437
+492
+546
This amounts to increases totaling $2,339 million in budget authority and $2,103
million in outlays for these years. These estimates, in addition, are conservative
and do not reflect any congressional penchant for other increases. In allowing these
increases, it would signal the end of any reform efforts by the Administration.
However, it would prevent the now recurring "cliff" in the education appropriations
that results from low Administration funding levels and ever increasing congressional
marks.
Alternative #2
This alternative would hold fast to the Administration's current reform posture.
On program grounds this position has considerable merit. It continues to rely upon
the valid premise that there are related benefits to Federal activities and these
must be weighed against any adverse effects. However, this alternative insures a
major and ever growing difference between what the Congress is likely to do and what
the Administration is requesting. These discrepancies, as discussed above, lead to
truly major ($500 million plus) increases in succeeding fiscal years.
Alternative #3
This strategy, as once proposed in the FY 1976 President's Budget, represents a
moderate compromise from the reform strategy contained in alternative #2. Its
principle features are some provision for "b" students, as well as emphasis on
absorption by school districts of a certain portion of the costs. Although current
data are not available, at the time when this proposal was developed, we estimated
that approximately 3,400 out of 4,400 school districts had less than 5% of their total
E-27
operating budget from impact aid and would, therefore, receive no payment. Yet,
these 3,400 districts' payments resulted in actual FY 1976 appropriations of nearly
$400 million. However, little congressional acceptance can be anticipated for this
measure.
Budgetary effects (outlays in millions)
1978
1979
1980
1981
Alternative #1 (Agency preference)
736
767
817
871
Alternative #2 (HRD recommendation)
350
330
325
325
Alternative #3
388
379
375
375
Current Policy
350
330
325
325
Most Likely
736
767
817
871
Implementation of HRD Recommendation
The Department should be directed in their policy letter to continue along
currently budgeted amounts and to press for reform.
E-28
1978 Spring Planning Review
Department of Health, Education, and Welfare
Issue #E-3: Student Assistance
Statement of Issue
What should be the Administration's strategy on Student Aid programs?
Background
Office of Education Student Aid programs include:
Basic Educational Opportunity Grants (BOG)
Supplemental Educational Opportunity Grants
College Work Study
National Direct Student Loans
State Student Incentive Grant Program.
With the exception of basic and state student incentive grants, control of these
program funds and the decisions about who will receive aid, rests with institutional
aid officers. A description of all of these programs is attached.
The Administration has stressed attainment of equal access to postsecondary
education and has argued that basic grants are the most efficient and equitable way to
achieve equal access because Federal funds are distributed to students according to
need. Under basic grants families are expected to contribute to the student's higher
education based on family income. The difference between what the family is expected to
contribute and the cost of going to a particular institution is defined as "student
need." Identical grants go to students with identical financial circumstances
(identical costs of attendance and income), regardless of State of residence or location
of school. On the other hand, supplemental grants, work study and direct loans are
distributed to schools, where the financial aid officer is responsible for their
E-29
allocation among needy students. Under these "college-based" programs, students with
identical need are not necessarily treated alike. However, student financial aid
officers claim that the needs of students are better met through the "packaging" of
aid funds to reach a total amount sufficient to assure the student's ability to meet
costs. In addition, campus-based programs offer an additional financial advantage to
higher education institutions because up to a fixed percentage of grants going to
institutions for student awards may be used for administrative expenses. Under the
Basic Grant program, institutional assistance is provided by subsidizing students
directly.
Since FY 1973, the Administration has consistently proposed to fully fund basic
grants, i.e., provide sufficient funds so that each student may obtain a full
"entitlement" of up to $1,400 minus expected family contribution. It also has con-
sistently proposed to terminate funding for the direct loan capital contribution,
hold college work study to a reasonable level, and provide no funds for supplemental
opportunity grants. Congress has traditionally reacted to the Administration's
requests by not fully funding the basic grant program, and by diverting funds to the
campus-based programs. In part this reflects the influence of college student aid
officers.
Congressional unwillingness to appropriate full funding levels resulted in a
phased-in program over a four-year period -- with the grants available only to freshmen
in academic year 1973-74, freshmen and sophomores in 1974-75 and freshmen, sophomores
and juniors during the current 1975-76 year. The basic grants program is fully
funded during the current 1975-76 academic year for these three classes of students,
with maximum and average awards of $1,400 and $789 respectively.
During the current academic year there has been an unanticipated surge in the
rate of student participation from a projected 56% of those eligible to a 74% actual
rate. That higher participation level is expected to continue in the 1976-77 academic
year, when the program will be open to all four classes of undergraduates. The
full-funded cost of BOGs for academic year 1976-77 is now estimated at $1,327 million.
E-30
The Administration has proposed two 1976 supplementals for BOGs. The first
supplemental -- of $180 million -- was designed to replace funds reprogrammed from
the 1976 appropriation for use in the current 1975-76 school year. This was caused
by the shortfall in funds during the current year. The second supplemental --- of
$224 million -- was designed to increase awards for school year 1976-77. In the
absence of added funding, increased student participation would have reduced average
awards by approximately 50 percent. The Administration suggested that Congress
could fully fund the BOGs program, i.e., provide $388 million in additional funds
needed to fully fund the program, by transferring and reprogramming funds from lower
priority education programs. Congressional response, thus far, has been for the full
House to reject reprogramming and transfers and to pass a supplemental appropriation for
BOGs of $612 million, the amount required to fully fund the program. This action
reflects pressures brought about by the increasing popularity of the basic grant pro-
gram. We believe, however, that given the new congressional budget procedures, it will
be increasingly difficult for the Congress both to fully fund the basic grant program,
and to fund the campus-based programs at levels comparable to recent appropriations.
Congress may very likely fully fund the BOGs program and reduce the level of funding
in the campus-based programs.
The full funded cost for fiscal year 1977 is now expected to be $1,379 billion,
$279 million above the amount anticipated when the 1977 budget was submitted. The
basic policy issues in this area are:
-- Given rising costs, should the Administration continue to seek full funding
for basic grants in the FY 1978 budget?
-- What should be the role of the college-based programs?
Should the Administration change its strategy for unwanted college-
based programs from immediate termination to one of gradual phaseout?
E-31
Alternatives
#1.
Maintain the current Administration strategy of fully funding basic
grants, and do not fund the campus-based programs except for the
work study program (HRD rec.).
#2.
Do not fully fund basic grants, but request an amount equal to that
originally estimated as the fully funded level in the 1977 budget,
prior to the increase in student participation. Do not fund the
campus-based programs except for the work study program.
#3. Fully fund the basic grants program, and fund the work study program
at a higher level than the Administration has recently requested.
None of the other campus-based programs would be funded (Likely
agency preference).
#4. Fully fund the basic grants program, fund the work study program at
a higher level than the Administration has recently requested, and
provide some funding in the direct loan program and the supplemental
educational opportunity grant program, in an attempt to ultimately
phaseout these programs.
Analysis
Budgetary effects ($ in millions) :
1978
1979
1980
1981
Alternative #1 (HRD rec. )
BA
2,095
2,095
2,095
2,095
O
2,552
2,168
2,115
2,113
Alternative #2
BA
1,816
1,816
1,816
1,816
O
2,552
1,988
1,917
1,913
E-32
1978
1979
1980
1981
Alternative #3 (Agency Preference)
BA
2,185
2,185
2,185
2,185
O
2,552
2,236
2,199
2,201
Alternative #4
BA
2,445
2,445
2,445
2,445
O
2,552
2,476
2,460
2,461
Current policy level
O
2,206
2,131
2,115
2,113
Most likely level
O
2,552
2,476
2,460
2,461
The four alternatives have the following program components in terms of FY 1978 BA.
($ in millions)
1976
1977
Appro.
Budget
Alt. #1
Alt. #2
Alt. #3
Alt. #4
Basic Grants
$1,327
$1,379
3/$1,379
$1,100
$1,379
$1,379
Supplemental Grants
240
-0-
-0-
-0-
-0-
100
Work Study
390 2/
250
250
250
340
340
Direct Loans
332
12
12
12
12
12
State Student Incentive
Grants
44
44
44
44
44
44
Guaranteed Loan Student Aid
subsidies
452
400
410
410
410
410
2,785
2,085
2,095
1,816
2,185
2,445
1/Reflects full House action of $612 M supplemental for basic grants for school year '76-77. Excludes $180.2 M
used to replace '76 funds reprogrammed for the '75-76 academic year.
2/Excludes one-time work study appropriation of $119.8 M passed in 1976 continuing resolution.
3/Number printed in budget was $1.1 billion. $1,379 M reflects new estimate of full funding.
E-33
Alternative #1 (low alternative)
This reflects the current policy of full funding of BOGs adjusted for higher
participation, and little funding for the campus-based programs. This alterna-
tive embodies the general Administration strategy of reliance on basic grants,
some work study, and guaranteed loans.
Alternative #2
This is the same as Alternative #1, except that the basic grants program is
funded at $1.1 billion, the level originally proposed in the 1977 budget. This
would represent a fiscally austere approach to higher education programs, in that
neither basic grants nor the campus-based programs would be funded at high
levels.
This budget strategy would place heavier reliance on guaranteed loans.
Normally, the role of guaranteed loans is to complement basic grants for students
who want to attend more expensive schools/or whose higher family income does not
qualify them for grant support. Under this option, guaranteed loans would
substitute for need-based grants.
Alternative #3 (Medium alternative)
Alternative #3 represents all of the elements contained in Alternative #1, along
with some accommodation in terms of increased funding for the work study program.
Alternative #4 (High alternative)
Instead of completely eliminating the direct loan program, Alternative #4 would
request approximately half of the 1976 NDSL appropriation level and $100 million
for SEOG. In all other respects, this option is identical to #3, This option is
the least fiscally austere, and represents the most accommodation with respect to
the campus-based programs.
E-34
The Administration, in its higher education reauthorization submission to the
Congress, proposed that schools in the NDSL program be given the option of
becoming qualified lenders under the guaranteed student loan program. The
interest rate would be raised to 8 percent and schools would, in effect, receive
payments for the in-school interest subsidy. The funding level for NDSL in
this option would be targeted on schools whose late participation in the program
has left them with small loan revolving funds.
E-35
Attachment A
Office of Education Student Aid Programs
Basic Grants
-- Education Amendments of 1972.
-- An "entitlement" program which provides grants of up to $1,400 depending
on need directly to eligible students in postsecondary education.
-- Each student "entitled" to up to $1,400 a year (minus "expected family
contribution"), not to exceed one-half costs.
-- If appropriations insufficient to fully fund all "entitlements," statute
provides system to reduce grants accordingly.
-- Government or contractor deals directly with student to establish his need.
School has no say on amount of award.
-- Estimate of full funding costs for school year 1976-77 is $1,327 million.
Supplemental Grants
-- Higher Education Act, 1965.
-- For students of "exceptional financial need" who would not, but for the
grant, be financially able to pursue education at their school.
-- Student may or may not have a Basic Grant, or other Federal aid.
E-36
-- Federal Government provides 100% of funds.
-- Student receives up to $1,500 per year, but not over $4,000 for four years.
-- For 1976-77, FY 1976 appropriation of $240 million will provide average
grants of $539 to an estimated 445,000 students.
Work Study
-- Higher Education Act, 1965.
-- Part-time employment at school or nonprofit organization for students who
need earnings to finance education at their school.
-- Student may or may not have Basic Grant or other Federal aid.
-- Federal Government provides up to 80 cents for each dollar of salary.
-- Program in fact aids schools as well, e.g. by permitting them to keep
library open later with student help.
-- For 1976-77, FY 1976 appropriation of $390 million will support estimated
895,000 students in part-time jobs paying an average of $525.
Direct Loans
-- National Defense Education Act, 1958 as amended.
-- For students who need loan to pursue course of study at their school.
-- Student may or may not have Basic Grant or other Federal aid.
FORD
GERALD
E-37
-- Revolving funds at 2,800 institutions have received approximately $3
billion in Federal capital contributions since 1958.
-- School must match each 90 cents of Federal contribution with 10 cents of
its own.
-- Student pays nothing while in school, and repays at 3% interest thereafter
-- New loans averaging $690 to estimated 834,000 students in 1976-77 financed
by $321 million Federal capital contribution, $33 million school con-
tributions, and estimated repayments of $228 million.
Under the three institution-based programs funds are divided by State according
to three different formula grants set by law. Within each State they are allocated
among the schools by panels of student aid officers who are convened by the OE
regional office to review school applications for financial aid. Once a school's
share is determined, the student aid officer at that school has considerable
flexibility in awarding aid to students according to need. The officer is able to
"package" the Federal aid to provide sizeable assistance to individual students. For
example, one student might receive:
Supplemental
$1,000
Work Study (job)
700
Direct Loan
1,000
$2,700
State Student Incentive Grants
-- 1972 Amendments
-- Direct student assistance, run by the States, and Federal/State match of 50/50.
E-38
-- Grants awarded on the basis of need.
-- 1976 appropriation of $44 million will support four classes of under-
graduate students totalling 176,000 recipients.
E-39
Programs Included in Proposed Reductions to Resist Likely Congressional Increases
for Certain Education Programs
Base
1977
1978
1979
BA
O
BA
O
BA
O
BA
O
Resist likely congressional
increases for Education for the
Handicapped and maintain the
1977
326
269
-90 -
-11 -
-90 -
- 58
Administration's current request
1978
90
294
level.
1979
90
140
Do not continue 1976 appropria-
1977
484
475
-20
-20
_20
_20
tion increases for Head Start.
1978
484
478
1979
484
478
Do not provide for congressional
1977
74
41
-2
-5
-7
-5
increases for innovative and
1978
74
61
experimental programs.
1979
74
69
Do not continue increases in
Office of Education salaries
1977
117
115
-2
-2
-2
-2
and expenses likely to be pro-
1978
117
117
vided in the 1976 supplemental.
1979
117
117
Request congressional increases
1977
70
57
-10
-8
-10
-10 -
for the TRIO program.
1978
70
68
1979
70
70
Resist congressional increases
for Education for the Disad-
vantaged and provide only for
the 1977 requested level prior
1977
2,050
1,929
-150
-108
-150
-136
to fold into the block grant
1978
2,050
2,010
($1.9 billion).
1979
2,050
2,037
E-40
2
Base
1977
1978
1979
BA
0
BA
0
BA
0
BA
10
Resist likely congressional
1977
57
48
-15
-15
-15
-15
increases for Indian Education.
1978
57
56
1979
57
55
Resist likely congressional
increases for Vocational Educa-
1977
1,176
777
-30
-14
-30 -
-26
tion and maintain the Administra-
1978
30
681
tion's current request level.
1979
30
323
Resist likely congressional
1977
250
222
-3
-3
-3
-3
increases for Emergency
1978
250
243
School Assistance.
1979
250
248
Resist likely congressional
increases for Impact Aid and
1977
694
716
-418
-370 -
-466
I
-437
maintain the Administration's
1978
743
736
current request level.
1979
791
767
Resist any likely congressional
1977
191
159
-49
-35
-49 -
-45 -
increases in Elementary and
1978
191
180
Secondary Education.
1979 191
185
Do not budget for congressional
1977
185
181
-12
-8
-12
-11
increases in Innovation Con-
1978
185
183
solidation Title IV, ESEA.
1979
185
184
Do not provide for probable
1977
218
166
-19
-3
-19
- -13
congressional increases for
1978
81
165
Library programs.
1979
81
123
Includes double appropriation to advance fund.
0000
E-41
Attachment B
Education Programs Not Forward Funded
(Millions of $)
1976
Program
Appropriation
Impact Aid
680
Student Loan Insurance Fund
202
Subsidized Insured Loans
452
Loans to Institutions (NDSL)
2
Aid to Land Grant Colleges
12
Higher Education Facilities Loans
3
Education Activities Overseas
2
Salaries and Expenses
107
Teacher Corps
38
Public Library Programs
52
National Institute of Education
70
Assistant Secretary for Education
33
Special Institutions
142
Child Development
484
Total Programs Not Forward Funded
2,279
Total Education Programs Forward Funded
5,742
Total 1976 Appropriation for Education Programs
8,021
E-42
1978 Preview
*1
Department of HEW/Branches
Attachment C
Major Areas Where No Reduction Proposed
(millions of $)
Program
Base Estimate
1977
1978
1979
BA
0
BA
O
BA
O
Assistant Secretary for
Education
33
32
33
33
33
33
Student Loan Insurance
Fund
--
91
100
100
150
150
Higher Education
Facilities Loan
3
13
4
8
4
6
Education Development
--
4
--
1
--
--
Education Overseas
2
2
2
2
2
2
National Institute of
Education
90
88
90
90
90
90
Developing Institutions
110
81
110
94
110
99
State Student Incentive
Grants
44
32
44
41
44
43
Insured Loans
400
470
410
416
410
428
Child Abuse
19
16
19
16
19
16
Construction (Higher Ed.)
--
50
--
43
29
43
No Total
E-43
Summary Tabulation
Budget Authority
1976
1977
1978
1979
Current
Current
Poten.
Low
Current
Poten.
Low
Current
Poten.
Low
Program
Estimate
Policy
Level
Option
Policy
Level
Option
Policy
Level
Option
Block Grants
--
3,300
--
--
3,500
3,500
3,300
3,700
3,700
3,300
Elementary and
Secondary
2,401
141
2,426
2,426
129
353
117
111
353
97
Indian Education
57
42
57
57
42
57
42
42
57
42
Impact Aid
680
325
694
694
325
743
325
325
791
325
Emergency School Aid
242
250
253
253
250
253
250
250
253
250
Education of the
Handicapped
226
-0-
326
326
--
90
--
--
90
--
Vocational and Adult
Education
673
539
1,176
1,176
--
30
--
--
30
--
Higher Education
2,963
2,273
2,595
2,595
2,283
2,605
2,267
2,312
2,634
2,296
Library Resources
71
62
218
218
62
81
--
62
81
--
Educational Development
--
--
--
--
--
--
--
--
--
--
Innovative and
Experimental
37
67
74
74
67
74
67
67
74
67
Educational Activities
Overseas
2
2
2
2
2
2
2
2
2
2
Salaries and Expenses
107
115
117
117
115
117
115
115
117
115
Student Loan Insurance
Fund
202
--
--
--
100
100
100
150
150
150
Higher Education Facil-
ities Loan Insurance
Fund
3
3
3
3
4
4
4
4
4
4
National Institute of
Education
70
90
90
90
90
90
90
90
90
90
Assistant Secretary
of Education
33
33
33
33
33
33
33
33
33
33
Special Institutions
123
142
142
142
140
140
136
124
124
120
Child Development
495
484
484
484
484
484
464
484
484
464
Total
8,385
7,870
8,693
8,693
7,627
8,758
7,314
7,871
9,068
7,356
E-44