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FY 1976 - 12/18/74 - USDA Food Agencies, Human Resources
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FY 1976 - 12/18/74 - USDA Food Agencies, Human Resources
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The original documents are located in Box 8, folder "FY 1976 - 12/18/74, USDA Food Agencies, Human Resources" of the White House Special Files Unit 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 Gerald Ford donated to the United States of America his copyrights in all of his unpublished writings in National Archives collections.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. MEMORANDUM OF PRESIDENTIAL HANDWRITING FILE CODE DATE: 12/17/74 SUBJECT: Meeting with Roy L. Ash, 12/18/74, to make final FY 76 budget decisions for USDA food programs and several agencies in the human resources and community affairs areas; to consider appeal of previous Presidential determinations re HEW budget RECOMMENDED LETTER MEMO PHONE CALL NEWS SUMMARY NEWS CLIPPING OTHER BRIEFING PAPER FORD & LIBRARY GERALD TO: THE PRESIDENT FROM: ROY ASH NOTE: Above removed from Special Files Box #4 CHECKMARK ONLY SENSITIVE - NO HANDWRITING Digitized from Box 8 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library THE WHITE HOUSE WASHINGTON December 17, 1974 MEETING WITH ROY L. ASH Wednesday, December 18, 1974 2:15 p.m. (60 minutes) Oval Office From: A ROY L. Ash I. PURPOSE To make final FY 76 budget decisions for USDA food programs and several agencies in the human resources and community affairs areas. To consider the appeal of previous Presidential determinations regarding the HEW budget by Secretary Weinberger. FORD is LIBRARY GERALD II. BACKGROUND, PARTICIPANTS AND PRESS PLAN A. Background: The FY 76 budget submissions for USDA's food programs and several agencies in the human resources and community affairs areas have been reviewed and the results have been relayed to the affected agencies. This meeting will focus on the issues raised during the above reviews that require Presidential consideration and determinations. In addition, the meeting will provide an opportunity for Secretary Weinberger to appeal prior Presidential determinations regarding the FY 76 budget for HEW. B. Participants: Roy L. Ash, Paul O'Neill, and Dale McOmber. For the latter part of the meeting Secretary Weinberger and perhaps Under Secretary Carlucci, Assistant Secretary for Education, Virginia Trotter, and Assistant Secretary for Health, Charles Edwards will attend. C. Press Plan: David Kennerly photo III. TALKING POINTS A. Paul O'Neill, will you describe the issues raised by the USDA food programs? ORIGINAL IN PRESIDENTIAL HANDWRITING FILE - 2 - B. Paul O'Neill, which of the agencies in the human resources or community affairs areas should we consider first? C. Secretary Weinberger, what is the first issue you would like to raise as a part of your budget appeal? ( FORD is LIBRARY EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF management AND BUDGET DECISION WASHINGTON, D.C. 20503 MEMORANDUM FOR, THE PRESIDENT FROM : ROY #. ASH SUBJECT: 1976 Budget Decision: Department of Agriculture (Child Nutrition Program) In his October budget submission Secretary Butz proposed and I recommend that the 1976 budget amounts for the Child Nutrition program include a proposal to substitute a comprehensive bloc grant program for the present set of fragmented and complex child feeding programs. Assistant Secretary Feltner is sug- gesting reconsideration of this recommendation in a recent letter (Tab A). Secretary Butz has not taken a position. Background The USDA goal in food and nutrition programs is to alleviate poverty-caused hunger and malnutrition by helping assure that needy families have access to sufficient resources for an adequate diet. However, the present set of child feeding programs are far more costly than necessary to achieve that goal since they: provide extensive subsidies to non-needy; duplicate benefits to many participants; and, result, to a significant extent, in substitutions rather than net addition to food that would otherwise be consumed. Analysis We have provided a summary of the pros and cons submitted by USDA to form the basis for your decision on whether to advance the bloc grant proposal at this time. We have added OMB comment on these arguments; the three major options together with their budgetary impact; and our recommendation. FORD LIBRARY & 93RALD 2 USDA Arguments For: The child nutrition bloc grant would provide: a comprehensive approach to program reforms; complete coverage for all needy children; simplification of complex and confusing administrative requirements; savings of $526 mllion in fiscal year 1976 and $563 million in 1977 and the out years in Federal operating expenses by elimination of numerous individual child feeding programs; and, State flexibility to adjust programs to local preferences. OMB Comment: The bloc grant would provide 100% Federal funding to children for a complete year. However, current reim- bursement covers approximately 65% of the cost of meals provided all children for a school year. Thus, States would be released from their obligation to fund the matching requirements mandated by P.L. 91-248 of approxi- mately $400M which they could use to continue subsidy of non-needy children at their discretion. USDA Arguments Against: Any reform which appears to deliberalize the program could bring a counter-effort for a universal feeding program; Congressional amendments could scuttle estimated savings; It would be difficult if not impossible to get Congressional approval of the proposal due to intense public interest group pressure; The Administration would be subject to accusations of neglecting children in general; States and especially local jurisdictions could be non- responsive or unfair in their treatment of needy children, and; Should surplus commodities again become available, donations would be made in addition to cash support for the bloc grant, rather than in lieu of cash as under current programs. OMB Comment: While a universal feeding program is a threat, it is doubt- ful that there would be any significant support. There is a general feeling that the current program is more than sufficient. This is opposed by many because of the ex- cessive costs and the fact that States and local jurisdic- tion would have to surrender their perrogatives. GERALD FORD LIBRARY 3 With regard to the consequences of the proposal on the disposition of surplus commodities, the proposal could be written to include authority to provide commodities as a substitute for cash under the bloc grant as long as nu- tritional requirements could be met. The USDA bloc grant assumptions underestimate the universe of needy children by approximately 1.0 million. However, while immediate savings would not be as large as USDA estimates, the overall savings in subsequent years will be substantial. USDA staff has identified three alternatives: USDA Child Nutrition Program Alternatives Outlays ($ millions) 1975 1976 T.Q. 1977 1978 1979 1980 Alternatives: 1. Do nothing 2,025 2,263 560 2,425 2,568 2,688 2,785 2. Bloc grant proposal -- 1,737 434 1,862 1,972 2,065 2,139 (savings) (526) (126) (563) (596) (623) (646) 3. Pare-down existing program 9,830 2,005 500 2,036 2,156 2,257 2,329 Eliminate School Breakfast, Special Milk, Special Supplemental Feeding program for Women, Infants, and Children (WIC) and Equipment Assistance programs. Alternatives 1 and 3 are not responsive to the need for fiscal restraint, nor do they implement the policy of limiting Federal feeding subsidies to those in need. If, under alternative 3, we proposed that the specific needy oriented programs expire, the Administration would be exposed to the probable extension of those programs with programmatic increases at least as great as those experienced in the past. OMB recommends, therefore, that the acceptance of the Child Nutrition bloc grant proposal be reaffirmed and that USDA be encouraged to provide the necessary support. Decision Approval Disapproval FORD LICRARY 07P835 THE DEPARTMENT DEPARTMENT OF AGRICULTURE OFFICE OF THE SECRETARY WASHINGTON, D. C. 20250 December 11, 1974 Mr. Paul H 0'Neill Deputy Director, Office of Management and Budget Washington, D.C. 20503 Dear Mr. O'Neill: In recent years, there has been a tremendous growth in the Department's food-oriented welfare programs until they now cost approximately $6 billion annually, two-thirds of our budget. Each year, Congress continues to broaden these programs, increasing their coverage and benefits. The Administration needs to develop a strategy to counter this trend. Director Ash, in his July 22 policy guidance letter to the Secretary, requested the Department to search out ways to do this. Therefore, the Secretary proposed a program of block grants to States to replace the existing Child Nutrition Programs. We believe this is a workable alternative to the present programs. However, the recent election resulted in a Congress which is likely to want to extend benefits even beyond current levels. With high food costs, it is possible that public support could be generated for even greater Federal outlays. The central question, therefore, is whether this is the appropriate time to advance this block grant proposal. We believe that this may not be the right time for this proposal and that a better alternative would be to reduce existing programs. This decision needs careful consideration beyond the level of the Department of Agriculture. The considerations are discussed in detail in the attachment to this letter. I will be happy to discuss this further with you and to provide any additional information you may need. Sincerely, Richard L. Feltner Assistant Secretary FORD LIBRARY & SERA Attachment CHILD NUTRITION PROGRAM OPTIONS GERALD FORD LIBRARY Background In his policy guidance letter of July 22 to Secretary Butz, Director Ash said that bringing the budget into balance will require that the President propose to the Congress both a balanced budget and legisla- tion to achieve that objective. He asked that we vigorously search out ways to change entitlement programs or otherwise check the growth of uncontrollable programs. In response to this request, the Secretary proposed the replacement of the Child Nutrition programs with block grants to states. The amount of the block grant would be based on the total number of needy children in the country. It would provide suffi- cient funds to meet one-third of the recommended daily allowance for these children. States would have broad authority to expand the program to cover all children through either the use of other funds, or by assessing higher charges to non-needy children, or by a combination of these. Advantages. The block grant approach offers several advantages over existing programs. It would -- Accept as a Federal responsibility assistance to needy children, but reject Federal responsibility for feeding all children; -- Simplify the administration and reduce costs at the Federal level by eliminating separate programs now in existence dealing with school lunch, free lunch for needy children, school breakfasts, equipment assistance, grants to states for administrative expenses, non-school food programs, commodity donations, special milk, and special programs for infants and pregnant and lactating women; -- Permit maximum flexibility at the state and local levels in designing programs which they feel are best adapted to their needs; Present a comprehensive approach to program reform, a viable alternative to the overlapping and duplicative programs now in existence; -- Reduce Federal expenditures by about $0.5 billion below the cost of existing programs. Disadvantages. Despite the above advantages which the block grant approach offers, there are problems associated with the program which should not be overlooked and which may now be more serious than when the proposal was initially offered. The block grant proposal would -2- -- Open up child nutrition to major legislative changes, and provide the proponents of the "universal free lunch program" with an opportunity to offer their program as a viable alternative. This will come at a time when the Congress is more "one-sided" than it was when the proposal was offered. The cost of a universal free lunch program far exceeds current program costs and would come at a time when excess Federal spending is a critical national problem. (The proponents of free programs may offer this alternative anyway since several programs are scheduled to expire on June 30, 1975.) --- Be subject to amendment by the Congress to increase the amount of the block grant to the point where it may actually cost more than current programs; -- Be difficult to get approval from the Congress. The food service organizations will almost certainly oppose this proposal. The Administration could possibly be saddled with a "failure" in one of its key positions. In addition, the Administration will already have its hands full defending the recent decision to revise the food stamp program. -- Possibly subject the Administration to accusations of neglecting children in general and the "near-poor" in particular, criticism which will have strong emotional appeal despite the fact that the program as proposed meets the Administration's commitment to the needy; -- Result in the states eliminating the program in communities with a small percentage of poor children; -- Create problems regarding commodity donations; complete elimination of commodity donations to schools would cause states difficulty in maintaining delivery systems for other donation programs. In fact, it may cause states to dismantle their commodity handling systems. Though Section 32 would still be available as a surplus removal vehicle, commodities may have to be donated in addition to cash support instead of substituting the surplus removal cost for cash support. Alternatives. In view of the changes which have occurred since the initiation of the proposal in October, consideration should be given to the following alternatives. A table comparing the cost of these alternatives is attached. I. Pursue the block grant proposal as orginally suggested by USDA. ( FORD FARRITY -3- II. Do as little as possible to change existing programs on the premise that the Congress, as it will be constituted, will only move in one direction -- toward greater Federal responsibility and larger Federal expenditures in this area. This assumes that we would support the simple extension of those programs which would otherwise expire on June 30, 1975. III. Attempt to pare down existing programs by opposing extension of the school breakfast, non-school food programs, and women, infants and childrens programs, all of which expire on June 30, 1975. This approach might be as difficult to get through the Congress as the block grant approach, but it might result in some limited success. The programs could be pared down to a dollar level consistent with the block grant approach. WE FEEL THAT IN LIGHT OF THE ABOVE CONSIDERATIONS, THIS ALTERNATIVE IS THE MOST ACCEPTABLE ALTERNATIVE FOR THE DEPARTMENT. CERALO FORD LIBRARY Comparison of Child Nutrition Progarm Alternatives Alternative Alternative III II Child Nutrition Programs: Section 4; regular lunch $488,000 $488,000 Section 11; Free and reduced-price lunch 845,000 845,000 School Breakfast 1/ - - 84,525 Equipment assistance 28,000 28,000 State Administrative Expenses 6,700 6,700 Nonschool Food 1/ - - 114,600 Commodities to States 448,750 448,750 Nutritional Training and surveys .... 1,000 1,000 Operating Expenses for Child Nutrition 13,000 13,000 Subtotal 1,830,450 2,029,575 Special Milk Program 2/ - - 133,563 W.I.C. - - 100,000 Total 1,830,450 2,263,138 Block grant (Alternative I) 1,737,000 1,737,000 Savings 93,450 526,138 1/ Authorization expires on June 30, 1975. 2/ This program, although authorized, could be eliminated if no funds are appropriated in 1976. FORD VIBRARY December 11, 1974 THE WHITE HOUSE DECISION WASHINGTON MEMORANDUM FOR THE PRESIDENT FROM: ROYAL. ASH SUBJECT: HEW Appeal of 1976 Presidential Decisions We have reviewed the HEW memorandum which, although it aggregates the individual issues, appeals many of your initial 1976 budget decisions. Your initial decisions would provide HEW with budget authority of $124.4 billion and outlays of $120.1 billion -- increases of $9.9 billion in budget authority and $11.6 billion in outlays over the 1975 levels. HEW is appealing for an add-back of $1.1 billion in budget authority and $824 million in outlays. HEW's appeal acknowledges the validity of higher estimates for uncontrollable programs resulting in a net increase in outlays of $412 million over its earlier budget request. In order to provide an offset of $700 million to fund items in his appeal, Secretary Weinberger proposes legislation to limit the statutory Social Security adjustments to 8 percent. This compares to the estimated cost-of-living indrease of 9 percent otherwise required for July 1, 1975. This is inconsistent with your public commitment to protect those hardest hit by inflation, e.g., the aged on fixed incomes. The Secretary's letter recognizes your public commitment, but would apply it to programs which are in fact neither income tested nor provide uniform benefits. We believe there is no chance of congressional acquiescence in such a proposal. In fact, such a proposal could stimulate an immediate statutory increase before the July 1, 1975, date. We recommend that you reaffirm all but one of your initial decisions and reject HEW's new proposals for the reasons discussed in Attachment B. Our recommendation would accept only the HEW appeal of $12 million for NIH biomedical research. Attachment A is a summary table that compares your initial decisions, the HEW appeal, and the 0:1B recommendation on those items appealed by HEW. Attachment B is a brief analysis of the proposals at issue and incorporates in full HEW's specific arguments for each of its appeals. HEW's appeal memorandum is at Attachment C. Attachments F.O.R.D LIBRARY Attachment A 1976 Budget--Summary Table DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 BA in Initial 1975 Pres. 1974 Pres. Determi- HEW OMB HEW Proposal Actual Decisions nations Appeal Recom. Social Services BA 1,345 1,829 1,300 1,921 1,300 Health Services BA 2,049 1,847 1,681 1,952 1,681 for the Poor and Disadvantaged Health Care system (HSA and ADAMHA) Preventive Health BA 307 333 324 341 324 (CDC and FDA) Health Research NIH BA 1,258 1,159 1,159 1,171 1,171 NCI Appeal BA 527 565 590 (899*) 590 Education Grants BA 339 291 283 392 283 to States (State Departments of Education, Handicapped Educa- tion, and State Student Incentive 40 Toughood Grants) 4 44 Vocational Reha- BA 734 725 736 776 736 bilitation Grants Other HEW Program BA 94,237 107,794 118,342 118,343 118,342 Programs Total BA 100,796 114, 54 124,415 125,486 124,427 Total O 93,635 108,498 120,055 120,871 120,064 * Cancer Institute appeal amount; HEW accepts the Presidential decision. 189, FORD VIBRAST Attachment B Individual Discussions of GERALD FORD LIBRARY HEW Appeal Items ( 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW OMB Program Actual Decision Decision Appeal Recom. Social BA 1,345 1,829 1,300 1,921 1,300 Services O 1,392 1,806 1,300 1,921 1,300 Initial Presidential Decisions Your initial decision rests on the principle that a heavier sharing of the costs of social services by State and local governments will encourage improved administration and a more rigorous evaluation of the worth of these services at the local level. This incentive is consistent with the proposed new legislation which allows more management discretion at the local level. The 50% sharing of these costs by the States by 1977 is consistent with legislation you submitted to require the same matching in 1975 for medical and social services financed through the Medicaid program and the AFDC income support program. This program has never been able to demon- strate the efficacy of the services financed to a degree which would justify a higher Federal funding share than that provided under Medicaid. HEW Appeal "The allowance assumes that we will seek legislation to reduce Federal matching for social services under Public Assistance from 75 percent to 65 percent in 1976 and to 50 percent in 1977. Moreover, the dollar allowance is based on the assumption that States will spend no more than they now do on social service programs. This would result in a 25 percent reduction in com- bined Federal and State spending on social services in 1976. While it can be agreed that the current program is not as effective as it should be, a reduction of this magnitude is bound to have a severe impact on the poor. "We have fought hard for legislation reforming the social services program, and such a bill recently passed the House with Administration backing. If this bill is not passed at this session of Congress, all of our prior negotiations will be down the drain if we attempt to cut Federal matching next BERALD FORD LIBRAE year. If it does pass, and an amendment is submitted next year, we will be accused of acting in bad faith and the proposal will very likely be ignored. Thus, I strongly recommend that you reconsider the decision to submit legislation reducing Federal matching for social services. "Furthermore, as you know, there is a $2.5 billion ceiling on social services which simply means that if the States offer qualified services programs, they can draw the full amount. Therefore, all of our social services figures are estimates at best, and the full $2.5 billion may be required in any event. By the same token, we could arbitrarily lower our estimates of the total program level, as OMB has done and thus we would not need to add the full $621 million in outlays." OMB Recommendation We recommend that you affirm your initial decision, which assumes that State spending will not decline and may even increase slightly. If in fact the States increase their spending sub- stantially, Federal spending would have to rise under the new matching formula. Your initial decision does make Federal matching rates for medical and social services consistent. REWALD 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW OMB Program Actual Decision Decision Appeal Recom. "Health Services BA 2,049 1,847 1,681 1,952 1,681 for the Poor and O 1,539 1,960 1,839 1,969 1,839 Disadvantaged" and "Improving the Health Care System" (HSA and ADAMHA) Initial Presidential Decision: Your initial decision provided for: - a mandatory 20% cost sharing on the part of grant recipients for alcoholism, maternal and child health, family planning, migrant health, and drug abuse service projects; - new starts in alcohol, drug abuse, and mental thealth research at $12 million within the $122 million total; - a "no-new-starts-policy" beyond 8 year continuation support for the 600 existing community mental health centers; and - maintaining the National Health Service Corps and Health Maintenance Organization demonstration programs at the 1975 levels. These initial determinations reflected financing through Medicare and Medicaid as the appropriate Federal role and would encourage greater cost sharing on the part of grant recipients. In addi- tion, the decisions reflected a policy of limiting direct Federal financing programs. This is particularly appropriate because, unlike Medicaid, these programs are not limited to the poor through income tests. HEW Appeal: "Health Services for the Poor and Disadvantaged". The allow- ance assumes that we will seek legislation to increase State and local matching for the Department's special health service programs, including Neighborhood Health Centers, Maternal and Child Health, Migrant Health, Family Planning, Alcoholism and Drug Abuse. In my view, this is not a feasible proposal and would result in an arbitrary reduction of services to 2 people not now properly served by the Nation's health service delivery system. I believe that these programs should be held in place until Comprehensive Health Insurance is enacted and implemented. We have consistently maintained that insurance was a necessary and effective substitute for these programs, not that they were ineffective or unnecessary in themselves. "Improving the Health Care System" The allowance would cut back the Department's efforts to change the health delivery system to make it more responsive to National needs. I am particularly concerned that the National Health Service Corps be permitted to attract more health workers to rural areas, that a reasonable base be established for health services research, that the initial effort to encourage the development of HMO's not be stopped before it really gets started, and that efforts to improve health statistics move forward. Better data will assist our development of a comprehensive health in- surance program and the improvement of existing health delivery systems. OMB Recommendation: HEW proposes, in effect, to expand the Federal role in direct delivery of health services. We recommend affirming the initial Presidential decision on a grantee cost sharing of narrow categorical health service delivery programs in light of the Federal Government's $22 billion in financing programs -- Medicare and Medicaid. Such a strategy stressed a Federal role limited -- in the area of health services -- to financing through national programs rather than a series of project grants to a few favored grantees who fortuitously receive grants while citizens of other com- munities are limited to the more uniform financial assistance available under Medicare and Medicaid. FORD LIBRARY 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW OMB Program Actual Decision Decision Appeal Recom. Preventive Health (FDA and BA 307 333 324 341 324 CDC) O 296 325 339 350 339 Initial Presidential Decision Your initial decision held food and drug inspections at the 1975 funding levels. It would, however, require a cost sharing of 20% in venereal disease and immunization projects by grant recipients. HEW Appeal "The allowance would halt the expansion of the Food and Drug Administration's consumer protection programs and reduce the Department's efforts to control venereal and other communicable diseases by 20 percent below current levels. We have made significant progress in these areas in recent years and we do not believe that this progress should be halted or reversed in 1976." OMB Recommendation We recommend affirming the original allowance, on the grounds that decisions on program levels in FDA cannot be definitively related to degrees of consumer health and safety. There is, for example, no objectively "right" inspection rate or level. Moreover, necessary program initiatives or expansions can probably be provided through reallocations from lower priority program areas. Finally, as compared to other areas (e.g., occupational cancer research), FDA is relatively well-funded at the allowance level. FORD LIBRARY We also recommend reaffirming your initial decision to reduce venereal disease and immunization project grant funding by 20% and require a 20% grantee match on the grounds that (a) it encourages tighter management on the part of grantees and more vigorous evaluation of program worth; (b) the Federal Government supports venereal disease and immunization activities primarily and in substantially greater amounts than with project grants through Medicaid; and (c) direct Federal project grant funding represents only a tiny portion of total State and local resources devoted to venereal disease and immunization activities. FORD 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW/NCI OMB Actual Decision Decision Appeal Recom. "Health Research" NIH BA 1,258 1,159 1,159 1,171 1,171 O 1,180 1,299 1,162 1,171 1,171 NCI Appeal BA 527 566 590 899 590 O 423 553 580 746 580 Initial Presidential Decision: Your initial decision held NIH at the 1975 overall funding level in 1976, but increased the National Cancer Institute by $24 mil- lion over the 1975 level. Within the total allowance, research training funds were limited to support for 1,000 new postdoctoral fellowships. HEW Appeal: "The allowance for health research would hold all efforts outside the Cancer Institute to the exact dollar level of the 1975 revised estimate. This is an implicit 10 to 15 percent reduction in pro- gram output. Because we believe that other health programs have a higher priority than research this year, we do not appeal this general result. However, we would like an additional $12 million to carry out the new research mandated by legislation in areas such as aging, diabetes, and sudden infant dealth." NCI Appeal: (from Dr. Rauscher, NCI Director) "I feel compelled to appeal again the enormous discrepancy between our request and what is currently to be included in the President's 1976 Budget Request. The justification for this appeal is con- tained in the material submitted to OMB on November 29, 1974, and Mr. Benno Schmidt's November 22, 1974, letter to the President. I will simply summarize the main points: 1. The original request of $898.5 million and 2,366 posi- tions is the amount necessary to make maximum progress in our fight against cancer. A minimum of $786 million and 2,225 posi- tions is needed to allow the program to progress in an orderly way. 2. The original request included $68.5 million for the new Cancer Control Program. This amount is required to apply now the latest research findings to persons with cancer. This amount is included in the $898.5 million noted above. The Cancer Control share at the $786 million level is $57 million. 3. We respectfully disagree with the policies limiting our use of funds for construction, training and cancer centers. The NCI and its advisors are in the best position to decide on the optimal use of these funds for the cancer program within the total finally appropriated. This appeal is fully supported by the President's Cancer Panel and National Cancer Advisory Board. We appreciate the oppor- tunity to call these matters to your attention and stand ready to discuss them with you at any time." OMB Recommendation: We recommend that you grant the HEW appeal to provide a $12 million increase in NIH research other than Cancer for legis- latively "mandated" studies. HEW accepts your initial deci- sions on training policy. With regard to the Cancer Institute, we recommend that you reaffirm your decision to provide a $24 million increase over the 1975 level and that you reaffirm the policies within the original decision. The Science Advisor has recommended a $30 million increase for all health research without specifying particular areas. FORD 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1975 Initial 1974 Presidential Presidential HEW OMB Program Actual Decision Decision Appeal Recom. "Education Grants to BA 339 291 283 392 283 States" O 280 295 329 342 329 Initial Presidential Decisions Your initial decision would: -- Carry out the 1975 decision to terminate Federal funding (-$39 million) for general operating support to State Departments of Education. -- Require in education for the handicapped that State and local education agencies provide 50% of the grants for operational support programs and shift the $25 million saved from that action to innovative capacity building projects (-$25 million). -- Eliminate provision of Federal matching funds ($44 million requested in FY 1976) for State Student Aid grants which treat students in different States unevenly and often do not allow the student to apply the grant to the school of his choice. This approach should be considered as part of an overall Federal policy on higher education now under review and, if proposed, should be designed equitably. HEW Appeal "I'm asking you to restore proposed budget reductions in the education support services grant consolidation (+$40 million), formula grants for the education of the handicapped (+$25 mil- lion), and State student incentive grants (+$44 million) . The present allowance for grants consolidation is below the amount needed to trigger consolidation and would require a legislative amendment to HR-69, which stands no chance of being accepted. The allowance for the handicapped would reduce current formula funding by 50 percent. The allowance for State student incentive grants would terminate a program which provides incentives to States to supplement Federal funds for student aid, the very direction which I believe we need to go in order to improve our student aid strategy. While I am not appealing the $530 million allowance for vocational education, I am afraid that we have little chance to achieve consolidation within that budget level, because we would need new legislation." OMB Recommendation Reaffirm your original decision to eliminate Federal funding for routine State administrative functions; require State and local education agencies to share in the funding of operational services; and, suspend funding of a poorly designed, inequitable and marginal student grant program in favor of the Basic Opportunity Grant (BOGs) program and a possible new initiative in higher education. BERALD FORD 1976 Budget DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW OMB Program Actual Decision Decision Appeal Recom. Vocational Rehabilitation Grants BA 734 725 736 776 736 O 727 762 751 785 751 Initial Presidential Decisions Your initial decision holds the program at roughly the current level. This reflects serious concerns about adequacy of program management by the States, and a proposal to return control of funding levels to the Appropriations Committees. HEW Appeal "The allowance holds grants to States for vocational rehabili- tation services to the 1975 level of $680 million. We believe that the full authorization of $720 million should be funded in 1976 because of the requirements of the 1973 act to increase services to the more severely disabled. Even at $720 million, the total number served in this program will decline due to this new requirement and inflation." OMB Recommendation We recommend you reaffirm your initial determination to hold funding at the 1975 level and seek appropriation language that would overcome the mandatory spending requirement of the authorizing legislation. FORD FORD 1976 Budget GERALD LIBRARY DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ($ in millions) 1976 1975 Initial Presidential Presidential HEW OMB Program Decision Decision Appeal Recom. Vocational Education Legislative Structure Formula Grants BA 495 373* 495* 373* Project Grants BA 35 160 38 160 Total 530 533 533 533 * Includes permanent appropriation. Initial Presidential Decisions Your initial decision provided $530 million for Vocational Education programs. HEW is not appealing this level. However, your decision did not address the proposed structure for Voca- tional Education programs. The original OMB allowance provided operational support for Vocational Education programs at a lower level than in 1975 and allowed HEW to increase its capacity building efforts in the innovative projects area. The Federal role would be moved to one of limited grants (3 years) for research, innovation and dissemination and away from financing a portion of service delivery. The allowance for the operational support Basic Grant program provided a 60/40 State Federal matching require- ment and decreased the Federal share to zero by 1980. A 50/50 match would be required for innovative grants -- down from 80 to 90%. HEW Appeal -- "This issue concerns the distribution of funds for vocational education in the context of proposed legislation. CERRLE FORD LIBRARY 2 -- Administration policy has been to seek consolidation of vocational education programs. To that end, the Department has developed a bill that has considerable support from the vocational education lobby and interested Congressional staff. To drastically shift funding away from the consolidation approach is in direct contrast to our previous position. -- The OMB distribution would shift the primary emphasis in vocational education away from formula grants administered by the States to project grants. -- One effect of the OMB allowance is to move more control of vocational education funds to the Federal Government and away from the States, changing the historic Federal-State relationship in this area. -- For this reason, the OMB proposal can be expected to create resistance on the part of the States, the vocational education lobby, and supporters in the Congress. -- This change in the Federal role is an obvious move away from the New Federalism in which States have been given greater authority over the use of Federal funds. -- Bills have already been introduced on the Hill similar to HEW's draft legislation which have widespread support among the vocational education community. These bills incorporate HEW's proposed structure and distribution of funds for vocational education programs. -- HEW's bill was developed in a lengthy process involving discussion with the interest groups and appropriate Hill staff. To change suddenly the structure, content, and concept of the bill when it is submitted to the Hill in January will severely damage our credibility and capacity to accomplish any negotiations with the Hill and outside groups. It will be difficult enough to persuade the Congress to accept consolidation with- out the funding increase originally requested." 3 OMB Recommendation We recommend no change from the structure provided for in the allowance. It recognizes that the primary responsibility for vocational education rests with the States, not the Federal government. Further, we do not understand HEW's contention that an Administration approach has been set and that the allowance would shift from that position. There has been no review or clearance by the White House or Executive Office staff of the HEW proposed new legislation. While the allowance would increase funds in the innovative area by fourfold the greatest change is in emphasis. Programs proposed for inclusion under the innovation category would require innovative or capacity building approaches, problems would be identified, solutions proposed and a limited (3 year) life for the project would be planned at the outset as opposed to continuing general support for State agency operations. The attached narrative description details the difference in approach between the HEW and OMB recommendation. The OMB approach would provide a greater opportunity to focus the Federal contribution on formative and innovative program areas in vocational education. FORD LIBRIET Vocational Education Program HEW Proposal OMB Recommendation Consolidate 13 existing cate- Revise proposal to provide for gorical programs or earmarking the Basic Grants program with provisions into four areas of a State/Federal match of 60/40 support: (1) program planning, in FY 1976. The set-asides and (2) vocational education programs earmarks would be eliminated. and services, (3) programs for individuals with special needs, and (4) special projects for innovation in vocational educa- tion. Give the States broad discretion Consolidate the handicapped in determining priorities for set-aside ($42 million in FY program funding. 1975), grants for special needs ($79 million in FY 1975), and Apply uniform 50/50 matching research ($38 million in FY 1975) rate for all programs except into an Innovative Projects innovation, which are 100% activity to increase the Federal. capacity-building role. Insti- tute a 50/50 State/Federal match. Hold harmless at current levels Grants for Innovative Projects the set-asides for the dis- would be limited to 3 years. advantaged and handicapped. Authorize $603 million each year Authorizations to be consistent for 1976-1980 and $160 million with FY 1976 budget decisions. for the 1976-77 transition period. GERALD FORD LIBRARY HEW Personnel * Actual 1974 1975 1976 Initial Presidential Decision -- 46,690 46,815 HEW Appeal (increase) -- +558 +1,518 OMB Recommendation 46,658 47,000 47,500 (+310) (+685) Although Secretary Weinberger's appeal memorandum does not address personnel, we are informally advised that he proposes the increases shown, excluding Social Security, which is covered in a separate decision memorandum. We recommend the compromise position indicated above. FORD & LIBRARY GERALD 1975 1976 * Excludes: St. Elizabeths Hospital 3,911 3,911 Office of the Secretary 5,366 5,890 Social Security Administration 70,871 70,871 80,148 80,672 THE SECRETARY OF HEALTH. EDUCATION, AND WELFARE. WASHINGTON, D. c. 20201 DEC 11 1974 MEMORANDUM FOR THE PRESIDENT: SUBJECT: Fiscal Year 1976 Budget Allowance I have received from OMB staff the 1976 budget allowance for the Department. This allowance would provide the Department with 1976 outlays of $120.1 billion. I am asking you to restore $824 million in outlays and $1.1 billion in budget authority. & FORD This would be almost completely offset by $700 million in savings if you agree to propose an 8 percent limit on the cost-of-living BERALD LIBRARY increase for Social Security and SSI program benefits, as I mentioned to you at our meeting today on Social Security. If you were to propose a limit of 7.5 percent, the $1 billion saving would more than offset these requested restorations. I strongly support your effort to maintain fiscal constraint in the Government's budget. When we submitted our budget on September 30, it was below the OMB outlay planning ceiling. Even with the restorations we are seeking (and even without the offset mentioned above), the Department's 1976 request has about the same impact on the 1976 budget deficit as contemplated in the OMB ceiling because inflation will bring us an extra $2.5 billion in revenues for the Social Security trust funds. In any event, we believe that the additional $824 million in outlays we are requesting will not significantly compromise your fiscal policy objectives if our proposed offset is adopted. The President 2 There are certain themes in the allowance which I believe move the Department's programs in the wrong direction and would convey a damaging message to Congress and the public. - Several- proposed budget cuts, principally in health and social services programs, will hit the poor and disadvantaged disproportionately. You and I have stated publicly that the poor should not be required to do more than their fair share in the fight against inflation. This commitment should not be abandoned. - Several of the reductions appear to be based on the assumption that States and localities can pay a larger share of program costs. Our latest forecast of State and local fiscal capacity indicates that the recent surpluses have been rapidly eroded by economic conditions. Decisions already made in the 1976 budget revision shift substantial costs to State and local governments. Therefore, proposals to increase cost sharing are more than likely - to result in Congressional inaction at best. FORD & LIBRAG -- The allowance for the Department's education programs suggests that the move toward the new Federalism has been reversed. Program consoli- dation can only be started under HR-69, if we meet a defined level of funding which the proposed budget would not reach. Also, funds would be shifted from broad formula grants to States and localities to project grants managed by Washington. - Two decisions-the proposal to ask for less than minimum funding to trigger one part of education consolidation and a decrease in Federal matching for social services--would destroy painstakingly developed compromises with Congress. These actions would be interpreted as bad faith, and Administration abandonment of prior commitments, and would make effective negotiation with the Congress less possible in the future. The President 3 -- The proposed budget would hold the Department's controllable health programs to the 1975 reduced level which is well below the 1975 appropriation bill signed this week. It is not only the markedly reduced program level that concerns us, but the many specific line item reductions that are proposed--more than 30 out of some 60 that make up our detailed estimates. This approach can be perceived by key members of our health agencies as a diminution of their judgement and responsibilities in professional areas. For that reason, we strongly urge that we have much greater flexibility in using the funds allocated to us. When we meet to discuss the 1976 allowance for HEW, I would like to discuss restorations in the following areas: Social Services (+$621 million in budget authority and outlays) The allowance assumes that we will seek legislation to reduce Federal matching for social services under Public Assistance from 75 percent to 65 percent in 1976 and to 50 percent in 1977. Moreover, the dollar allowance is based on the assumption that States will spend no more than they now do on social services programs. This would result in a 25 percent reduction in combined Federal and State spending on social services in 1976. While it can be agreed that the current program is not as effective as it should be, a reduction of this magnitude is bound to have a severe impact on the poor. We have fought hard for legislation reforming the social services program, and such a bill recently passed the House with Administration backing. If this bill is not passed at this session of Congress, all of our prior negotiations will be down the drain if we attempt to cut Federal matching next year. If it does pass, and an amendment is submitted next year, we will be accused of acting in bad faith and the proposal will very likely be ignored. Thus, I strongly recommend that you reconsider the decision to submit legislation reducing Federal matching for social services. Furthermore, as you know, there is a $2.5 billion ceiling on social services which simply means that if the States offer qualified services programs, they can draw the full amount. Therefore, all of our social services figures are estimates at best, and the full $2.5 billion may be required in any event. By the same token, we could arbitrarily lower our estimates FORD GERALD The President 4 of the total program level, as OMB has done and thus we would not need to add the full $621 million in outlays. Health Services for the Poor and Disadvantaged (+$189 million in BA, $83 million outlays) The allowance assumes that we will seek legislation to increase State and local matching for the Department's special health service programs, including Neighborhood Health Centers, Maternal and Child Health, Migrant Health, Family Planning, Alcoholism and Drug Abuse. In my view, this is not a feasible proposal and would result in an arbitrary reduction of ser- vices to people not now properly served by the Nation's health service delivery system. I believe that these programs should be held in place until Comprehensive Health Insurance is enacted and implemented. We have consistently maintained that insurance was a necessary and effective sub- stitute for these programs, not that they were ineffective or unnecessary in themselves. Improving the Health Care System (+82 million BA, $47 million outlays) The allowance would cut back the Department's efforts to change the health delivery system to make it more responsive to National needs. I am particularly concerned that the National Health Service Corps be permitted to attract more health workers to rural areas, that a reasonable base be established for health services research, that the initial effort to encourage the development of HMO's not be stopped before it really gets started, and that efforts to improve health statistics move forward. Better data will assist our development of a comprehensive health insurance program and the improvement of existing health delivery systems. Preventive Health (+$17 million BA, $11 million outlays) The allowance would halt the expansion of the Food and Drug Administration's consumer protection programs and reduce the Department's efforts to control venereal and other communicable diseases by 20 percent below current levels. We have made significant progress in these areas in recent years and we do not believe that this progress should be halted or reversed in 1976. Health Research (+$12 million BA, $9 million outlays) The allowance for health research would hold all efforts outside the Cancer Institute to the exact dollar level of the 1975 revised estimate. This is an implicit 10 to 15 percent reduction in program output. Because we believe that other health programs have a higher priority than research this year, we do not appeal this general result. However, we would like an additional $12 million to carry out the new research mandated by legislation in areas such as aging, diabetes, and sudden infant death. GERALD FORD LICKERY The President 5 Education Grants to States (+$109 million budget authority, $13 million in outlays) I'm asking you to restore proposed budget reductions in the education support services grant consolidation (+$40 million), formula grants for the education of the handicapped (+$25 million), and State student incentive grants (+$44 million). The present allowance for grants consolidation is below the amount needed to trigger consolidation and would require a legislative amendment to HR-69, which stands no chance of being accepted. The allowance for the handicapped would reduce current formula funding by 50 percent. The allowance for State student incentive grants would terminate a program which provides incentives to States to supplement Federal funds for student aid, the very direction which I believe we need to go in order to improve our student aid strategy. While I am not appealing the $530 million allowance for vocational education, I am afraid that we have little chance to achieve consoli- dation within that budget level, because we would need new legislation. Vocational Rehabilitation Grants (+$40 million budget authority, $32 million outlays) The allowance holds grants to States for vocational rehabilitation services to the 1975 level of $680 million. We believe that the full authorization of $720 million should be funded in 1976 because of the requirements of the 1973 act to increase services to the more severely disabled. Even at $720 million, the total number served in this program will decline due to this new requirement and inflation. Sup Secretary Minbaga GOOLD & FORD 1976 Budget Department of Health, Education, and Welfare and Special Action Office for Drug Abuse Prevention ($ in millions) 1975 Initial Presi- Presi- 1974 dential dential HEW SAO OMB Actual Level Decision Appeal Recom. Recom. National Institute BA 243 211** 211 222 306 213 on Drug Abuse (NIDA) 0 156 226 226 229 260 227 Special Action Office for Drug Abuse BA 51* 13 -- : 10 -- Prevention 0 21 45 9 9 14 9 Total BA 294 224 211 222 316 213 0 177 271 235 238 274 236 * $24 million lapsed ** $17 million of 1974 funds used in 1975 This paper addresses two issues: (1) the 1976 funding level for NIDA in HEW and (2) an extension of the Special Action Office for Drug Abuse Prevention beyond its statutory, June 30, 1975, termination date. Attachment A identifies the budget details of the issues. Initial Presidential Decisions 1976 NIDA Funding. Your initial decision on a 1976 funding level for NIDA was to hold it to the 1975 level. This decision reflected a policy of: -- Federal funding of 95,000 treatment slots at an average Federal share of 70% compared to an average of 80% in 1974; FORD is -- continuing the slot funding priority -- adopted in 1971 -- heroin addicts; CERALD -- limiting demonstration and prevention to current projects and terminating non- reimbursable, short-term contract training of counselors and other paraprofessionals; and 2 -- allowing $3 million (which represents roughly 10% of the annual NIDA research budget) for new research. These policies reflect as an appropriate Federal role the supplementing of State, local, and private funding for treat- ment, but require State, local and private sources to pick up a greater share of the federally-assisted treatment capacity costs. Currently, the Federal Government finances about half of the national treatment capacity. Your initial decision also recognizes that only 2/3 of the federally-funded slots are filled by the primary target group -- heroin addicts. Special Action Office Extension. We have not previously raised with you the issue of extending the Special Action Office because we understood there was agreement on terminating it in June as originally mandated by Congress. Dr. DuPont, Director of the Special Action Office, who, in October, proposed its termination on schedule, submitted a new budget request on December 11, 1974, proposing a four-year extension of the Office. Special Action Office Appeal NIDA Funding. Dr. DuPont -- who is also the Director of NIDA -- appeals both your initial decision and Secretary Weinberger's appeal level. He believes that your initial decision "seriously impairs drug abuse prevention functions" in HEW, particularly in light of recent evidence which he believes indicates that the heroin problem is again worsening. He believes that the Administration should seek an additional $50 million to support 21,000 additional slots, for a total of 116,000 slots and that $ 9 million more should be available for new drug abuse research. Dr. DuPont also believes that the Federal Government should take on a greater responsibility in the areas of treatment for marihuana, stimulants and depressants (polydrugs) and should mount larger training, public education, prevention, rehabil- itation activities and grants to States. HEW Appeal Secretary Weinberger has reviewed Dr. DuPont's request for an additional $95 million for NIDA above your initial determination of $211 million. The Secretary appeals for an add-back of only $11 million. Special Action Office Extension. Dr. DuPont believes that the Office has made a considerable contribution to the government's drug abuse prevention effort since its creation in 1972, and that 3 its legislatively scheduled termination on June 30, 1975, would severely damage the Administration's capability to effectively coordinate the Federal drug abuse prevention effort. Further, he is concerned that termination would signal a lowering of national priority at a time when the drug abuse problem appears to be increasing again. He proposes a four-year extension of the Special Action Office within the Executive Office of the President. OMB Recommendation FORD & LIBRARY GERALD NIDA Funding. We recommend that you reaffirm your initial decision on the NIDA funding level, with the exception of a $2 million increase to allow for follow-on costs in NIDA for transferred Special Action Office programs. Our recommendation reflects the fact that only 2/3 of all patients in HEW-supported treatment programs are heroin abusers. Moreover, NIDA treatment slot demand projections (see the graph at Attachment B) supplied by the Special Action Office indicate that of the 116,000 slots it requests, only 80,000 would be filled with heroin abusers; slots for this primary target group could be financed within the 95,000 level. Further, in addition to the HEW funded slots, there are approxi- mately 125,000 State and local slots of which only 75% were filled at the end of 1974. Thus, overall capacity appears adequate. The higher level of funding for non-heroin abusers and non-treatment activities proposed by Dr. DuPont would be a departure from previous priorities and the concept of a limited, targeted Federal role. Expansion of lower priority drug abuse activities duplicates ongoing programs elsewhere in HEW and in other agencies, e.g., research, education, and training. Special Action Office Extension. We recommend against extension of the Special Action Office. The Office was created to oversee and coordinate the rapid increase in the Federal support for drug treatment capacity; it did that job reasonably well. Treatment capacity is, how- ever, stabilizing. Moreover, virtually all civilian drug abuse programs are located in HEW and the major substantive policy decisions concerning drug abuse treatment have already been made. We recognize the possible need -- for political reasons, as well as to handle whatever coordination functions remain -- to con- tinue visible White House leadership of the drug abuse preven- tion program. There are three ways to meet this political need, in descending order of visibility: (1) a Special Assistant (or Advisor) to the President for Drug Abuse Prevention; (2) an Executive Director of a Domestic Council Committee on Drug Abuse; or (3) a Special Assistant for Drug Abuse Prevention to the Secretary of HEW. 4 Decision: NIDA Funding Approve Dr. DuPont's Appeal ($306 million) Approve HEW Appeal ($222 million) Approve OMB Recommendation ($213 million) Special Action Office Extension Approve Dr. DuPont's Recommendation (extending the separate Office for 4 years, requiring $10 million annually) Approve Alternative Options: (a) Special Assistant to the President (b) Executive Director of Domestic Council Committee (c) Special Assistant to the Secretary of HEW FORD & LIBRARY GERALD 1976 - .get Department of Health, Education, and Welfare and Special Action Office for Drug Abuse Prevention ($ in millions) 1976 1975 Initial 1974 Presidential Presidential HEW SAO OMB Actual Level Decision Appeal Recom. Recom. National Institute on Drug Abuse Research 37 32 32 32 41 32 Training 15 10 3 3 7 3 Community Projects: (152) (115) ** (124) (135) (194) (126) Treatment 133 99 ** 114 115 165 114 Demonstration 16 13 8 16 20 9 Education and Prevention 4 3 2 4 10 3 Grants to States 15 35 35 35 45 35 Management and Information 25 19 17 17 19 17 Subtotal, NIDA 243 211 211 222 306 213 Special Action Office for Drug Abuse Prevention GERALD LIBRAST R.FORD ? FORD Salaries and Expenses 5 3 : : 3 : Projects 46* 10 -- : 7 : Subtotal, SAO 51* 13 -- i 10 : Total 294 224 211 222 316 213 *$24 million lapsed **S17 million of 1974 funds -- 9095 SAO ESTIMATED DEMAND FOR NIDA/SAO DRUG ABUSE TREATMENT SLOTS Clients in Treatment 140,000 120,000 116,000 100,000 95,000 Demand for Polydrug Treatment 80,000 60,000 40,000 Demand for Heroin Treatment GERALD R.FORD R. FORD VIBRARY 20,000 0 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1974 1975 1976 Fiscal Years , 2 t 1976 Budget CONSUMER PRODUCT SAFETY COMMISSION ($ in millions) 1975 1976 1974 Presidential CPSC OMB Actual Decision Allowance Appeal Recom. BA/Obl. 28.8 35.0 35.6 49.2 35.6 0 18.7 29.7 35.1 41.4 36.1 Employment Ceiling 780 890 863 1,119 863 Allowance The allowance maintains CPSC at its 1975 Presidential request level of $35 million plus an additional $600,000 for mandatory cost increases. The allowance reflects CPSC's inability to: - specify how its past or future activities will reduce consumer product injuries, or - utilize fully and effectively its past funding. CPSC has spent excessively on office furnishings and com- puter services, for example, and let lapse 18% of its 1974 budget authority. CPSC Appeal Chairman Simpson's attached appeal--which has also been sent to eighteen Senators and Congressmen--protests that the allowance would "deal a devastating blow to CPSC and the cause of consumer health and safety." The same level in 1976 as in 1975 would "indicate to this Commission, to the Congress, and ultimately to the American people, at best, a crippling and, at worst, a virtual abandonment of this urgent and critical task. " Chairman Simpson maintains that "public criticism could be leveled not only at the Commission for its lack of regulatory performance but also at the Administration for apparent with- drawal of budget support needed to reduce public suffering and economic loss from unsafe products.' Chairman Simpson closes his appeal: FORD LIBRERY "In light of the apparent continuation of what I perceive to be an unexplainable discrimination against the Consumer Product Safety Commission--and more importantly, against consumers who are the ultimate victims of unsafe products-- I respectfully request that you reject OMB's budget recommendations and I request a personal meeting with you to discuss the future of this Commission." OMB Recommendation We recommend reaffirming the allowance of $35.6 million for 1976. The 1976 and 1975 levels represent a 24% increase over CPSC's actual 1974 program level. In 1976, all mandatory cost increases would be allowed in order to maintain the 1975 pro- gram level. None of the "program reductions" referred to in Chairman Simpson's letter would, in fact, be required. Chairman Simpson's appeal letter--much like the initial 1976 request and the CPSC staff justification for that request--does not specify what ways CPSC's requested funding level would impact on consumer safety or what deleterious effects would result from continuing the 1975 program and funding levels in 1976. GEBALD FORD LIBRARY PRODUCT U.S. CONSUMER PRODUCT SAFETY COMMISSION WASHINGTON, D.C. 20207 December 11, 1974 The President The White House Washington, D. C. 20500 Dear Mr. President: I am both stunned and dismayed at the 1976 budget allowance conveyed to me by your Office of Management and Budget. I was informed yesterday that OMB will recommend to you a budget level of $35.6 million and 862 positions. That level will deal a devastating blow to the Consumer Product Safety Com- mission and the cause of consumer health and safety. As Chairman of the sole Governmental agency responsible for protecting the American consumer from the unreasonable risk of injury associated with over 10,000 consumer products, I must inform you that a budget of $35.6 million would indicate to this Commission, to the Congress, and ultimately to the FORD American people, at best, a crippling and, at worst, a virtual abandonment of this urgent and critical task. My 1976 budget request of $49.8 million and 1,104 positions represents a fiscally responsible, independent judgment based upon an exhaustive and thorough analysis of the total resource requirements necessary to carry out the Congressionally mandated mission of this Commission. The action of the OMB in proposing an approximate one-third overall reduction in product safety programs, ignores that judgment and the mission which we are tasked to perform. It seems inconsistent to me that President Nixon and the Office of Management and Budget concurred in the 1975 appropri- ation request of $42.8 million for this Commission, and that now we are faced with the recommended level of $35.6 million for 1976 from the same staff at OMB which approved the higher 1975 level. -2- This reduction has come even in the face of dramatic infla- tionary forces, pay increases and annualization costs associated with the establishment of a new regulatory Commission. Upon the founding of this Commission, OMB, not the Commission, both formulated and approved a 1974 budget level of $30.9 million. This amount was supplemented by an additional $3.8 million trans- ferred by OMB from impounded Food and Drug Administration funds. Thus the proposed 1976 budget authority of $35.6 million--in terms of constant dollars=-represents a significant absolute program and budget reduction from even that first year appropriation. This Commission has made significant progress in establish- ing a balanced and integrated organization to protect the American consumer. I must point out, however, that each year there are still over 20,000,000 American men, women and, most tragically, children who are suddenly and without warning injured, disabled and killed by consumer products. The annual cost of such accidents was estimated at $5.5 billion in medical care, disability payments and lost productivity. A budget reduction of the magnitude proposed would not only substantially diminish any effort to address this national tragedy but would force the Commission to consider abandoning needed development of new mandatory product safety regulations in favor of a program restricted to the en- forcement of existing standards and reaction to emergencies that arise in the form of imminently hazardous products that have al- ready found their way into consumers' hands. FORD I clearly recognize your determination to control Federal expenditures as a means of combatting inflation, and I assure you that I wholeheartedly support that effort. Fiscal restraint always has been, and always will be, a prominent concern in all of my actions. However, it would be imprudent to reduce this program to save meager dollars which could accomplish considerably leveraged reductions in the costs associated with injuries to consumers. I am sure you recognize that every dollar cut from this agency's responsible estimate of the funds required to achieve a level of organizational integrity only delays the attack on a consumer safety problem that is not only real but sizeable. Further, a failure to appropriate the resources necessary to provide needed injury information, needed technical skills for understanding of the safety problems, and economic analyses capability to determine the most appropriate regulatory action -3- in response to a product hazard could predictably result in "regulatory over-kill." A regulatory Commission charged with enormous responsibilities and mandated authority, but not afforded the resources to properly carry out those tasks has two choices: (a) abandon a major portion of its mandated mission; (b) attempt to meet the problems with the concomitant possibility of imposing regulatory solutions based on incomplete data. In principle, I would renounce both of those alternatives. However, in all practicality, I could foresee the Commission forced into a pattern of regulatory operations incorporating both. I feel compelled to point out that public criticism could be leveled not only at the Commission for its lack of regulatory performance but also at the Administration for apparent withdrawal of budget support needed to reduce public suffering and economic loss from unsafe products. In the 1975 budget message to the Congress, President Nixon said, "To enable the Federal Government to meet emerging challenges more effectively, several new organizations have been created during my Administration One of the organizations identified by the President was the Consumer Product Safety Commission. SEALS FORD In view of this, I view the reduction imposed by OMB to be arbitrary and illogical, having been determined without cognizance of mission and programs and without regard to meeting the "emerging challenges" referred to by the President. I subscribe to the words of Theodore Roosevelt: "The object of government is the welfare of the people." In this particular instance I believe the welfare of the American people is best served by providing the minimal resources requested by the Con- sumer Product Safety Commission to fulfill its mission. In light of the apparent continuation of what I perceive to be an unexplainable discrimination against the Consumer Product Safety Commission-and more importantly, against consumers who are -4- the ultimate victims of unsafe products--I respectfully request that you reject OMB's budget recommendations and I request a personal meeting with you to discuss the future of this Com- mission. Respectfully, Richard O. Simpson Richard O. Simpson Chairman CC: Honorable James O. Eastland Honorable James L. McClellan Honorable Milton R. Young Honorable Gale W. McGee Honorable Hiram L. Fong Honorable Warren G. Magnuson Honorable Norris Cotton Honorable Frank E. Moss Honorable Marlow W. Cook Honorable Carl Albert Honorable George H. Mahon Honorable Elford A. Cederberg Honorable Jamie L. Whitten Honorable Mark Andrews Honorable Harley O. Staggers Honorable Samuel L. Devine Honorable John E. Moss Honorable James T. Broyhill FORD & LIBRARY GERALD FEDERAL MEDIATION AND CONCILIATION SERVICE (FMCS) New authority requires the Service to mediate disputes in the private health care industry and to convene fact-finding boards of inquiry. OMB recommended against a FY 1975 Supplemental and FY 76 increases for mediation on the grounds that present resources could be reprogrammed to meet the new mandatory requirements. The OMB allowance provided for additional funds to be appropriated in FY 1976 as a contingency solely for the boards of inquiry. FMCS believes that the proposed program level will result in the agency handling the health care cases at the expense of other crucial mediation cases, and that curtailment of such services would further aggravate the economic stability of the Nation. OMB recommends handling the mandatory health care cases by curtailing discretionary work in the area of intrastate cases, disputes involving small numbers of workers, and technical assistance in labor-management relations. Much of this work could be handled by State mediation agencies and the Department of Labor (technical services). Budget Full-time authority Outlays permanent (in thousands of dollars) employment 1974 actual 11,895 11,783 444 1975 agency request 18,500 17,794 622 1975 OMB recommendation 15,945 15,737 499 575 1976 agency request 23,340 22,540 675 1976 OMB recommendation 16,950 16,356 499 Effect of OMB recommendation on agency request -6,390 -6,184 Transition period 4,377 3,630 499 1977 estimate 16,950 16,950 499 GEBALO FORD FEDERAL MEDIATION AND CONCILIATION SERVICE UNITED STATES GOVERNMENT WASHINGTON, D.C. 20427 December 13, 1974 OFFICE OF THE DIRECTOR Mr. Paul H. O'Neill Associate Director for Human GERALD FORD and Community Affairs Office of Management and Budget Room 260, Executive Office Building Washington, D. C. 20503 Dear Mr. O'Neill: The Federal Mediation and Conciliation Service was advised verbally on December 11 that the fiscal year 1975 Supplemental Budget request, in support of the health care legislation authorized by the Congress under Public Law 93-360, effective August 25, 1974, has been disallowed by OMB and that any additional positions and funds required to carry out the mandatory mediation efforts under this law should be repro- grammed within the existing appropriation available for fiscal year 1975. Of equal significance is the constraint imposed by OMB on the fiscal year 1976 Budget request. The allowance proposed would provide funding of Health Care Boards of In- quiry only, and restrict our mediation program to the current fiscal year level. This action will force our agency to fur- ther reduce essential mediation assistance to other private and public segments of the labor-management community in order to provide such service to the health care industry. For us to provide service to one segment of the economy at the expense of others would have an extremely deleterious effect on our ability to further labor-management relations in the interest of industrial peace. It is therefore critical that the decision of the OMB to disallow the fiscal year 1975 Supplemental request and to severely reduce the fiscal year 1976 estimate be re- considered. The elimination of the fiscal year 1975 Supple- mental Budget request will curtail vital mediation services to all parts of the private and public sectors of the econ- omy in every state. Furthermore, the fiscal year 1975 Budget, - 2 - as presented to the Congress, did not contemplate use of personnel and funds for the new health care legislation. However, with the passage of this legislation it became mandatory for the Service to provide mediation to each health care case. This is draining our manpower resources considerably beyond our capability and is forcing us into deficiency spending during the current year. The private health care industry embraces more than 4,000 hospitals, some 18,000 nursing homes, and 2,000 other health care institutions. Combined, they employ some 2.3 million workers. Union activity among these workers is accelerating at a truly hectic pace. Public Law 93-360, for the first time since passage of the Railway Labor Act in 1926, makes mediation mandatory in this major segment of the Nation's private economy. The size and diversity of the health care indus- try, combined with the fact that FMCS mediators must respond to all contract negotiation impasses, give the Service no alternative but to seek substantial assistance to meet its new statutory obligation. The Service conservatively estimated that at least 750 mandatory health care mediation cases would be GERALD FORD VIBRARY handled in the 10 months of fiscal year 1975. That this projection was low is borne out by the fact that our health care caseload for the first three-month period stood at 417. These cases, of course, are in addition to the regular dis- pute mediation caseload of 8,809 cases closed in the past five months--an 18.7 percent increase over the same period of fiscal year 1974. Because of the action deadlines spec- ified in Public Law 93-360 the mediator, once involved in a health care case, is obligated to devote full time, and considerably more travel, to that case. This factor, cou- pled with the geographic dispersion of health care insti- tutions, caused the Service to request additional resources to provide the minimum essential mediation and technical assistance to labor and management. If the Service must absorb the workload for the health care industry within its present resources in fiscal year 1975, we will be forced to begin curtailing essential mediation services to labor and management in other sectors of the economy. It is estimated that the Service would not be able to adequately handle some 3,000 labor-management disputes during the balance of fiscal year 1975 within the present manpower resources. It is my firm belief that cur- tailment of such services would further aggravate the econ- omic stability of the Nation. - 3 - Of equal significance are the contraints imposed by OMB on our fiscal year 1976 Budget request. The allow- ance proposed will restrict our agency to the current fiscal year budget level, and provides no accommodation for the in- creased activity in the health care industry, where we expect to be involved in at least 1,000 active cases in fiscal year 1976. Since no funds have been appropriated for fiscal year 1975 to service health care cases under the new legislation, this action will place us in an impossible situation. As a result, we see no way in which this agency can handle health care cases except at the expense of other crucial mediation cases. For the reasons stated above and the multitude of reasons previously provided to your staff, it is imperative that reconsideration be given to a supplemental appropriation for fiscal year 1975 for the additional 123 positions and $2,550,000, and that the fiscal year 1976 budget level in- clude a total of 675 positions and funds in the amount of $23,340,000. Because of the emergency nature of this re- quest, it is critical that favorable action be taken to re- store these estimates to the levels requested. Sincerely, National Director GERALO RALO LYVUSIT FORD NATIONAL CAPITAL PLANNING COMMISSION Comments OMB recommendation would hold program to FY '75 level. : Agency will not appeal. Budget Full-time authority Outlays permanent (in thousands of dollars) employment 1974 actual 1,559 1,486 64 1975 current estimate 1,777 1,842 64 1976 agency request 2,145 2,145 64 1976 OMB recommendation. 1,895 1,895 64 Effect of OMB recom- mendation on agency request -250 -250 Transition period 424 424 64 1977 estimate 1,895 1,895 64 LISRART & BERALD National Foundation on the Arts and the Humanities ($ in thousands) 190 1975 1976 1974 Budg. Approp. Pres. Agc. OMB Agency OMB Actual Req. Level Decision Req. Allow. Appeal Recom. BA 131 195 173 173 297 185 200 185 BO 96 164 164 156 239 175 196 175 Background The Foundation, in its FY 1976 submission, requested $296.8 million, an increase of $123.8 million above the FY 1975 appro- priation amount of $173 million. This represents an increase in FY 1976 funding of more than 70% above that of FY 1975. The FY 1976 request also represents full funding of the Foundation's authorized level. The Foundation was notified last February that its planning level for 1976 was $185 million. Since FY 1970, the Foundation's request levels have increased by a factor of nearly 10, from $20 million in FY 1970 to $195 million requested in FY 1975. The nearly 50% increase requested in the 1975 Budget was based, in large part, on the desire to allow the Foundation to provide major support for the Bicentennial celebration. The Foundation sees past growth as a logical premise upon which to build to an even greater Federal role in these areas. The Foundation's long range projections bear this out: Foundation's Long Range Projections ($ in millions) 1970 1971 1972 1973 1974 1975 1976 TR QTR 1977 1978 1979 1980 BA 20 37 69 89 131 173 297 106 399 470 563 678 BO 15 29 44 67 96 156 239 56 369 439 513 618 GERALD FORD 2 Issues There are only two basic issues to be resolved in your decisions on this agency's budget. The agency position and the OMB recommendation on each issue are set out below together with the strongest arguments for each. We have attached a more exhaustive OMB analysis at Tab A and the Foundation's appeal letter at Tab B. Issue No. 1: Should we continue, in the FY 1976 Budget, the very large growth rates in Federal support of recent years? Agency Appeal: In response to the OMB allowance, the agency has reduced their initial 1976 Budget request of $297 million by $97 million to a level of $200 million in their appeal. This figure is still $27 million above the FY 1975 amount and $15 million above the OMB allowance. They maintain: "OMB is recommending $185 million. This amount is almost exactly equal to the Foundation's current operating level. Since in fact we are in a growth industry, so to speak, this would mean a distinctly backward programmatic step. At the very minimum we urge you to consider recommending $200 million for the 200th anniversary year of the Nation. This would give people a figure that not only sounds good, it is good, it is a Bicentennial goal in which you could take pride and make an impact. The figure happens to be about the amount ($195 million) the agencies requested from Congress in Fiscal 1975. It represents only a 15.6% increase over the current year Budget Authority; and $15 million would be in private money. It is $100 million below the authorized ceil- ing for 1976; indeed, $27 million below the 1975 authorized ceiling." OMB Recommendation: Approve an FY 1976 budget request of $185 million in Budget Authority because: FORD 3 -- This level provides a 7% increase (+$12 million) above the 1975 appropriation in a year when many social and economic assistance programs are being held constant or reduced. -- This substantial increase indicates continued emphasis on the Foundation's unique role in the Bicentennial and continued Administration support for the arts and humanities. -- Continuing to increase Federal support at the rapid rate of the past few years would threaten to make the Federal government the funding source of first resort -- especially in a time when foundations and State and local governments are inclined to reduce their support. The Federal government has become the largest single source of support for the arts and humanities. -- This is a good time to "take a breather" and to focus and delimit the Federal role. This needed reexamina- tion of the Federal role cannot be done well during a period of very rapid expansion. There is currently no limit to what the Endowments see as the principle Federal role either in terms of: (a) program areas; (b) functions (i.e. production of art and knowledge vs. its widest dissemination or operational and insti- tutional support vs. innovation and stimulation) ; or, (c) share of total support. Decision: FORD Approve agency appeal ($200 million) Approve OMB recommendation ($185 million) Issue No. 2: Should the 1976 Budget project a reduction in program/budget levels for fiscal years 1977 through 1980 to recognize completion of the Bicentennial support mission in 1976? 4 Agency Appeal: "OMB recommends an out-year budget authority of $145 million for all four years, or a $40 million cut below its recommendation for 1976. It is particularly crucial that you focus on this figure at the present time because you will be required to transmit re-authorization legislation to the Hill in April. Whatever figure is in the budget, will be in your re-authorization request. The OMB figure means that you would be asking Congress for authorization funding levels at HALF the current authorization level to which you gave your full support and to which your leadership so contributed in the Congress. ($300 million - OMB insert) OMB's rationale is that since many of the agency's activ- ities are contributing to the Bicentennial, we should drop them forthwith -- i.e. programs like folk arts, crafts, preserving our cultural heritage in our nation's museums, improving federal design, major film series on America's history, etcetera. These agencies view these activities as ongoing, so does the Congress, and until OMB's action, we had thought the Administration did, too! It has been GERALD FORD LIBRARY repeatedly emphasized to us by the Congress -- and our advisory councils, that we should in no way alter our poli- cies to accommodate Bicentennial programs having one-time or temporary impact on the Nation. It was made clear to us that we should consider the Bicentennial not as a peak from which Federal support to the arts and humanities would descend, but a step from which it would continue forward to the perma- nent betterment of our Nation. At the very minimum, we recommend an out-year figure of $300 million. This is the PRESENT AUTHORIZED CEILING for 1976! This means you would be requesting Congress simply to extend the presently authorized level for four years. Within that ceiling, you could then later determine the appropriation level you wished to request. (If you wish to scale the out- year projection to $300 million by 1980, the four-year figures would be 225, 250, 275, 300.) 5 While the $300 million is substantially below what is needed, or what in normal times we would urge you to consider, it is at least not a REDUCTION, which would bring criticism from all sides. We cannot think of many who would applaud." OMB Recommendation: We recommend an FYs 1977-80 Budget Authority estimate of $145 million because: -- Bicentennially related activities amount to at least $40 million of the 1976 Budget Authority at the $185 million level. There is no Administration commitment to continue to fund these activities at the expanded level after the Bicentennial celebration and their cessation should result in a reduction in the budget estimates. -- The growth of the Foundation in FY 1974 and FY 1975 was based, in large part, on allowing the Foundation to perform a significant Bicentennial role. While the Foundation maintains that these activities would have been funded regardless as part of their regular program of grants, that is not the OMB understanding of the thinking that resulted in the large growth in budget requests. -- The issue is more substantial than whether the Bicen- tennial role was the determining factor in the present high levels. The central issue is the future direction and scope of this agency. The Foundation believes that its mandate is "open-ended." It believes that as its constituency increases that its funding must increase proportionately. If this rationale were to prevail, it would result in funding (by the Foundation's own projection) of nearly $700 million by FY 1980. This would be more than half of the current estimate of all private donations in support of the arts alone. The OMB recommendation would indicate a decision to delimit the Federal role and to control the Foundation's growth and permit stable funding patterns, while con- tinuing to be the largest single source of support for cultural activities in the nation. FORD à BALD 6 Decision: Approve agency recommendation (Project $300 million for each of the years 1977 through 1980 and seek authorizing legislation at this level.) Approve OMB recommendation (Project $145 million a year and seek authorizing legisla- tion at this level.) L & FORD GERALD T A B A OCT 11 1974 Discussion of Recommendations The National Foundation on the Arts and the Humanities (NFAH) was established by the Congress in 1965. It is an independent agency that contains two separate Endow- ments, one for the Arts and another for the Humanities. Each of these Endowments is headed by a Chairman appointed by the President and each is advised by a National Council, also appointed by the President. Administrative support is provided to each Endowment by a shared staff. The principal effort of the Endowments is to provide Federal support for the creation and dissemination of art and humanistic knowledge and activities through grants to practitioners and various institutions. FORD Foundation Growth GERALD The President's FY 1975 Budget requested $195 million for the Foundation. This represented an increase of some $63 million, an increase of nearly 50% above the FY 1974 level of $132 million. The Congress, in its action on the President's request of $195 million, provided $173 million which represents an increase of more than $40 million above the FY 1974 level, an increase of some 30%. The Foundation, in its FY 1976 submission, is requesting $296.8 million, an increase of $123.8 million above the FY 1975 appropriation amount of $173 million. This repre- sents an increase in FY 1976 funding of more than 70% above that of FY 1975. The FY 1976 request also represents full funding of the Foundation's authorized level. Since FY 1970, the Foundation's request levels have increased by a factor of more than 10, from $19 million in FY 1970 to $195 million requested in FY 1975. 2 Private Support The Foundation estimates donations of private funds and support through non-Federal sources as follows: Arts: They conservatively estimate that $1.2 billion was provided in 1973 in private contributions to the Arts. In addition, they estimate $150 million in' State and local support. Humanities: They estimate that a total of $3.4 billion will be provided in private support for humanistic activity. In addition, $1.8 billion will be provided by State and local authorities. (This estimate includes the support of such activities as: universities, libraries, etc.) The Endowment believes this is a comparable figure with their own funding level, since the broad range of activities supported is similar to their own. The Endowments believe that much of their support evokes matching support by private, State and local agencies. However, they have no definite estimates of the leverage effect. The Arts Endowment does cite examples such as the increase in State arts agencies' size and numbers as being Federally related. Moreover, they cite new qualitative support for the arts from the U. S. Conference of Mayors. They further cite the overwhelming number of individual contributions that are given to the Endowment. (Some 19,165 out of 19,590 are individual donations totaling $1.9 million). The Humanities Endowment, while not citing any major specif- ics, does indicate that they believe non-Federal support is tied to quantum increases in Federal support. However, in the case of both Endowments there is no evidence which demonstrates a causal relationship between increases in Federal funding and increases in private, State and local FORD & 3 support. There is only an assertion of causality based upon the personal experience and judgments of the Chair- men. Appropriate Federal Role and Level of Support The Division believes that it is time to re-examine: (a) the appropriate Federal role; and (b) what is a reasonable level for Federal financing in these fields. The Foundation, in its initial authorizing legislation (P. L. 89-209), received the following mandate, to develop and promote a broadly conceived national policy of support for the humanities and the arts in the United States " This directive has resulted in programs which are very diverse in content and in a dual role of the pro- duction and dissemination of knowledge and art by both endowments. Moreover, this mandate has resulted in a sense of "mission" on the part of the Foundation that sees past growth as a logical premise upon which to build to an even greater Federal role in these areas. The Foundation's long range projections bear this out: Foundation's Long Range Projections ($ in millions) 1975 1976 TR QTR 1977 1978 1979 1980 Budget Authority 173 297 106 399 470 563 678 Outlays 164 239 56 369 439 513 618 Both Endowments deny that there is a danger that the Federal government will become the dominant patron of the Arts and Humanities since the Federal share is far less than the FORD & GERALD 4 total support from private agencies and State and local governments. They state that Foundation money is highly catalytic and results in increased non-Federal support. However, they agree that the Federal share is now the largest single source of support for these areas. In requesting a statement of the mission and objectives of each Endowment, including the limits or bounds of the Federal role in terms of the relationship of these objec- tives to State, local and private institutions, the responses of both Endowments brought forward the following themes: -- Continued growth is a "given" in the minds of both Endowments. The justification for this continued expansion is tied to a general concept of "need." However, in the materials submitted and in con- versations with Foundation staff, a definition of "need" has not been developed. In fact there is no limit to what the Chairmen of the Endowments see as the Federal role except the operational capacity limits of the grantees and contractors. -- The Arts Endowment continues to view itself, even within its expanded role, as a catalyst evoking great amounts of non-Federal funds and remaining a "junior partner" in funding. (However, as noted, the Endowment is the largest, single source of funding in the U. S.). The Humanities Endowment's response is colored with the tone of its being a principal source of support for the Humanities and not placing much emphasis on non-Federal increases. In so doing, the Endowment cites as a possible objective the almost $700* million funding level of the National Science Foundation. GERALD R. FORD 5 -- Finally, neither Endowment foresees a narrowing of program horizons. Thus, support for such diverse activities as dance touring, tapestry exhibitions, folk art, archeology, chamber music, television dramas, short films, research grants and curriculum development are envisioned and at expanded levels. There is no suggestion towards a selective funding process to eliminate support of certain programs or areas of activity. The Division believes that this ill-defined "need" concept is not useful for a well-reasoned determina- tion of the need and the appropriate Federal role. The need for and role of the Endowments can be usefully analyzed by considering issues such as: production vs dissemination; Bicentennial support; financial management expertise of artistic and cúltural institutions; salary structures, etc. Production VS. Dissemination In FY 1975 and FY 1976, the Arts Endowment estimates that 22% of its funds will be going to foster the arts and 78% to the dissemination thereof. This means that in FY 1975, $64.2 million will fund dissem- ination activities and $18.1 million will be used for production. In FY 1976, the figures are $30.5 million for production and $108.0 million for dissemination. The Endowment for the Humanities estimates that approxi- mately 82% of their FY 1975 funds will be devoted to dissemination of humanistic knowledge or projects. This amounts to $65.8 million. The remainder, $14.4 million, or 18% of the total, will be devoted to the production of this knowledge or these projects. In their FY 1976 re- quest, approximately 79% will be used for dissemination ($109.4 million) and 21% for production ($29.1 million). FORD GERALD LIBRARY 6 We believe this ratio of approximately 4 to 1 for both Endowments is desirable and reflects adherence to OMB direction. However, we must also point out that the definitions of production and dissemination are imprecise and the "gray area" is a large one. Bicentennial Program Support Based on FY 1974 Budget decisions and White House direction, the Foundation has mounted a substantial Bicentennially related program. Here are estimated total funding levels for each Endowment and that portion proposed specifically for Bicentennially-related activities: ($ in millions) FY 1974 FY 1975 FY 1976 Total Bicen. Total 1 Bicen. Total Bicen. Arts 64.5 13.1 82.3 19.8 138.5 36.0 2 Humanities 62.5 11.0 80.3 23.0 138.5 32.0 Discussions with the Foundation relating to both the FY 1974 and FY 1975 budget levels indicated the position of the Foundation that "start-up costs" for Bicentennially related activities, of necessity, required funding beginning as early as FY 1974 for the Bicentennial celebration in 1976. With the "lead time" requirement in mind, funding was provided for the FYs 1974 and 1975. It was envisioned that funding levels would begin to decline thereafter. However, the Foundation now maintains that short-term funding for the Bicentennial is also required due to the lateness in starting the Bicentennial effort. Includes private donations. Includes the Endowment's entire State-based program at $13.2 million which they maintain will be entirely Bicentennial. FORD LIBRARY is CERALD 7 Budget Perspectives Each Endowment was requested by OMB staff to indicate those activities which "could not be either undertaken or continued" under the OMB FY 1976 planning amount of $185 million for the entire Foundation. (This figure is in comparison with an FY 1975 request level of $195 million and a Congressional appropriation level of $173 million). It should be noted that the reduction of $10 million in the FY 1976 planning target below the FY 1975 request amount of $195 million was based on the White House/OMB decision in the 1975 Budget process that FY 1975 was to be the peak year for Bicentennial activities and that funding would be reduced thereafter. The response of both Endowments listed the following programs that would be either discontinued or not undertaken under the revised amount (not in priority order). Arts: 1. Increased monies in all three categories to account for inflationary factors or necessary growth to bring a program up to an effective level. 2. Substantial strengthening of the basic cultural resources of the country. 3. Increased monies to bring the arts to more people through the State arts agencies via the basic State agency grants, artists-in-schools, dance and theatre touring, residency and sponsor development, special State grants, strengthening community services, professional program development for States and regional organizations, theatre and expansion arts in State agencies. 4. Increased or new funding for creative development and preservation of our heritage, including: enhancement of FORD LIGRARY is 8 America's indigenous arts, museum renovation, architecture preservation, special programming for music, public media and dance for bicentennial purposes and for "City Futures," which is part of the architecture bicentennial program in 1976. 5. Added monies for bicentennial related programs in Expansion Arts, programming in the arts on television, "City Spirit," special music programs, wider availability of muse- ums, cultural facilities design assistance, Special Projects, works of art in public places, arts centers and festivals -- almost all of these programs are bicentennially oriented either directly or because of the time frame in which they occur. 6. Incentive support for professional cultural insti- tutions directly related to increased or totally new sources of support and programmatically directed to broader public participation. Humanities: 1. Reduce the proposed amount available for the public programs that go to support the State based activities, media programs and museum/historical society grants. 2. Reduce the proposed amount available to fund activ- ities in the area of curriculum reform for higher, elementary and secondary education. 3. Continue the bulk of the fellowship program at the FY 1975 level. There would be a reduction in the area of professional teaching/study fellowships. 4. Provide for no expansion in the research area. 5. Reduce the level provided for other minor programs. FOR 9 There is no identification in priority ranking of what would be eliminated from their program proposal, if it is held essentially to the currently planned level of support. Rather, they have identified across-the-board decreases. Both Endowments refused to identify a firm list in priority order. Administrative Support As noted previously, the Foundation has grown by a factor of more than 10 in its request levels to the Congress. In terms of staffing and support, the increases :have been proportionate to the growth. The increase in workload is attributable, in part, to the following causes: -- Applications: As the Foundation grew, the number of individuals and institutions seeking assistance has grown concommitantly. The following indicates the FY 1974 actual and anticipated FY 1975 and FY 1976 application levels: 1974 Actual 1975 Est. 1976 Est. Applications Awards Applications Applications Humanities 6,165 1,184 7,500 9,000 Arts 14,167 2,957 19,500 22,000 Each of these applications, regardless of amount or scope, requires review by a panel of experts and staff attention. Naturally the amount and detail of this review will vary according to type of grant. However, each application requires attention. This volume could only be controlled if the Endowments began to focus their lines of activity and requests to proposals on priority fields. FORD SERALOR 10 -- Technical Assistance and Travel: The Endowments, at the direction of their respective Councils, are involved in the concept of technical assistance and directed activities. This necessitates increased amount of administrative support. -- Moving and Space: At present the Foundation is in three separate buildings. This has necessitated moves that have resulted in renovation costs, moving costs, rent fluctuations, etc. These, and other factors, have resulted in a Foundation request of some 320 additional full-time permanent positions. (A comparable 320 would also be added to the total amount). This represents an increase of 82% above the FY 1975 full- time permanent ceiling of 387 positions. These increases in personnel are coupled with a $9 million or 86% increase in administrative funding. Issues 1. Level of funding for the Foundation in FY 1976. 2. Amount of funding, within the budget totals, that will be provided for Bicentennial activities. 3. The nature and type of administrative support. Issue #1: Level of funding for the Foundation in FY 1976. Option #1: Provide funding at the FY 1976 planning figure of $185 million. This will provide an increase of $5 million in gifts and matching for the Arts Endowment and $7 million in gifts and matching for the Humanities Endowment and bring them on an equal FY 1976 request level of $87.25 million each, thereby equalizing unequal FY 1975 levels for each Endowment. FORD GERALD RALD 11 Discussion: This amount, which is $10 million below the FY 1975 request of $195 million, is $12 million above the FY 1975 appropriation level of $173 million. Pro: -- Provides funding at a level that is currently contained in the FY 1976 budget totals. -- Provides maximum opportunity for strengthening managerial and administrative functions by pre- cluding large funding growth. -- Keeps the President's FY 1976 request within a desirable total, while also providing a continua- tion of a very sizeable level of support. Con: -- Raises a question, based on past growth pattern, of a continued Presidential commitment to expansion, given Congressional reductions in FY 1975. -- Provides an FY 1976 funding request level below that of the original FY 1975 request. Option #2: Provide funding at the FY 1975 original request level of $195 million. Pro: -- Restates a continued Presidential commitment to expansion in this area. -- Increases funding levels at a time of increases in costs to cultural institutions. -- Provides a moderate increase for administration that would aid in the administrative consolidation that is necessary. FORU GERALD 12 Con: --- Brings funding level above that contained in the FY 1976 planning amounts. -- Provides continued Bicentennial support beyond the "peak" funding year. Option #3: Allow for a continuation of past growth pattern by providing the requested amount of $296.8 million or the agency "fall-back" amount of $274.1 million. Pro: -- Continues present trend of strong support and a steep rate of growth in Administration requests. -- Provides even more support for Bicentennially related activities. Con: -- Indicates no limit to the Federal role in direct support of these fields. -- Directly contradicts Congressional conservatism on this program. -- May lead to a Federal role which pre-empts or dominates support of these areas. -- Certainly increases the possibility of Federal support simply "buying up" what would have received State/local funds, especially in the current retrençhment psychology now prevalent among foundations. -- Continues a growth rate which threatens the capability to maintain sound administrative and management control. FORD GENALD 13 Division recommendation: Option #1. Issue #2: Amount of funding, within the budget totals, that will be provided for Bicentennial activities. Option #1: Limit any increases, above the FY 1975 appro- priation amount of $173 million up to the FY 1976 planning amount of $185 million, to Bicentennial, activities only. Pro: -- Limits the non-Bicentennial program to present levels of support but maintains the Administration's commitment to strong support for the Bicentennial, even through FY 1976 and into FY 1977. -- Under the severe constraints of the FY 1976 budget, increases for the Bicentennial should take priority in this fiscal year with some portion of the slack available for non-Bicentennial growth as the Bicentennial program phases out. Con: -- This would effectively be a policy of no growth for the non-Bicentennial activities of the Foundation for FY 1976 and could be interpreted as a reduction in the Administration's commitment to the field, based on past growth patterns. Option #2: Provide program and funding increases for both Bicentennial and non-Bicentennial activities in accordance with the present mix. Pro: --- Avoids criticism of abandoning the commitment to the basic program and restates a commitment to the Bicentennial. FORD & LIBRARY GERALD 14 -- Maintains the Administration's commitment to the Bicentennial but as a share of the Foundation's budget. Con: -- Constrains Bicentennial support to only part of the Foundation's increase. Option #3: Provide funding at the FY 1976 planning figure of $185 million, but the increase of $12 million above the FY 1975 appropriation will be for non-Bicentennial activities only. Pro: -- Makes "peak" funding year for the Bicentennial during FY 1975. Restates commitment to growth of the basic program. Con: -- Reduces support for the Bicentennial during FY 1976. Division recommendation: Option #3. Issue #3: The nature and level of administrative support. Option #1: Provide no increase in either personnel ceilings or in administrative funds in accord with the planning budget. Pro: -- In accord with a moderate budget, personnel and administrative costs should be constrained. -- Requires the Foundation to focus on its current administrative activities and reduce where necessary. FORD is GERALD LIBRAR 15 Con: --- Does not provide for additional staff for anticipated increase in workload. Option #2: Provide an increase in full-time permanent and total positions of 320 (above a base of 387 and 557, respectively) bringing these ceilings tó 707 FTP and 877 total. This is in accord with the Foundation's requested level of $296.8 million. Pro: -- Will provide adequate staff to program and manage- ment increases the proposed funding level entails. Con: -- Will provide precipitous growth in staff which would strain the Foundation's absorption powers greatly. Division recommendation: We recommend no increase in administrative support for the Foundation. We believe that there is existing latitude with personnel ceilings and administrative support funds to allow the Foundation to accomplish its mission. Moreover, the President's desire to curb Federal personnel ceilings further mandates this position. Finally, we recommend that the following directions be given to the Foundation: -- As soon as possible, the Foundation should locate within one building in order to consolidate opera- tions and cut operating costs. FORD LIBRARY 16 --- Travel policies should be reexamined in the light of the President's recent initiatives to cut Federal spending and suitable reductions taken. Approved Prepared by by (Examiner) (Program Division : John Lively Chief) : C. William Fischer FORM & LIDRAR, T A B B NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES NATIONAL WASHINGTON, D.C. 20506 ON THE ARTS AND THE December 13, 1974 MEMORANDUM FOR THE PRESIDENT FROM: Namy Hann Ramed Bean Nancy Hanks, Chairman, Ronald Berman, Chairman, National Endowment National Endowment for the Arts for the Humanities SUBJECT: OMB Recommendations on the Arts and Humanities Summary 1. In the out-years, we believe the OMB recommendations are going in the opposite direction from your own policy (OMB recommends a reduction of $40 million from its 1976 level!). 2. In Fiscal 1976, the OMB recommendations are going in a backward direction (OMB recommends some $10 million below the Administration's request for funds last year! !). None of the recommendations would maintain your leadership position in this field; to the contrary, particularly the proposal on the out-years, would simply and honestly be in- terpreted as a reversal of your own policy and a radical change in federal policy toward the Arts and Humanities. is 2 Out-Years 1977-80 OMB recommends an out-year budget authority of $145 million for all four years, or a $40 million cut below its recommendation for 1976. It is particularly crucial that you focus on this figure at the present time because you will be required to transmit re-authorization legislation to the Hill in April. Whatever figure is in the budget, will be in your re-authorization request. The OMB figure means that you would be asking Congress for authorization funding levels at HALF the current authorization level to which you gave your full support and to which your leader- ship so contributed in the Congress. OMB's rationale is that since many of the agency's activities are contributing to the Bicentennial, we should drop them forthwith -- i.e. programs like folk arts, crafts, preserving our cultural heritage in our nation's museums, improving federal design, major film series on America's history, etcetera. These agencies view these activities as ongoing, so does the Congress, * and until OMB's action, we had thought the Administration did, too! It has been re- peatedly emphasized to us by the Congress -- and our advisory Councils, that we should in no way alter our policies to accommodate Bicentennial programs having one-time or temporary impact on the Nation. It was made clear to us that we should consider the Bicentennial not as a peak from which Federal support to the arts and humanities would descend, but a step from which it would continue forward to the permanent better- ment of our Nation. At the very minimum, we recommend an out-year figure of $300 million. This is the PRESENT AUTHORIZED CEILING for 1976! This means you would be requesting Congress simply to extend the presently authorized level for four years. Within that ceiling, you could then later determine the appropria- tion level you wished to request. (If you wish to scale the out-year projection to $300 million by 1980, the four-year figures would be 225, 250, 275, 300.) While the $300 million is substantially below what is needed, or what in normal times we would urge you to consider, it is at least not a REDUCTION, which would bring criticism from all sides. We cannot think of many who would applaud. * See attached statement. FORD GERALD -- 3 1976 - Budget Authority OMB is recommending $185 million. This amount is almost exactly equal to the Foundation's current operating level. Since in fact we are in a growth industry, so to speak, this would mean a distinctly backward programmatic step. At the very minimum we urge you to consider recommending $200 million for the 200th anniversary year of the Nation. This would give people a figure that not only sounds good, it is good, it is a Bicentennial goal in which you could take pride and make an impact. The figure happens to be about the amount ($195 million) the agencies requested from Congress in Fiscal 1975. It represents only a 15.6% increase over the current year budget authority; and $15 million would be in private money. It is $100 million below the authorized ceil- ing for 1976; indeed, $27 million below the 1975 authorized ceiling. 1976 - Outlays The OMB has recommended an FY 1976 outlay figure of $175 million. Given a $185 million budget authority, our calculations indicate that the outlay figure is in error. Our experience has proven that we would require a figure of $180.8 million. We recommend that OMB take into account the agencies' past experience and judgment on the outlay ceiling needed. Please note: if your problem is still with federal cash outlays, we have determined a way to maintain the "Treasury Matching Fund" concept while insuring that the private monies involved are not counted as federal cash outlay. This would also have the advantage of curing many administrative headaches as well as reducing administrative costs. Basically, it could be accomplished by asking for all or almost all federal monies in "definite" appropriations. However, a certain amount of those funds would be used like "Treasury Fund" grants, with donors in the private sector simply notifying us of the gifts they make directly to our grantees. We have reason to believe Congress would be willing to consider such an arrangement. FORD GENALD LIBRARY 4 1976 - Transition The OMB recommendation is to provide exactly one-fourth the recommended 1976 budget authority, for the 3-month transition period. Because we serve constituencies such as state arts agencies, or tie obligations to academic years and performing/exhibition seasons that begin late summer/ early fall, we request that the transition period funding level take this into account. 1976 - Administrative Funds, Personnel, and Management The OMB recommendation is that the 1975 administrative figures be held in 1976. At a minimum, we urge $13 million in administrative funds. We are not going to be able to keep the agencies going without some form of automatic data processing. We must have a minimum of $540,000 to continue the implementa- tion of ADP support capability. Further, no matter what the level of appropriations, by law we have to review each application through an advisory process, and the applications in the Arts Endowment, for example, increased more than three- fold (from 6,000 to 19,500) in two years. We simply must have more administrative funds and personnel to handle the appli- cations fairly. OMB reportedly has included suggestions that we consider moving into one building (that is impossible); review our expenses on travel (we will, of course, but keeping in mind that we simply must have funds to evaluate before making grants via staff, panel and Council travel); and questions providing technical assistance (the National Councils view this as one of THE most important functions of the agency). Attachment THE BICENTENNIAL As an example of Congressional intent, specifically directed to this most important subject, we quote from the April 3, 1973 Senate Report on our reauthorization legislation. "The Committee calls attention to a major purpose of the Act which is to encourage the development of a climate in which the arts and humanities may flourish. In this regard, long range goals are essential, rather than goals which relate to a specific period of time, no matter how important that given limited time period may be. With respect to the Endowments' work, the Committee believes that the Bicentennial should be considered in terms of lasting and abiding values, rather than in terms which have only temporary or limited mean- ing to future cultural growth. "It should also be emphasized that the funding levels recommended are in accord with the rate of growth to date, with the needs expressed by both Endowments reflecting the numbers of appli- cations of high quality which they are presently unable to support, and with the basic principles that federal funds provide a most important in- centive toward engendering greater private support." OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION (OSHRC) OMB's recommendation would deny increase in Administrative Law Judge (ALJ) and support personnel because productivity increased 100% between 1972 and 1974, in terms of cases decided per ALJ. The productivity increase pro- jected by the Commission in its budget submission indicated current staff could absorb a 37.5% caseload increase between 1974 and 1976. The OMB recommendation would reduce the three separate legal review staffs of the Commissioners by nine positions stnce a new joint staff serves all three Commissioners. It would eliminate $250 thousand in costs of printing bound volumes of ALJ decisions because of small demand, the availability of trade press digests, and the existence of less costly means to provide copies on request. The Commission appeals generally for its original full request. Specifically, it now says it does not anticipate further productivity increases and asks for 7 more ALJ's (and 3 clerks) to avoid increases in backlog or elapsed time between a notice of contest and an ALJ decision. It also asks for the $250 thousand for printing ALJ decisions, as District Court decisions are printed, to help employers decide within the 15 days allowed them whether to contest citations and to meet Information Act requirements to publish or make decisions readily available. OMB still believes productivy increases will permit the current number of ALJ's to handle 1976 workload. The most productive ALJ's already decide 44% more cases than the average. (However, if DOL is given 180 more compliance officers as it requests, an additional 8 ALJ's would be required. We will increase the Commission's budget if the final decision gives DOL more com- pliance officers.) Less expensive duplicating processes can meet the small demand for copies of ALJ decisions. A long time is required to issue bound volumes; the public therefore relies on the trade press, not the Commission, for current information. Budget Full-time authority Outlays permanent (in thousands of dollars) employment 1974 actual 4,687 4,595 156 1975 agency request 5,843 5,780 183 1975 OMB recommendation 5,512 5,512 172 1976 agency request 5,880 5,880 175 1976 OMB recommendation 5,300 5,300 165 Effect of OMB recommendation on agency request -580 -580 -10 Transition period 1,798 1,325 165 1977 estimate 5,300 5,300 165 FORD WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY Comments No change from agency request. An additional memorandum concerning future cost overruns in being pre- pared for the President's consid- eration. : Full-time Budget permanent authority Outlays employment (in thousands of dollars) 1974 actual 164,894 170,410 1975 current estimate 126,889 184,900 Not applicable 1976 agency request 99,724 181,600 to 1976 OMB recommendation 99,724 181,600 this Effect of OMB recom- agency mendation on agency request -- -- Transition period 26,700 39,600 1977 estimate 120,609 182,300 FORD 07W831