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The original documents are located in Box 10, folder "FY 1977 - Fifty Issues (2)" of the
White House Special Files Unit Files at the Gerald R. Ford Presidential Library.
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Digitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
FY 1977 BUDGET
Environmental Protection Agency
Budget Summary
Outlays ($ Millions)
FY 76
FY 77
Percent
Percent
Percent
$
of Total
$
of Total
Change
Sewage Treatment
Construction
2,350
74
3,770
84
+60%
Grants to State
and local planning
agencies
92
3
70
2
-24%
Regulation development
enforcement and
technical assistance
386
12
314
7
-19%
Research and Development
297
9
280
6
- 6%
General Agency Management
and Regional Adminis-
tration
68
2
66
1
- 3%
3,193
100%
4,500
100%
+41%
Budget Policy Highlights
- Continue to make progress in cleaning our lakes and
streams by emphasizing expenditures for sewage treat-
ment plants.
- Propose amendments to the Federal Water Pollution
Control Act which place a greater priority on catching
up on the backlog of sewage treatment plants needed
to solve the more immediate and widespread water
quality problems and reduce Federal commitments for
projects of marginal effectiveness.
- Provide additional resources to the States for the
implementation of the Safe Drinking Water Act in order
to assist them in assuming primary enforcement
responsibility.
10RD LIBRA CTY
23
2
- Include new funds for water quality planning on the
few remaining high priority areas which have not
received financial assistance.
- Continue to assist State and local pollution abate-
ment agencies to meet their environmental goals by
funding these programs at the obligational level
recommended in the FY 1976 Budget.
Specific Budget Decisions
1. Construction Grants
(a) FY 1977 outlays. Expenditures will increase
60%, from $2.35 billion in FY 1976 to $3.8
billion in FY 1977. The FY 1977 outlay level
represents a 94% increase relative to FY 1975.
(b) FY 1977 obligations. The total value of new
grants will increase from $4.5 billion in
FY 1976 to $6.1 billion in FY 1977 -- over a
35% increase. The Federal Water Pollution
Control Act Amendments of 1972 provided $18
billion for the construction of municipal
waste treatment grants. Beginning in FY 1977,
over $6 billion will still be available for
obligation. These unobligated funds will be
sufficient to fund the majority of projects in
most States and consequently it will not be
necessary to request additional budget
authority in FY 1977. Recommendations for
funding beyond the funds presently available
will be made subsequent to Congressional con-
sideration of the Administration's legislative
reform proposals for this program.
Budget Constraints
(a) Reimbursable Projects. Previously, $1.9 billion
has been appropriated to reimburse municipalities
for projects constructed prior to the passage
of the Federal Water Pollution Control Act
Amendments of 1972 (P.L. 92-500). The FY 1977
budget contains no additional funds for this
purpose.
(b) Reform Legislation. Amendments to the Federal
Water Pollution Control Act Amendments of 1972
are being proposed which would reduce Federal
liability from $333 billion to a program level
in the neighborhood of $30 to $60 billion and
therefore would bring the potential Federal
funding requirements in line with the projected
availability of funds. These amendments would:
3
- Give priority to the backlog of construction
needed to provide existing communities with
sewage treatment facilities. This would be
accomplished by requiring that the construction
of sewage treatment facilities for future
community growth be the financial responsibility
of local and State governments.
- Leave to local governments the responsibility
for raising funds for those projects, such as
collector sewers, whose cost can be, and
traditionally has been, borne directly by the
user.
- Limit Federal funding to the provision of
secondary treatment except where the grant
applicant demonstrates that the water quality
benefits to be achieved from higher treatment
levels are commensurate with their cost.
- Encourage the adoption of inexpensive non-
structural measures to treat episodic pollution
problems associated with storm water.
2. Program and Planning Grants to State and Local
Agencies
Funds are provided to State and local pollution
abatement agencies to implement the Safe Drinking
Water Act, The Clean Air Act and the Federal Water
Pollution Control Act.
Federal support of State water supply programs is
proposed at a level of $20 million - a doubling of
the FY 1976 level. This funding will assist States
in assuming the primary enforcement responsibilities
for public water systems under the Safe Drinking
Water Act.
Budget Constraints. Air control agency grants will
decrease from the FY 1976 obligational level of $55.5
million to an obligational level of $51.5 million
in FY 1977. The initial schedules for complying
with the requirements of the Clean Air Act have,
for the most part, been completed. The amount
requested in FY 1977, which is identical to the
FY 1976 request will provide for the necessary
modifications to the schedules and for other high
priority State activities.
4
Water control agency grants will decrease from an
obligational level of $50 million in FY 1976 to an
obligational level of $40 million in FY 1977.
Although the program is reduced $10 million below
the 1976 appropriation, the 77 level is the same
as the 1976 Presidential request, which will support
the continuance of high priority State program
activities. The remainder of the cost of meeting
the State responsibilities in this area is provided
by State governments.
Section 208 water quality planning grants will
decrease from $53 million to $15 million in FY 1977.
Previous to FY 1977, more than $200 million has
been provided to local and State planning agencies
to conduct areawide waste management planning. The
amounts provided in the FY 1977 budget include
sufficient funds for the few remaining high priority
study areas.
3. Regulatory Program. FY 1977 outlays will decrease
19% relative to FY 1976. This reduction reflects
an expected decrease in expenditures for contract
support initiated in previous years for the develop-
ment of the vast majority of regulations which are
now being implemented. Outlays of $314 million are
adequate to make the appropriate revisions in
regulations and to provide resources to the State
and local government for their implementation. It
should be noted that outlays do not provide a
complete representation of the level of activity
in this area since the FY 1977 budget provides $369
million in budget authority, approximately the
same program level as provided in FY 1976.
AGRICULTURE HIGHLIGHTS
Farm Income Stabilization Programs
Farm income stabilization programs for farmers
provide: credit on reasonable terms, income
protection against low market prices for grains
and other commodities and against natural
disasters adversely affecting crop production.
This is accomplished by providing price supports,
direct payments, and crop insurance to farmers.
- Outlays for farm income stabilization (price
supports, direct payments) will decline by
$630 million in 1977, largely due to:
The sale for unrestricted use of stocks
of peanut oil accumulated under the
peanut price support program, and the
offering of surplus peanuts for sale to
crushers. This is necessary because of
the substantial inventories that have
been accumulated by the Government. Oil
sales should total about 375 million
pounds, and will be carried out in a
way that will not disrupt the vegetable
oil market. In the absence of reform
legislation, it is likely that peanut
production will exceed consumption.
A 15 percent reduction in marketing
quotas for the 1976 crop of flue-cured
tobacco. This action is necessary to
bring supplies in line with demand and
thus avoid costly surpluses which must
be paid for by the Federal Government.
Price support loans will be reduced by
$255 million.
An anticipated reduction in the need
for credit (loans) extended to foreign
nations to encourage purchase of our
agricultural commodities, from $900
million in 1976 to $450 million in 1977.
This reduction is based on the strong
foreign demand for grains.
GERALA FORD
21
2
Heirs
The death of an owner of a small business or
farm can create major financial problems for the
heirs, particularly if they wish the business to
remain in the family. Unless sufficient liquid
assets are available (or become available upon
the death of the owner) to pay the estate tax
liability, heirs may be compelled to sell the
business.
The Administration will seek legislation permitting
heirs of owners of small farms to defer the first
payment of estate taxes for five years and amortize
the balance over 20 years at 4 percent simple
interest. This will ease significantly the current
problem faced by heirs of being forced to sell
farms that have been in a family for years in
order to pay estate taxes.
Research
Production Efficiency Research
A $21 million increase is proposed for new
fundamental research efforts in the agri-
cultural sciences, 5.5 percent above research
outlays in FY 1976. This work is aimed at
improving the efficiency of our agricultural
production by reducing the amount of
petroleum-based fertilizer or other inputs,
or increasing output by breeding for greater
resistance. Much of the research beginning
in FY 1977 will be of the most basic nature,
in an attempt to further an understanding of
biological processes. Subjects receiving
special attention will be: (1) increasing
understanding of the process by which plants
convert light to energy; (2) increasing under-
standing of the process by which plants convert
and use nitrogen as nutrients; (3) broadening
the genetic base of plants to maintain high
yields with greater resistance to pests,
diseases, and weather.
Trial Boll Weevil Eradication and Pest
Management Program
$4.3 million of Federal funds will be used
in FY 1977 to begin a 3-year trial program:
(1) to eradicate the boll weevil from
3
Virginia, North Carolina, and South
Carolina; and (2) to operate a concurrent
program in another part of the South, as
yet undetermined, to reduce the boll weevil
to economically manageable proportions.
The strategies of eradication and pest
management form the two major alternatives
for insect control. During and at the con-
clusion of the 3-year program, evaluations
will be made to determine comparative
cost/benefit relationships, the efficacy
of regulatory measures, the willingness of
affected growers to cooperate, and other
factors. The President and the Secretary
of Agriculture will then determine the best
strategy for dealing with the boll weevil
throughout the entire South.
The boll weevil is our nation's worst
agricultural insect, causing approximately
$300 million worth of damage each year in
lost cotton, as well as requiring over
one-third of the pesticide applied to our
crops nationwide each year ($75 million
worth). A sustained effort needs to be
made to reduce both economic damage and
environmental costs.
Grain Inspection
Because of recent abuses in the Federally
supervised national grain inspection system,
the credibility of the current public/private
system in the United States is being seriously
questioned here and abroad. A basic defect in
the current public/private system is the inherent
conflict of interest in the private inspection
agencies and the lack of authority for the
Department of Agriculture to supervise ade-
quately the private activities.
To strengthen the system and restore confidence
in the grain quality, the Administration has
4
proposed amendments to the U.S. Grain Standards
Act that include: (1) authority to require
official inspection agencies to meet criteria
to qualify for designation; (2) authority to
suspend and to revoke designations of official
inspection agencies for specified causes and
for the Department to perform original inspec-
tions on a temporary basis if the service is not
otherwise available; (3) elimination of conflicts
of interest by official inspection agencies;
(4) increasing penalties for certain violations
of the Act from misdemeanors to felonies; and
(5) authority for the Secretary to require
installation of monitoring equipment in grain
elevators as a condition of eligibility for
official inspection. No major expenditures or
increases in Federal employment should result
from this proposal.
Reform of Agricultural Conservation Program (ACP)
Legislation will be proposed to the Congress to
reform the agricultural conservation programs by
eliminating payments to farmers for carrying out
farming practices which are a normal part of their
operations, and by emphasizing long-term conserva-
tion practices which are of national concern and
achieve desirable land-use adjustments. This will
reduce the cost of the program from $175 million
annually to $90 million.
Forestry
Program levels for recreation use, wildlife habit
management, rangeland improvement, and several
other national forest activities will increase
by $26 million and about 8 percent. Research
will be increased by $4 million and 5 percent,
primarily for improvement of information and
analytical procedures for the next cycle under
the Forest and Rangeland Renewable Resources
Planning Act of 1974. Total outlays will decline
because payments to States, based on 25 percent
5
of national forest receipts in the transition
quarter, will decline by $54 million and because
1977 fire-fighting costs are included in the
allowance for contingencies, rather than in the
estimate for Forest Service. These additional
costs, largely unpredictable, have averaged
about $100 million in recent years.
Rural Housing and Community Development
Housing assistance is provided in rural areas
by direct Federal loans and grants. The loans
are for the purchase of single and multiple-
family housing units, as well as for repair and
rehabilitation of existing units. The budget
proposes about $2.7 billion in loan funds in
1976 and 1977, compared with $2.2 billion in 1975.
Some small housing programs have been proposed
for termination during FY 1976 because they are
ineffective - high relative cost, small number
of families taking advantage of the programs -
and because other assistance programs are
available; e.g., the home ownership subsidized
loan program, the rental assistance program, and
HUD's Section 8 program. The programs proposed
for termination are:
- Farm labor housing loans and grants
(loans - $10 M; grants - $8 M).
- Mutual and self-help housing grants ($9 M).
- Self-help housing land development fund
loans ($1 M).
Small businesses
In recognition of the difficulties which many small businesses
face in obtaining needed financing in commercial markets, the
Small Business Administration's major loan guarantee program
which will help about 22,000 businesses in 1976 will be
increased by 33% to $2 billion in 1977, thereby providing
assistance to an additional 6,000 firms. By careful management,
SBA will be able to operate this program at no cost to the
taxpayers.
During 1976 and 1977, particular emphasis will be given to
increasing the success rate of firms receiving loan assistance
from the Small Business Administration, thereby enhancing the
benefits to small firms and reducing costs to taxpayers.
Actions by SBA will include improved criteria for selecting
applications for loan assistance, additional funds for technical
assistance to firms receiving loans, and additional staff to
more effectively manage its portfolio of existing loans.
The total amount of SBA direct loans will be reduced slightly
from $350 million in 1976 to $315 million in 1977, primarily
because it is expected that there will be a decrease in
demand to assist firms faced with energy shortages.
The Lease Guarantee program, which is operating at a $35 million
level in FY 1976 and which is expected to serve only about 100
businesses during the year, will be phased out with no new
commitments in 1977. A recent General Accounting Office report
found that the program is not being operated on an actuarially
sound basis, even though Congress intended that it should be
self-sustaining. The GAO estimated that net losses would be
about $17 million on policies issued through fiscal year 1974.
25
2
to $45 million in 1977, pending an evaluation of the effective-
ness of these programs which were proposed by the Administration
in 1974.
The President's budget also proposes a rescission of the $4
million Congress added for 1976 and the transition quarter
to fund additional economic development planning districts. It
would be inappropriate to expand the share of EDA funds going
for this planning and administrative infrastructure when the
available resources should be used to implement existing
redevelopment plans and more effectively utilize the capabilities
of established districts. The 1977 budget includes funds for
those districts now being financed by the Economic Development
Administration.
Minority enterprise
The 1977 Budget reflects the Administration's continued strong
support of efforts to expand minority participation in private
enterprise. The Office of Minority Business Enterprise in
the Commerce Department provides financial assistance to
States and local organizations to support efforts to create
and expand business ownership opportunities for minorities
and to provide management and technical assistance for
these businesses. This assistance is being continued at
the 1976 level of $50 million, and OMBE will direct more of
its efforts to stimulating private, State and local initiatives.
The Small Business Administration will expand its programs for
assistance to minority businesses, with an additional $3 million
for technical and management assistance to minority firms
participating in its loan programs and in its 8(a) procurement
program. SBA expects to provide over $465 million in loans
and loan guarantees to about 8,600 minority businesses in 1977.
Postal Service
The President's Budget continues the policy of moving toward a
nostal system in which the mail users will pay the cost of
the services, and the burden on the taxpayers will be reduced.
In 1977, the public must continue to carry a large share of
the postal costs, as the subsidies are gradually reduced to
allow adequate time for the users to assume responsibility for
these costs.
The Postal Reorganization Act of 1970 established an indepen-
dent Postal Service based on the principle that ultimately
it would be virtually self-sustaining, with the costs of
providing postal service being borne by those who use the
mails. The 1970 Act authorized certain interim subsidies
to bring about this transition to independent status. The
Budget requests $1.5 billion for this purpose in 1977, in
contrast to the Postal Service's request for $1.8 billion.
From the beginning of the Postal Service, through 1977, over
$9.5 billion will have been provided for this transition
subsidy.
Recent legislative changes have authorized an extension of
the time period granted mailers of second, third, and fourth
class matter to adjust to higher full cost recovery postage
rates. The President's Rudget does not recommend appropriation
of the additional $307 million requested by the Postal Service
to finance this extension. Such subsidy payments would place
an unfair burden on the taxpayer and constitute a direct
windfall benefit, in the form of subsidized lower rates, to
certain classes of mail users. The President proposes to
restrain Federal outlays by $307 million by not requesting
the additional subsidies. This action will not appreciably
impact the Postal Service's financial position as these
revenues can be made up through higher postage rates on the
affected classes of mail.
The Postal Service continues to face serious difficulties in
achieving a balance between its costs and revenues. Like most
businesses, it has experienced strong inflationary pressures,
and postage rate increases have been necessary to cover rising
costs. The Postal Service is urgently exploring ways to
control costs through such steps as closing small post offices,
reducing overtime, and transferring employees from overstaffed
operations to fill vacancies elsewhere. A number of other
cost saving proposals are under review. It also may be
necessary to find ways to accelerate the process of adjusting
postage rates to reflect cost changes.
Transportation
Highways
Proposed highway outlays for 1977 and 1978 will be the highest in
history. In 1976 outlays will be $6.6 billion, in 1977 $7.0 billion
and in 1978 almost $7.4 billion. In the 1976 budget, the Administration
proposed a $4.6 billion Federal-Aid Highway program level for 1975 and
$5.2 billion for 1976. In order to stimulate employment in the con-
struction industry and the economy, the President released $2 billion
in additional funds in 1975. Congressional action added another $1.1
billion to the 1975 program. For 1976 and the Transition Quarter, the
1976 Appropriations Act imposed an obligation ceiling at a $9.0 billion
level for the 15-month period. The 1977 budget recommends the con-
tinuation of a statutory obligation ceiling in the Appropriations Act
and proposes a $6.7 billion program level for 1977, which is consistent
with earlier Administration legislative proposals, but lower than the
unusually high 1975 and 1976 levels.
The Administration continues to urge the Congress to enact substantial
highway funding reform proposals. Authorizations should be at responsible
levels and the fiscal operations of the highway program should be brought
into conformance with the procedures of the Congressional Budget Act
of 1974. The maze of 35-plus non-Interstate categorial grants should
be consolidated into three broad programs to permit maximum state and
local flexibility in use of funds. Federal expenditures for completion
of the Interstate Highway System should be directed toward completing
key links necessary to connect the national system. Because the Congress
has chosen not to address the financial restructuring recommended by
the Administration, the proposal to permit state preemption of 1c
of the gas tax which would have yielded $1 billion to the states is
not reflected in this budget. Therefore, the funding level of the
Highway Assistance Programs reflected in this budget is $1 billion
above levels contained in the Administration's proposed legislation
for 1977.
26
Transportation
Mass Transit
Federal assistance for transit is projected to grow from $69 million
in 1965 to a planned level of $2.5 billion in 1977. About $575 million
of the 1977 amount will come from transfer of funds from unwanted
Interstate highway projects. Transit aid includes major assistance
for rapid transit system construction, purchase of buses and subway
cars, lately, operating subsidies and research and development.
The Urban Mass Transportation Administration will provide $650
million in contract authority to an estimated 278 metropolitan
areas through its formula grant program. This amount compares
with $500 million in 1976. However, in fiscal 1977, the budget
proposes a limit on the use of Federal funds to pay operating
subsidies to 50% of the formula-allocated funds. This limitation
will help foster fundamental, long-term improvements at the local
level in the financial management and operations of transit systems.
The Administration is concerned that Federal subsidies for operating
costs perpetuate high-cost transit operations and archaic fare
structures. Without needed capital improvements and operational
innovations, public assistance to transit simply becomes costlier,
and eventually requires cutbacks in service and increased fares.
This budget proposal will insure that necessary capital equipment
is replaced and use of the Federal funds almost entirely for
operating subsidies is avoided.
While both the 1976 and 1977 budgets include funding allowances to
enable the Federal Government to participate in the initiation of
a selected number of new rapid transit systems, Department of
Transportation policy and practice will continue to insist that
applications for such new projects reflect a careful and rigorous
analysis of transit alternatives to assure that lower-cost, but
equally effective, options are considered.
Transportation
Washington, D.C., METRO
Between 1969 and 1975 the Federal Government committed $1.0 billion
of direct Federal aid and guaranteed $1.0 billion of local bonds
toward construction of the Washington, D.C., metropolitan area subway
system. Local governments committed $600 million in the same period.
This mass transit system, which was estimated in 1969 to cost $2.5
billion, is now estimated to cost over $4.6 billion.
The 1977 budget includes $90 million of Federal funding for METRO
construction under this project's separate 1969 legislation, and
an estimate of $400 million for the amount of Interstate highway
funds which local jurisdictions are expected to apply toward METRO
construction in 1977. Including local matching funds, approximately
$700 million could be invested in METRO in fiscal 1976 and about
$645 million in 1977. These amounts in fiscal 1976 and 1977 will
add an additional 25-30 miles to the almost 50 miles of system
under construction as of January 1976. Initial rail rapid transit
service is now scheduled to begin on a 4.6 mile downtown stretch in
mid-1976.
While current funding continues investment in the relatively more
productive parts of the METRO system, concerns about rising capital
costs and unanticipated operating deficits have prompted the Federal
Government to urge a careful review of future fiscal and construction
planning for METRO. It is essential that local governments join with
the Department of Transportation in subjecting this project to further
analysis in order to get control over escalating construction and
operáting costs. Meanwhile, the 1976 and 1977 funds will be targeted
to construct operational segments of METRO at the earliest possible
dates.
Transportation
Rail Freight System in the Northeast (ConRail)
Since 1970, nine railroads in the Northeast and Midwest have declared
bankruptcy. In order to prevent serious economic problems in the
region, legislation has been proposed for Federal assistance to
permit the reorganization of seven of these railroads into a new
corporation, ConRail. The nation's largest railroad, Penn Central,
will be included in this new system.
The Federal Government, acting through the U.S. Railway Association
(a new agency, not part of the Department of Transportation), will
provide a total of $2.1 billion to ConRail over five years. This
money will be used to fix the worn-out track and other facilities,
as well as pay for initial operating losses. To protect the tax-
payers' interest, all of these funds are to be repaid when ConRail
becomes profitable.
About 5000 miles of rail lines owned by the bankrupts will not become
part of ConRail. Federal programs are available to help state and
local interests subsidize, buy, and improve these facilities, wherever
continued rail service is found to be necessary.
Transportation
Northeast Corridor
The corridor between Boston and Washington, D.C., is the most densely
populated and heavily travelled one in the country. Rail passenger
service plays an important transportation role in this corridor,
with over 9 million trips being taken on AMTRAK trains there each
year. The Administration has proposed a six-year, $1.2 billion
program to bring the railroad passenger service in this corridor
to the highest level it has ever experienced. The request for 1977
is $125 million. The program would extend electrification beyond
New Haven to Boston, replace and improve much of the track, ties
and associated right-of-way and make various station improvements.
This investment would improve service between Boston, New York
City and Washington, D.C., to provide a reliable, comfortable ride
with improved energy efficiency which should result in higher rider-
ship levels. The Administration is currently discussing this proposal
with the Congress in negotiations being conducted on the omnibus rail
legislation.
Transportation
Passenger Service
AMTRAK was created in 1970 as a for-profit, private corporation to
revitalize rail passenger service. Since then it has been given
over $1 billion in Federal assistance for capital improvements and
an additional $1 billion in operating grants. Its performance has
been mixed -- while ridership has increased substantially from
11 million in 1972 to 17 million in 1975, losses have risen at
an even greater rate from $153 million in 1972 to $299 million in
1975. The Congress refused to allow reduction of lightly patronized,
inefficient service during this time while adding other routes with
little transportation value. On trains outside the Northeast Corridor,
AMTRAK passengers have an average of over a $30 per trip subsidy,
compared to an average fare of less than $24. The Administration in
1977 proposes to allow AMTRAK operating grants of $378 million, an
increase of $49 million over 1976. Since this is about $51 million
short of what would be needed to retain all present routes, some service
cuts will be required. AMTRAK will determine specific routes to be
eliminated as allowed in legislation passed recently which permits
service cuts to be made according to newly developed criteria.
Transportation
Aviation
The aviation program in the Department of Transportation will increase
by $100 million to $2.4 billion in 1977. Federal grants to airports
rose from $50 million in 1970 to nearly $350 million in 1975 and will
be maintained at $350 million in 1976 and 1977. When serious airport
congestion arose in 1969-70, Federal aid for improving and upgrading
airports was greatly increased, and new taxes (primarily passenger
ticket tax of 8%) on aviation users were levied. Meanwhile, airport
congestion problems lessened, and are now considerably less than the
1969-70 levels.
The Administration has proposed legislation which would spread the
aviation tax burden more equitably and require those who benefit
from the system to pay for it. Specifically, taxes on air carrier
passengers would be reduced while general aviation taxes would be
raised to reflect the public assistance they receive. This legislation
proposes to use revenues from aviation users to pay certain costs
($476 million in 1977) directly associated with maintaining the air
traffic control and navigational aid systems. At present the general
taxpayer rather than the user pays for all operating costs of $1.6
billion annually associated with the National Airspace System.
As in previous years the budget provides for an increase of 519 to
29,083 in the number of air traffic controllers so that safety is
assured in connection with the forecasted growth in aviation activity.
A modest increase in system maintenance personnel is also planned.
These FAA employment level increases will be offset in part by re-
allocation of positions from other activities.
Transportation
Waterway User Charges
During calender year 1976, the Administration plans to submit a
legislative proposal that would impose charges for the use of
waterway facilities. It will aim at recovering $80 million in
1977 which is a portion of the Federal costs of providing those
facilities. Details of the proposal are being worked out by DOT
and other interested Federal agencies. Waterway carriers, mainly
barge operators, have never been charged for the use of waterways
facilities, all of which have been financed by the Federal Govern-
ment. This Federal subsidy has given waterway carriers a competitive
advantage over railroads particularly, and is not fair to the general
taxpayer. This user charge proposal will be a start toward remedying
this situation.
Merchant ship construction and operations
To remove the cost disparity between U.S. and foreign shipbuilders,
the Maritime Administration of the Commerce Department pays
construction differential subsidies for U.S.-built ships intended
for use in the U.S. foreign trades. Oversupply of certain ship
types, especially oil tankers, has led to a slowdown in demand
for merchant ship construction. Whereas the program has been
maintained at approximately a $250 million level since 1970,
decreased demand for subsidies in 1975 led to a $101 million
program level in that year. Recovery of ship construction
demand is projected for 1976 and 1977, with respective budget
levels of $200 million and $247 million. Contracts in 1976-1977
will add approximately 770,000 deadweight tons to U.S. shipyard
production totals. No new budget authority is required to
support a $247 million program level in 1977 because of unused
funds carried into 1977 from prior years.
The Maritime Administration also pays U.S. ship operators an
operating differential subsidy to offset the higher cost of
operating a ship under the U.S. flag rather than under a
foreign flag. An appropriation increase from $316 million
in 1976 to $404 million in 1977 is proposed for this purpose.
Community Development Grants
On August 22, 1974, President Ford signed into law a
bill establishing a new program of community develop-
ment block grants to States and local governments.
The Budget provides for a significant increase in
block grant commitments under the program, with
funding in 1977 proposed at $3.2 billion.
The block grant program has brought about major changes
in the way Federal community development assistance is
provided:
-- We now have a single program which can provide
funding for community development activities,
instead of the separate programs that existed
until 1974 for such things as sewer lines,
neighborhood centers, municipal parks, and
urban renewal.
Funding for individual community development
projects now depends on local needs and
priorities, rather than on the whim of Federal
officials or the luck of the draw, as it did
under the old system.
There is now a formula for allocating Federal
aid on the basis of relative need, instead of the
old approval system that put a premium on having
expensive consultants and influential spokesmen.
(This means that while some communities may get
less in the future than they got in the past, no
community gets less than its fair share of total
funding.)
Chief executives of large cities and counties now
have a pretty good idea of how much Federal com-
munity development assistance they can expect to
receive, and can plan accordingly; the old system
usually kept them in the dark as to what they
could expect in Federal aid until the awards were
made.
In recognition of these improvements, the President's
Budget provides $3.2 billion for block grants in 1977--
about $450 million more than in 1976. In percentage
terms, the increase is nearly three times as large as
27
Community and Regional Development
Public works programs to combat unemployment
The 1977 Budget includes $291 million for the programs of the
Economic Development Administration and the Regional Action
Planning Commissions in the Department of Commerce. These
programs are to be focused on developing permanent employment
opportunities for residents of economically depressed areas
of the country. In 1977 these agencies will once again turn
their full attention to assisting the chronically depressed
areas, after devoting considerable attention in 1975 and 1976
to creating temporary jobs for the unemployed. The $42
million requested for the Regional Commissions will provide
for the same level of program activity recommended in the 1976
Budget and is an increase over the 1975 level.
The $249 million requested for EDA's public works and business
development projects and related programs is considered to be
the amount that can be used in an effective manner to stimulate
long-term economic development in economically depressed areas
in 1977. While the appropriation request for EDA and the
Commissions is being reduced, outlays from the economic
development programs will increase from $505 million in 1976
to $530 million in 1977.
The 1977 Budget does not request further funding for the Job
Opportunities program or to continue the 1976 expansion of the
regular job programs of EDA and the Commissions. In the 1976
appropriations, Congress added $92 million to these agencies
for their ongoing programs, plus $375 million for the Job
Opportunities program. The Job Opportunities program is very
difficult to administer effectively, and is an undesirable
means of allocating funds among agencies. Under this program,
Commerce allocates the funds among the Federal agencies based
on a minimum amount of information on the proposed use of the
funds. This system avoids the normal budgetary and appro-
priation process for allocating funds to agencies and does not
permit either the Congress or the President to assure that the
funds are allocated effectively.
In addition to ending funding for temporary jobs, the 1977
budget proposes other restraints in the EDA programs. In
particular, the new program of formula grants to states which
provided $20 million in 1976 is being suspended, and the new
block grant program is being reduced from $77 million in 1976
27
HUD Comprehensive Planning Assistance (701) Program
The Federal Government helps public and private agencies
plan for the future through more than 45 different pro-
grams. The best known of these--HUD's 701 program
(named after the section of the law that created it) --
has been distributing grants for 22 years, and has
provided funding to numerous public planning agencies
throughout the country.
With the community development block grant program now
in full swing, there is less of a need to tie Federal
grants directly to planning activities. Accordingly,
the Budget provides for phasing down the 701 program
from $75 million in 1976 to $25 million in 1977.
The community development grant program provides State
and local governments with Federal money that may be
used for a wide array of activities, including planning.
Under the program, recipients are free to decide how
much Federal aid should be used for planning and how
much should be used to implement the plans. There is
another advantage to funding planning and implementation
from a single pot: The closer these activities are
linked, the more effective Federal community development
assistance will be.
Federal planning assistance will continue to be available
under other Federal programs, many of which are linked to
functions of national interest. And, HUD will continue
to provide planning assistance under the 701 program for
activities which might not otherwise qualify for assistance.
28
Higher Education
The President's budget provides $2 billion for higher
education in FY 1977. This will provide assistance to
approximately 2.4 million students enrolled in colleges,
universities and other postsecondary institutions across
the country. There are two principles that have guided
the Administration in the formulation of this budget.
First, no student should be denied access to a postsecond-
ary education because of financial barriers. Those in
need should receive grants; others with higher family
incomes should be helped to borrow to meet the costs.
Second, in most cases, aid should be provided to individ-
uals rather than to institutions. In this way, the student ---
who is the ultimate consumer in the education process ---
can exercise choice, not on the basis of the aid that a
school receives, but on the basis of the kind of education
the student wants. Aid to institutions should be limited
to carefully defined objectives or supplementary to direct
student aid.
In accordance with these principles, the Administration
is proposing the following actions:
-- A request of $1.1 billion for the Basic Opportunity
Grant program.
- A funding level of $44 million for the State
Student Incentive Grant program.
$400 million in subsidies for loans made under
the Guaranteed Student Loan program.
--- $250 million for the College Work-Study program.
--- $110 million for the Developing Institutions
program.
--- $60 million for Special Programs for the Disad-
vantaged.
-- Elimination of the Supplemental Education
Opportunity Grant program.
GERALA AUTHORIT 4. FORD
20
2
No new capital contributions for the National
Direct Student Loan program.
-- Elimination of the Veterans Cost of Instruction
program.
-- Elimination of the University Community Services
program.
-- Elimination of the Postsecondary Education
Commission program.
-- Elimination of the Personnel Development program.
Basic Opportunity Grants
The Basic Opportunity Grant program provides aid to
needy students and can be used at any college or university
selected by the student. The amount of the grant is based
upon the student's ability to pay, and is adjusted to the
cost of the institution to be attended.
The Administration is requesting rull funding for this
program in 1977. Every needy student may receive up to
$1,400 per year but no more than one-half of need. The
student's need is determined after taking into account
the contribution the family is expected to make. This
expected family contribution varies with income and family
size. Under the formulas used, no grants are now made to
students with family income above $12,000. 1.3 million
students will receive an average award of $854 under this
program. The amounts provided by the Administration will
provide $400 million more to serve 214 thousand more
students than Congress provided for 1976 and $100 million
more than was appropriated for all student grant programs
in 1976.
Supplemental Education Opportunity Grants
Because the Administration is requesting full funding
for the Basic Grant program, it is proposing to eliminate
the Supplemental Grant program. This program is administered
by the colleges and they determine who receives a grant
without any Federal restriction on standards of need, as
well as, the size of the grant (up to $1,500 a year). The
3
appropriation made by Congress for 1976 (which the
Administration has asked be rescinded) would provide
an average of $530 each to 445,000 students.
Work-Study Programs
In recognition of the fact that many college students,
including those who get a basic opportunity grant, need
a job to provide enough income to stay in school, the
Federal Government provides grant funds to colleges and
universities to create jobs for students. Federally funded
work-study programs pay 80% of the wages to a working
student employed by a school or by an off-campus nonprofit
institution.
The Administration proposes to provide $250 million in
1977. This will provide 652,000 jobs in school year 1977-78.
The Administration is proposing that the Federal share of
wages be reduced to 70% next year and down to 50% by school
year 1979-1980. This will allow more students to share the
Federal funds.
Guaranteed Student Loan Program
The Federal Government guarantees the repayment of
student aid loans made by others -- most typically banks
or the schools themselves. In addition to this direct
guarantee, the Federal Government will re-insure States
which offer their own loan guarantees by agreeing to pick
up 80¢ out of every dollar of a defaulted loan. One
million students will obtain $1,276 million in loans in
these loans in FY 1977.
The maximum interest rate is now 10%, of which the
Government pays any in excess of 7% for the life of the
loan. In addition, the Government pays all of the interest
while the student is in school. The maximum loan amount
is up to $2,500 per year, up to $7,500 total while an under-
graduate, and up to $10,000 total if a graduate student.
The loans are available to almost any student, regardless
of family income, and can be used to attend the school the
student chooses. In order to assure an adequate supply
of private capital for student loans, legislation is pro-
posed to increase the maximum interest rate charged by banks
from 10% to 11%, with the Government paying the increase for
outstanding loans, and students paying the increase on new
loans.
4
National Direct Student Loans
The National Direct Student Loan program has, since
1958, provided $3 billion to colleges and universities.
Colleges and universities have used these funds to provide
3% interest rate loans to students. Funds are provided
to colleges and universities, who in turn determine which
students meet their own definition of need and then can
receive these loans. Unlike other Federal loans, however,
this money is not returned to the Government, but is
repaid to colleges. This program was enacted well before
the current programs of direct grants to students meeting
a national definition of need, and of guaranteed loans.
In view of these new programs, no further capital contribu-
tion to college loan funds are proposed. However, colleges
will have over $225 million available for relending in
school year 1977-1978.
Institutional Assistance
The 1977 budget proposes the elimination of most
programs which provide aid directly to colleges or uni-
versities. The largest institutional aid program that
will be funded in 1977 is the developing institutions
program. Under this program, $110 million is being
provided to schools with high percentages of black and
other minority students to enable them to enter the main-
stream of American higher education. In addition, the
budget provides $60.3 million for institutions to assist
students who are disadvantaged.
Financial Assistance for Elementary
and Secondary Education
In the area of Federal support for elementary and
secondary education, the Administration is proposing to
group 27 separate programs into one, unified program
with a FY 1977 funding level that would total $3.3
billion.
The bulk of Federal support for elementary and second-
ary education funding is distributed through States to
local educational agencies through mechanisms that take
into account such factors as school-age populations, income
levels of the students' families, etc. These different
types of support have various objectives which may not
correspond to the State or local educational agencies'
most pressing need.
In order to eliminate administrative difficulties
and to provide greater freedom to educational agencies
in using Federal monies, the Administration is proposing
to combine these programs into one broad funding authority.
The programs included in the proposal are listed in the
attachment.
31
Programs Included in the Financial Assistance
for Elementary and Secondary Education Act
Present Elementary and Secondary Education Act
-- Education of the Disadvantaged: This program
provides support for compensatory educational
activities aimed at insuring equality of educa-
tional opportunity for disadvantaged students.
Support is provided to States and then to local
educational agencies based on a formula. In
addition, support is provided to States for the
children of migrant workers and for handicapped,
neglected and delinquent students who are residents
in State maintained institutions.
-- Educational Support and Innovation: This program
assists educational agencies in improving the
techniques and methods employed in education.
Funds are distributed to States on a formula
basis and selected projects are then funded within
each State.
Education for the Handicapped
State Grant Program
Formula grants are made to States to assist in the
provision of educational services to handicapped children
at the preschool, elementary and secondary levels. Funds
are allocated to the States based upon the number of all
children aged three to twenty-one inclusive in the States.
Severely Handicapped Projects
Project grants are made for the development of demonstra-
tion models that are easily replicable in schools. This
program is designed to make severely handicapped children
as independent as possible through specialized services.
Specific Learning Disabilities
Grants and contracts are made with institutions of
higher education, State, local and private agencies to
2
provide comprehensive services for all children with
specific learning disabilities. These activities are
achieved through the funding of model demonstration and
related programs.
Early Childhood Education
Grants and contracts are made on a matching basis
(90% Federal/10% local) to stimulate the development of
comprehensive educational services for handicapped children
from birth up to 8 years.
Regional Education Programs
Grants and contracts are made with institutions of
higher education, including junior and community colleges
and other appropriate educational agencies for the develop-
ment and operation, on a regional basis, of specifically
designed programs of vocational, technical, postsecondary
or adult education for handicapped persons.
Innovation and Development
Grants and contracts are made with inst: tutions of
higher education, educational and other public and private
non-profit agencies. This activity attempts to improve
the effectiveness of educational systems for the handicapped
through the verification and packaging of educational models.
Media Services and Captioned Films
This program provides the handicapped learner with
specific materials to increase educational achievement.
This is achieved through a National Center for Educational
Media and Materials for the Handicapped.
Regional Resource Centers
Project grants and contracts are made with institutions
of higher education, State educational agencies, or non--
profit private organizations to establish and operate
regional centers, whose purpose is to increase the develop-
ment and application of programs for handicapped children.
3
Recruitment and Information
This program provides for grants or contracts with
institutions of higher education, State and local
educational agencies to maintain information and referral
services for parents and their handicapped children.
Additionally, the program supports projects to interest
people in the career of special education.
Personnel Development
This program provides grants to institutions of
higher education, State and local educational agencies
and other non-profit agencies to prepare teachers,
supervisors and other educators, researchers, speech
correctionists and other special service personnel to
more effectively educate handicapped children.
Vocational and Adult Education
Basic Grants to States
Formula grants are made to States to assist them in
conducting vocational education and training programs.
States are required to set aside 15% for vocational
education for the disadvantaged; 15% for postsecondary
programs; and 10% for the handicapped. Funds may be used
for construction of area vocational education facilities.
States are required to match one dollar for every Federal
dollar.
Programs for Students with Special Needs
Grants are made to States by formula, with no matching
required to provide support for programs and services for
persons who are unable to succeed in regular vocational
programs. Programs are concentrated in communities where
there is a high incidence of youth unemployment and high
school dropouts. Specially trained staff and instructional
materials and equipment best suited to the students' needs
and abilities are provided.
4
Consumer and Homemaking Education
This program provides formula grants to States for
programs in Consumer and Homemaking Education. For
most of the programs, States must match the Federal
grant dollar for dollar. States must use one-third of the
Federal funds allocated for programs in economically
depressed areas or areas with high rates of unemployment
where matching is 90% Federal and 10% State and local.
Work-Study
Formula grants are allocated to the States for work-
study programs to assist economically disadvantaged, full-
time vocational students, ages 15-20, to remain in school.
The program provides part-time employment with public
employers. Priority is given to areas having high dropout
rates and high youth unemployment. Funds are allocated
on a matching basis -- 80% Federal and 20% State and
local.
Cooperative Education
Formula grants are made to the States to support
programs which involve an arrangement between schools
and employers which enable students to receive vocational
instruction in the school and related on-the-job training
through part-time employment. Priority is given to areas
where there is high incidence of student dropouts and
youth unemployment. Students must be at least 14 years old
and are paid by the employer either a minimum wage or a
student-learner rate established by the Department of Labor.
State Advisory Councils
Any State receiving a grant for vocational education
activities must establish a State advisory council, which
is appointed by the Governor. Of the State's allotment,
1% is earmarked for support of the council. The councils
assist in the development of the State plans and provide
'technical assistance to program administrators.
Innovation
Formula grants are awarded to the States for stimulating
new ways of creating bridges between school and employment
5
for young people, who: (a) are still in school, (b) have
left school either by graduation or by dropping out, or
(c) are in postsecondary programs of vocational preparation.
Fifty percent of the appropriation is reserved for alloca-
tion by U.S. Commissioner of Education for discretionary
grants or contracts to the States. The remaining 50% is
allocated to the State Boards of vocational education for
similar activities.
Curriculum Development
The Commissioner makes grants or contracts with
colleges and universities, State Boards of vocational
education, and other public or nonprofit private agencies
and institutions for curriculum development in vocational
and technical education. No matching funds are required.
This program provides for the development, testing, and
dissemination of vocational education curriculum materials
for use in teaching occupational subjects, including those
covering new and changing occupational fields.
Research
This program provides support to State Boards of
vocational education to foster research efforts designed
to improve the effectiveness of vocational education.
Fifty percent of these funds are, with the approval of
the State Board, expended by the U.S. Commissioner of
Education. The remaining 50% are provided directly to
the State Boards.
Adult Education
This program is operated through formula grants made
to States for the education of adults. The program is
directed toward adults who are 16 years of age or older
and who have not achieved the 12th grade level of education.
The purpose is to enable them to become more employable,
productive, and responsible citizens. Local school
districts submit plans and proposals to the State education
agency which makes the funding decisions. Ten percent of
the total cost of any program must be paid by the State
and/or local education agency, with up to 90% paid by
Federal funds allocated to the State.
6
Libraries and Instructional Resources
Public Library Services
This program provides support to States through
matching formula grants to assist them in providing
library services to areas without such services or with
inadequate services and to assist in improving the overall
quality of information services throughout the nation.
College Library Resources
This program authorizes grants to institutions of
higher education to assist them in the acquisition of
library resources. Since the program's inception in 1966,
approximately 2,200 institutions have participated annually
resulting in the acquisition of over 10 million library
volumes.
Library Training and Demonstrations
Library training grants are provided to institutions
of higher education and other nonprofit library organizations
to support librarian and information scientist training.
Demonstration grants and contracts are also awarded to fund
demonstrations of library delivery systems. Emphasis is
placed on improving both access to library services and
the operating efficiency of the library and resource sharing.
School Library Resources
Schools are provided library resources, textbooks and
other instructional materials for the use of children and
teachers in public and private elementary and secondary
schools. To receive funds, a plan must be approved assuring
need for assistance, equitable treatment of the private
school sector and local effort to provide services.
Undergraduate Instructional Equipment
This program provides grants to institutions of higher
education on a matching basis for the acquisition of
instructional equipment, materials and other minor remodel-
ing. States receive funds via formula based on enrollment
in higher education institutions and per capita income.
Impact Aid
In the 1977 President's Budget, the Administration
is proposing to reform the Impact Aid program by making
payments only to school districts that are adversely
affected by Federal activities in the area. If this is
done, the program costs would be $395 million in 1977.
The Impact Aid program should make sure that the Federal
Government pays its share of local school costs when
families living and working on Federally owned property
send children to the local schools. These families do
not pay property taxes. The program, however, is not
expanded beyond this legitimate aim.
There are three categories of children for whom
the Federal Government makes impact aid payments to
local schools. If program levels provided in the FY
1976 appropriations bill were to be continued, payments
for the entire program would total $680 million in 1977.
-- "a" category: those children whose parents
both live and work on Federal property
(and they do not pay property taxes). The
overwhelming majority of these children
are the dependents of military personnel.
1977 payments for these students would be
$247 million, 42% of the total.
-- "b" category: those children whose parents
either live or work on Federal property.
Support for these students is provided without
respect to whether the student's parent works
or lives in the same school district as that in
which the child is attending school. In
1977, unless the program is changed, $285
million would be spent for this category,
48% of the total.
GERALS ADVUNIT
32
2
-- "c" category students: those whose parents either
live or work in low cost public housing. This
support is provided without regard to any Federal
impact. In 1977, unless the program is changed,
$58 million would be spent for this category,
10% of the total.
Under the President's proposals, the 1977 budget would
provide support only for the "a" category children, those
whose parents both live and work on Federal property. The
Administration believes that the Federal Government has a
responsibility to pay the cost of educating these children.
In the case of the "b" category students, more than
99% of these children reside on private, taxable land that
is a source of revenue for the school district. Where there
is a Federal installation or building within the same school
district, there is, obviously an accompanying loss of
revenue. The presence of the Federal Government as an
employer adds to the economic, and therefore the tax base,
of the community. Payrolls, sales taxes, retail and
commercial activities all are increased. While these
activities do not provide direct support to school districts.
they are factors that enrich the community and place it in
a better position to support its educational system. If
communities did not believe this, they would not compete
for new Federal activities or protest when facilities are
closed
For example, Fairfax County, Virginia and Montgomery
County, Maryland, where the average per capita income in
1973 was 29% and 56% higher than the national average,
are school districts that could receive substantial amounts
of this aid.
In the case of the "c" category children, the Federal
responsibility is also very tenuous. Here, due to the
presence of low cost public housing within a school dis-
trict, the Federal Government is required to provide
educational support for children who reside in this housing.
This property is not owned by the Federal Government, but
by local authorities. Although the Federal Government
subsidizes this housing, it was built at the free choice
of the community to help its people. Public housing
projects make payments in lieu of taxes up to 10% of
rental receipts.
3
The Administration is proposing to continue the
following activities as well:
--
Support for local educational agencies that
experience sudden, unpredictable changes in
Federal activities.
-- Provision of support for direct educational
services to some Federal dependents.
-- Support for the construction of school facilities
in districts heavily impacted by Federal activity
or on Federal bases.
In proposing these changes, the Administration antici-
pates a saving of some $285 million in FY 1977, from the
$680 million otherwise would be spent
;
FORD
Programs for the Unemployed
The Budget reduces the size of the major programs for
the unemployed in 1977 to correspond to improvements
in the economy. Unemployment benefits are reduced by
$2.5 billion; temporary employment assistance (public
service jobs) is reduced by $1.2 billion.
New initiatives were undertaken in both areas at the
start of the recession, and additional efforts are now
proposed to bring the programs into line with the pro-
jected economic conditions.
Other important programs for the unemployed also dis-
cussed below are the regular employment and training
programs authorized by the Comprehensive Employment
and Training Act (CETA), and the summer youth employment
program.
Unemployment Compensation
The most important program for the unemployed is the
regular Unemployment Insurance (UI) system. Unemploy-
ment insurance serves as a first line of defense in the
national economy during periods of high unemployment.
The program restores part of wages lost, helps maintain
purchasing power, and thus helps to maintain the economic
well-being of both the unemployed worker and the community
as a whole. The program operates through a Federal-State
partnership in which the expenses of administration of
State unemployment compensation laws are borne by the
Federal Government and benefit payments are made largely
from tax receipts collected from employers at rates
established by the State. Except for limited standards
in the Federal laws, the States develop their own programs
and have wide latitude in their administration.
The Federal Government currently collects a tax of 0.5%
on the first $4,200 of wages paid each covered employee.
In addition to Federal and State administrative costs,
the Federal tax pays one half the cost of extended benefits
(State unemployment taxes pay the other half), which
provide up to an additional 13 weeks of benefits during
periods of high unemployment. The combination of regular
and extended benefits provides up to 39 weeks of compensation.
33
2
Types of employment covered by the program have been
gradually expanded over the past forty years as
experience has indicated the need; average weekly
benefits have also risen. About 85% of the work force
is covered by regular UI.
In the fall of 1974, the Administration and the Congress
began work to make temporary adjustments in recognition
of the worsening employment situation. The initial set
of measures were enacted in December 1974. They provided:
A temporary extension of unemployment insurance
benefits beyond the 39 weeks of maximum duration
up to 52 weeks, financed by the Federal unemploy-
ment tax.
Creation of a special unemployment assistance
program, financed from general revenues, for
workers not covered under the regular program
(about 12 million), or those without adequate
work history in the base period used by many
States to determine eligibility for the regular
UI programs, to provide for them a total of up
to 26 weeks of benefits.
Later in 1975, amendments extended the maximum number of
weeks of benefits available for those covered by the regular
program to 65 and the maximum number of weeks for the others
to 39.
These actions were stop gap. A two-stage effort has been
proposed by the President to make more permanent improve-
ments in unemployment compensation. On July 14, 1975, the
Secretary of Labor transmitted to the Congress a bill which
would:
-- Expand coverage under the regular UI program to 92%
of the work force by including:
Agricultural workers (about 710,000 who work
for larger employers - about two-thirds of
all agricultural workers)
Domestic workers (about 400,000 who work
for employers who pay $500 or more in quarterly
wages)
State and local hospital employees and
elementary and secondary school employees
(about 4.8 million workers)
3
-- Increase benefit levels by requiring each State to
provide each eligible claimant with a weekly benefit
amount equal to at least 50% of his pre-tax average
weekly wage. States could place a limit on the amount
of benefits payable to any individual equal to at
least two-thirds of the State-wide average weekly
wage for covered workers.
-- Strengthen the financing of the UI system by per-
manently increasing the wages subject to tax from
$4,200 to $6,000 a year and by temporarily increasing
the net Federal tax rate from 0.5% to 0.65% until
the general funds used to finance extended benefits
during the recession have been repaid.
-- Increase the system's responsiveness to changes in
the economy which determine when extended benefits
will be paid under the regular UI program.
-- Establish a National Commission on Unemployment
Compensation which will undertake a thorough and
comprehensive examination of the present unemploy-
ment compensation system and proposed changes, and
make recommendations for further improvements. The
Commission will study the appropriate objectives for
UI, including railroad UI, and the appropriate role
of U.L in income maintenance and its relationship to
other social insurance and income maintenance programs.
The Commission will examine the relationship between
UI and training and employment programs, and will
study the relationship of UI to the economy, with a
focus on the long range UI funding needs. In addi-
tion, the Commission will explore eligibility require-
ments, disqualification provisions, and factors to
consider in determining appropriate benefit amounts
and duration.
Because of these proposals and anticipated improved economic
conditions, no proposal is made to extend legislative authority
for the two emergency temporary unemployment assistance
programs which will expire in 1977. These programs were
conceived to provide additional support during the worst
period of the recession. The extension of benefits to 65
weeks under the regular program is now being phased down
under the temporary law on a State-by-State basis as
unemployment rates decline. Many workers now benefiting
from the temporary special unemployment assistance program
will be taken into the regular program under expanded
coverage proposed to take effect January 1, 1977.
4
In FY. 1977, it is estimated that some $14.8 billion of
unemployment insurance will be paid to approximately
8.9 million beneficiaries under the regular UI program,
the temporary extension to 65 weeks and the proposed
legislation. In addition, some 700 thousand people
will be paid an estimated $.9 billion under Federal
programs which provide unemployment benefits to former
Federal personnel, to workers qualifying under the
temporary special unemployment assistance program, and
workers qualifying for trade adjustment assistance.
Employment and Training Services
The principal Federal programs providing employment
and training services to the unemployed are authorized
by the Comprehensive Employment and Training Act of
1973 (CETA). CETA makes available a broad range of
employment and training activity primarily through
grants to States and localities. Under the major
program, Title I, about $1.6 billion is proposed for
1977. These funds will permit more than 430 prime
sponsors (states, counties, cities with populations of
100,000 or more, or voluntary combinations of local
governments) to serve an estimated 1.3 million economically
disadvantaged, unemployed, and underemployed persons in
various training and employment programs with the
expected improvements in the economy by 1977, more
emphasis is expected to be placed on training programs
aimed primarily at serving the economically disadvantaged,
and less emphasis on work experience.
Other parts of CETA offer nationally directed programs
for Indians, Migrants and Seasonal Farmworkers, severely
disadvantaged youth, and other groups.
The President's Budget also includes a special program of
summer jobs in 1976 and 1977 for disadvantaged youth.
The precise funding level for this program will be
determined after a careful review of unemployment rates
and other economic indicators each year. Supplemental
budget requests will be submitted as soon as projections
for the summer months are available (generally in March).
Finally, CETA authorizes public service employment both
as a transitional employment device for the disadvantaged
who may need work experience or a period of stable employ-
ment before moving into regular jobs, and as a temporary
employment device for some of the workers who lost jobs
in the economic downturn.
5
Total 1977 outlays for CETA programs, excluding temporary
employment assistance, are estimated at $2.8 billion.
One of the programs enacted in December 1974, with the
unemploy ment compensation revisions, was Temporary
Employment Assistance (TEA).
TEA authorized public service employment (PSE) similar
to the existing CETA programs. Here, however, the
emphasis was on rapid hiring for one-year jobs, rather
than on individual development and transition to regular
jobs.
A total of $2.5 billion was appropriated for TEA to enable
some 260,000 jobs to be created through the end of 1976.
Another 50,000 jobs are being financed under the regular
CETA programs.
Because of the uncertainty of the economic situation last
spring, no decisions could be made on TEA beyond 1976.
By the fall of 1975, however, it was clear that the worst
of the recession was over and that the economy generally
was improving. It is also known that the job creating
impact for PSE programs dissipates rapidly after the
first year. Increasingly, States and localities sub-
stitute these Federal funds for expenditures they would
have made from their own resources.
It was, therefore, necessary to consider how to phase out
the TEA program. The pattern of economic recovery is
likely to be uneven across the country. It is also likely
that improvement in employment will lag somewhat behind
improvement in other economic indicators.
The President is therefore proposing:
Maintenance of the regular CETA PSE program
for 1977 at a level of $400 million for about
50,000 jobs;
Funding of regular State and local CETA programs
at $1.6 billion to provide 466,000 training and
employment opportunities which will serve approxi-
mately 1.3 million new enrollees;
Maintenance of CETA national programs for 1977
at a level of $414 million;
6
Funding of the CETA summer youth employment program
at about $400 million to provide 672,000 jobs (subject
to change based on 1977 data) ;
Continued funding into 1977 for the 243,000 TEA jobs
that are in areas of substantial unemployment, at
which time a 9-month phase out will begin, so that
by the end of FY 1977, the TEA program can be completed.
Providing some discretionary funds to areas with
lower unemployment rates (which now have about
17,000 TEA jobs) SO they can phase out their pro-
grans earlier since their economices provide
greater unsubsidized job opportunities.
To simplify planning for States and localities, both the
continuation and subsequent phase out funding for the
Temporary Employment Assistance Program are requested
in FY 1976 as one supplemental for $1.7 billion.
The new funding will only be available to pay a Federal
contribution to salaries of up to $7,000 per year. This
provision intended to discourage further substitution of
Federal funds for local resources and to encourage transi-
tion of enrollees into unsubsidized employment. The
average wage tor most PSE enrollees is now slightly below
$7,000.
Summer Youth Employment Program
A program to provide jobs for economically disadvantaged
youth aged 14 to 21 during the summer months is included
in the President's budget request for 1976 and 1977.
Eligible youth are generally those from families whose
income is below the Federal poverty line ($5,050 for a
family of four). A preliminary estimate of $440.3
million for the 1976 program will support approximately
740,000 9-week part-time summer jobs at the minimum wage
This proposed level is equivalent to the level of effort
provided in the summer of 1975, allowing for an improve-
ment in the unemployment rate for youth. The preliminary
estimate for the 1977 summer program is $400 million,
which would provide 672,000 jobs.
This program provides part-time summer jobs in various
organizations, including schools, hospitals, libraries,
community service organizations and private nonprofit
agencies. Traditionally, these summer jobs are in such
fields as clerical, summer camp aides, school maintenance
aides, library aides, day care aides, and ecology pollsters.
Supplemental budget requests for funds for this program
will be formally transmitted to the Congress this year
and in 1977 as soon as data on the projected level of
youth unemployment and other relevant economic ractors
for the summers of 1976 and 1977 become available (approi-
mately early March, each year). These funds will be
distributed through the more than 430 State, county and
other local prime sponsors of the Comprehensive Employment
and Training Act.
LIBERTY STRAIS ? FORD
Financial Assistance for Community Services
The present social services program, as authorixed under
Title XX of the Social Security Act, provides grants to
the States on a population basis for the delivery of a
wide range of social services to individuals and families.
Federal funds are provided in a three-to-one ratio to re-
quired State matching funds.
The Administration is proposing new legislation for Financial
Assistance for Community Services to enhance and amplify the
State's discretion in the provision of services, and eliminate
undue Federal regulation and restrictions on providers. The
main features of Financial Assistance for Community Services
are:
(1) Eliminate the requirement of State matching funds.
(2) Distribute $2.5 billion as a block grant to the
States based on population. About 30 States will
receive higher funding in 1977 than 1975.
(3) Eliminate most Federal requirements and prohibitions
on the use of Federal funds.
(4) Emphasize services to low-income Americans; focus
Federal funds on those whose incomes fall below the
poverty income guidelines.
(5) Require public review and comment on State planning,
evaluation, and reporting processes.
The Federal Government would retain the role of evaluating the
overall operation of this program and of providing a clearing-
house for the dissemination and exchange of information among
the States on effective services.
The Administration-proposed program of Financial Assistance
for Community Services will provide States the latitude to
use this source of funding more productively to meet their
greatest service needs unencumbered by excessive Federal
administrative and reporting demands.
Department of Labor
The overall budget for the Department of Labor declines
$4.3 billion in outlays to a total of $22.1 billion,
compared to $26.4 billion in 1976. The reduction
primarily reflects improvements in the economy which
lead to lower amounts for unemployment compensation
and permit the phase out of the temporary public
jobs program.
(in millions)
1975
1976
1977
Unemployment rate
.....
7.3%
8.1%
7.1%
Unemployment benefits
(Outlays)
$12,792
$18,402
$15,893
Temporary Employment
Assistance
$ 319
$ 2,331
$ 1,065
Average employment
: -
44,200
274,200
125,300
36
JAN 17 1976
MEDICARE IMPROVEMENTS OF 1976
HIGHLIGHTS. The President's Medicare proposals will:
Provide catastrophic protection for 25 million
aged and disabled persons by limiting an
individual's payments to $500 per year for
hospital and nursing home care and $250 annually
for doctor's fees. The proposal will reduce
cost-sharing under proposed law for 3 million
persons.
Slow health cost inflation by limiting increases
in Medicare payment rates in 1977 and 1978 to 7%
per day for hospitals and 4% for physician
services.
Require that patients pay 10% of hospital and
nursing home charges after the first day, until
they reach the $500 maximum, and increase the
existing deductible from $60 to $77 annually for
physicians' services, relating it to increases
in social security cash benefits
The President is requesting Medicare outlays of $19.6
billion in 1977, a $2.2 billion increase over 1976.
The budgetary impact of the reform proposals--
"Medicare Improvements of 1976 are shown in Attachment
A.
BACKGROUND. There are two components to the Medicare
program:
1. Hospital Insurance (HI) pays for inpatient
hospital care and subsequent skilled nursing
home and home health benefits. HI is financed
through a 1.8% payroll tax (half paid by each
the employee and employer) collected along
with the regular social security retirement
and disability tax.
2. Supplementary Medical Insurance (SMI) pays for
physicians and other outpatient services. SMI
is financed by premiums collected from the
elderly and disabled wishing coverage, and by
general tax revenues. Currently about 60% of
the funds come from the Federal contribution.
37
2
For both hospital and physicians services, the elderly
are expected to pay some initial costs-- a "deductible"-
and to share ,a certain portion of the other costs.
Medicare, in turn, pays the remaining medical costs for
covered services. Medicare will reimburse hospitals for
all reasonable costs and pays physicians and other
suppliers of medical services according to schedules of
customary and prevailing charges for particular services
in each geographic area.
The inflation of health costs has been particularly rapid
since the enactment of Medicare in 1965. In that period,
hospital costs have risen by 220%, from $40 per day in
1965 to $128 per day in 1975. Physicians have raised
their fees by 85% over the decade.
The need to protect the aged and disabled faced with extra-
ordinary medical bills in the light of these increases
and the added costs of modern medical care--is of major
concern. Present benefit limits need to be removed and
"caps" placed on required cost-sharing. At the same
time, cost-sharing provisions are needed to encourage
economical use of services for short hospital stays and
routine physician care. The President's proposals
address both these problems.
The medical care field is unique from most other sectors
of the economy in that 2/3 of all costs are paid not by
the user, or patient, but by a third-party--normally
private insurance or the government. As a result, there
has been too little incentive for the providers of medical
care to keep costs as low as possible and to run efficient,
economical operations.
Although recognizing that many of the cost increases which
have resulted in higher charges for medical care were
unavoidable, the Administration believes that its Medicare
policy of reimbursing hospitals and physicians for nearly
all increases merely serves to reinforce inflationary
pressures in this area. Consequently, the President is
also proposing that Medicare reimbursement rates be limited
to discourage--rather than reward--excessive inflation.
FORD
Attachment A
Medicare Improvements of 1976
(in $ millions)
Outlays
1976
1977
1978
Catastrophic insurance
Hospital insurance ($500 limit)
+15
+330
+420
Supplementary medical insurance
($250 limit)
--
+208
+634
Subtotal
+15
+538
+1,054
Cost-sharing reforms
Hospital insurance (10% coinsurance)
-330
-1,730
-2,020
Supplementary medical insurance
-- dynamic deductible
($77 on 1/1/77)
--
-111
-255
-- 10% coinsurance hospital-based
services
--
-19
-38
Subtotal
-330
-1,860
-2,313
Reimbursement limits
Hospital insurance (7% per diem)
--
-730
-1,905
Supplementary medical insurance
(4% charges)
--
-179
-301
Subtotal
--
-909
-2,206
Total
-315
-2,231
-3,465
JAN 17 1976
FINANCIAL ASSISTANCE FOR HEALTH CARE
In 1977, the Administration is proposing the Financial
Assistance for Health Care program. The proposal con-
solidates 16 separate health programs, including Medicaid,
into a single block grant of $10 billion in 1977 and
$10.5 billion in 1978. The proposal would give States
greater discretion, make States responsible for health
services for their low-income populations, and distribute
Federal funds more equitably.
In 1975, HEW spent $24 billion on health services pro-
grams. These Federal funds were distributed through
12 types of non-Federal intermediaries to 25 kinds of
providers, and paid for delivery of services to 60
different beneficiary groups. Of this $24 billion,
Medicare accounted for $15 billion and Medicaid
accounted for $7 billion.
The Financial Assistance for Health Care program will
reduce the inequities of current Federal programs and
funding and eliminate extensive Federal decision-
making as to which communities and categories of groups
get special Federal subsidies for health services.
Equity. The present programs are an inequitable way of
providing Federal funds to ensure needed health services
to the poor.
-- States do not receive Federal funds on an
equitable basis. Federal funds are distri-
buted largely to States with higher per
capita incomes which can afford to meet
Federal matching requirements or to communi-
ties that are effective at "grantsmanship.
The amount of Federal funds States receive
per low-income person varies by State from
more than $800 to less than $200. States
38
2
with higher per capita incomes receive
more Federal funds because they offer
more generous benefits and eligibility
standards than States that have greater
need.
-- Individuals and families in different
States do not receive comparable benefits
from Federal funds. A low-income family
in one State may receive far greater
Federal assistance through Medicaid than
would the same family in another State,
due to differences in benefit standards
and payment schedules. Communities in
similar circumstances are treated
differently through the project grant
award process, e.g., community mental
health centers which have been funded
in over 600, but not in all communities.
-- Federal health funds do not benefit all
of the poor before they are spent on the
nonpoor. Recent HEW data indicates that
only half of the expenditures from the
15 existing narrow categorical health
programs--excluding Medicaid--actually
support services to the poor.
In short, Federal funds--under Medicaid as well as
under special, narrow categorical legislation--are
often distributed on the basis of where a person
happens to live, the group of which he is a member,
where he gets his health care, and many other factors
that are unrelated to need.
Efficiency. The narrow categorical nature of these
programs makes program efficiency difficult and
coordination nearly impossible. For example:
-- under the current array of Federal laws,
specific groups of individuals, e.g.,
3
migrants, merchant seamen, mothers or
children are eligible for comprehensive
services under special programs. Other
programs are organized around specific
services, e.g., family planning, immuni-
zations, or particular types of providers,
e.g., neighborhood health centers or
community mental health centers. Some
of the existing programs are targeted
on specific diseases, e.g., venereal
diseases, or health problems, e.g., lead
paint poisoning. As a result, it is very
difficult for State and local officials
to develop comprehensive public health
programs; and
-- some federally-funded health centers have
been shown to have unusually high costs-
more than $80 per visit--and to be less
productive than other health care providers.
The fact that the Federal Government spends
its money in this way undermines State and
local capability to develop efficient health
care systems.
The proposed Financial Assistance for Health Care Act
will not, in and of itself, solve all the health care
services problems of this country. But it will help to
assure that the money spent for health services by the
Federal Government gets distributed more equitably and
that States and localities have greater flexibility to
apply funds to their health priorities.
The principal advantages of the new program over Medicaid
and the 15 current individual categorical programs being
consolidated are that it would:
-- allow States discretion to establish compre-
hensive health services and eligibility
standards. In 1975, States and localities
4
spent. $16 billion of their own funds for
health purposes, much of which supported
health services to the low-income popu-
lation;
-- give States greater flexibility in meeting
the health needs of low-income citizens.
The needs and problems of these people will
vary at the local level, and so should the
solutions;
provide for a much fairer allocation of
money for the States. Federal funds of
$10 billion in 1977, $10.5 billion in
1978, and $11 billion in 1979 would be
distributed among the States by a formula
based primarily on the number of low-income
persons in each State. No State matching
would be required and no State would
receive less in 1977 than it did in 1976.
A phase-in period will gradually ease the
transition to the more equitable distri-
bution in future years;
-- require the development by the States of
health planning and cost control systems.
States will be required to develop plans
for use of these funds. The fixed Federal
payment will increase the incentive of
States to control costs; and
-- enable the Federal Government to reduce
Federal employment for health grant
programs being consolidated by over
2,300 positions in 1977.
JAN 17 1975
PUBLIC HEALTH SERVICE (PHS) HOSPITALS
The 1977 budget proposes legislation to transfer to
community use or close the 8 Public Health Service (PHS)
hospitals. Care to primary Federal beneficiaries will
continue to be provided, but through contracts with
local health providers. The 26 free-standing PHS
outpatient clinics and the leprosarium at Carville,
Louisiana, will continue to operate. This proposal is
consistent with a January 1973 proposal and with other
proposals in the 1977 budget designed to reform Federal
financing and direct delivery of health care.
The Federal Government provides direct comprehensive
health care at no cost to approximately 223,000 primary
beneficiaries, most of whom are merchant seamen employed
on board American registered private vessels. The Federal
Government maintains 8 Public Health Service hospitals and
34 outpatient clinics--as well as contracts with other
Federal and non-Federal providers to deliver this health
care. In 1921, there were 94 hospitals; all but 8 hospitals
have already been turned over to other agencies, converted
to community facilities, or closed. The remaining hospitals
are located in Boston, Staten Island, Baltimore, Norfolk,
New Orleans, Galveston, Seattle, and San Francisco. Over
5,200 Federal employees are required to deliver this care.
In January 1973, the Administration proposed a phase out
of the 8 hospitals and to finance the care of primary
beneficiaries through contractual arrangements. This
proposal reflected an overall effort on the part of the
Administration to reduce the Federal Government's role in
direct delivery of health care.
P.L. 93-155, the "Department of Defense Appropriation
Authorization Act, 1973," however, specifically requires
the Secretary of HEW to continue operation of these
hospitals at the level of operation on January 1, 1973.
These hospitals have, therefore, continued to operate.
P.L. 93-155 provided that the HEW Secretary could submit
legislation to close or transfer to community use any of
these hospitals.
2
The continued maintenance of the PHS hospital system
primarily to provide health services for one occupational
group,
i.e
merchant seamen, is of questionable equity
and program merit.
-- The average occupancy rate of these hospitals
by merchant seamen was 32.5% in 1973 and 31%
in 1974.
--- The hospitals are located in major metropolitan
areas where adequate community facilities are
available to care for current PHS hospital
patients if the facilities are closed. The
increased demands on other community health
care facilities would not adversely affect
access to care for other citizens.
-- At least 5 of the hospitals (Galveston, Seattle,
Baltimore, Boston, and San Francisco) are in
areas which have an excess of hospital beds for
community needs. Continued operation of these
PHS hospitals tends to push up hospital costs
in the areas in which they are located.
--- Only 69% of the hospitals' capacity will be
used in FY 1976 (even if the hospitals were
scheduled to remain open in 1977).
-- For the hospitals to remain operational, substantial
capital investment could be required in future
years in order to enable them to meet hospital
accreditation standards.
The Federal Government first began providing a separate
hospital system to serve merchant seamen in 1798, but the
need for a separate system can no longer be justified,
particularly in light of the excessive number of hospital
beds in the nation. Moreover, the primary program purpose
for this assistance to prevent the spread of communicable
diseases-- no longer exists. Access to health care by
merchant seamen is no longer a problem, and most seamen
union funds that originally covered only dependents have
been extended to cover seamen as well. Other beneficiaries
of the PHS hospital system have available health care
financing that makes the continued operation of the PHS
hospitals for them unnecessary.
3
Under P.L. 93-155, the closure of the hospitals requires
the "written, unqualified approval" of the State health
planning and regional health systems agencies as well as
approval by Congress. Approval will be sought from the
agencies involved and legislation will be submitted to
Congress by this spring to transfer to community use or
close the 8 hospitals. It is anticipated that transfer
or closure can be achieved by the end of January 1977.
Occupational Safety and Health Administration
The 1977 budget for the Department of Labor's Occupational
Safety and Health Administration provides an increase to
enable it to:
Devote more emphasis to job health problems.
Provide more help to those, particularly small
businesses, who are trying to comply with the
letter and spirit of the law.
Maintain, but improve, job safety activities.
Budget Totals (000's)
1975
1976
1977
Budget Authority
102,006
117,585
127,970
Outlays
91,086
119,330
124,940
The Occupational Safety and Health Act of 1970 requires
the Occupational Safety and Health Administration (OSHA)
to regulate job safety and health in most private sector
workplaces. The law specifies that this he accomplished
through mandatory standards enforced by OSHA through in-
spections and fines for non-compliance. It also provides
for programs of education and training for employers and
workers to help them meet the law's requirements. Although
this law preempts State authority in occupational safety
and health regulation, States that have programs approved
by the Labor Department can get 50 percent Federal financing.
The Budget includes financing for programs in 23 States
and jurisdictions.
The question of OSHA's ability to reduce job accidents
and job-related illnesses has not yet been answered
conclusively. The program was started in 1971 and it
is not possible to obtain the statistics necessary to
evaluate this program in only five years. There is thus
insufficient measured experience at this time to permit
firm conclusions. Federal Government inspections of
large numbers of private sector workplaces, including
small businesses less accustomed to Federal regulation,
has generated substantial controversy and criticism from
advocates and from opponents of Federal activity in the
area. The extremely complex nature of the cause and
effect relationships in job-related diseases has delayed
issuance of health standards.
40
2
The 1977 budget request of $127.9 million acknowledges these
problems and provides resources to allow DOL to continue a
balanced expansion of the program and attack some of the
more difficult problems.
The request is for resources to continue existing program
levels and to increase the following activities:
Occupational Health. The Budget requests an increase
of 95 positions and $2 million to develop and enforce
more job health standards without lessening OSHA's
capability to develop and enforce safety standards.
Voluntary Compliance and Consultation. Budget requests
$19.7 million for a variety of education and consultation
programs to help voluntary compliance with the law. Most
existing education programs in OSHA have been about
general rights and duties under the law; in FY 1977
OSHA will expand its efforts to work more closely with
business associations, unions, and large and small firms
to solve specific problems. The proposal contains an
increase of $4.7 million to expand OSHA consultation
programs to the 21 States not now providing this service
with Federal matching assistance from DOL.
Inspector Training. Because of criticism of inspector
quality and conduct, the Budget seeks an increase of
$2.1 million for expanded training programs to upgrade
the professionalism of OSHA inspectors and enable more
inspections under occupational health standards which
are increasingly complex and require higher skills.
Economic and Environmental Impact. To insure that new
OSHA standards not only protect workers but take account
of economic costs and technological feasibility, the
Budget calls for an increase of $4 million to provide
$6.3 million for conducting detailed studies of the
inflationary and environmental impact of standards
before they are promulgated.
National Emphasis Programs. Finally, the proposals
will enable OSHA to expand and continue the National
Emphasis Programs begun in FY 1976. These programs
seek to reduce injuries and illnesses in selected
high-hazard industries, including small businesses,
by focusing OSHA activities on the recognized hazards
for which OSHA standards exist and by obtaining the
voluntary cooperation of trade associations, management
groups, organized labor and the scientific community
in making the programs work.
Housing
Top priorities in the housing area, as reflected in the
1977 Budget, are to: (1) further the current recovery
in housing construction, (2) modernize our financial
system so that housing can hold its own in competing
for capital, and (3) enable more families to obtain
adequate housing.
Housing recovery. Clearly, a recovery in housing con-
struction got underway during 1975. By November, the
annual rate of new housing starts had risen more than
56 percent above the rate achieved in December 1974.
The Administration's economic policy would further
this recovery.
In addition, the President's budget program will facili-
tate the housing recovery by making it easier to finance
new housing. The Budget provides $3 billion for the
purchase of mortgages in 1976--an amount sufficient to
finance 120,000 new apartment units. Since the mortgages
will carry lower interest rates than those generally
available, rent levels can be lower than otherwise.
The financial system. The President is again urging
Congress to pass the Financial Institutions Act. This
legislation would improve the ability of financial
institutions to compete for funds. It would also
encourage lenders to make mortgage loans by providing
a tax credit on income from such loans.
Adequate housing for the Nation's families. The Budget
provides for continued increases in the number of persons
receiving Federal housing subsidies. Subsidies will be
approved for up to 400,000 tenant families under a new
rental housing program in both 1976 and 1977. This
program (commonly referred to as the "Section 8" program)
pays the difference between a percentage of family income
and the rent charged by the landlord. The long-term
Federal obligation to provide these subsidies will come
close to $41 billion.
During the 1976-1977 period, additional subsidies will
be approved for 175,000 families with moderate incomes
to help them buy their own homes, under the Section 235
homeownership assistance program.
41
During the same period, the Farmers Home Administration
in the Department of Agriculture will provide housing
subsidies for 191,000 families through programs geared
to meet the needs of rural areas. In addition, Farmers
Home will help finance nearly 300,000 units of housing
through direct and guaranteed loans in rural areas where
there is a serious lack of mortgage credit.
All told, occupants of approximately 585,000 units of
housing will be approved for new subsidies in 1977.
Summary. The Federal Government also supports housing
through a variety of other policies and programs which:
Increase the supply of credit available to finance
home purchases in urban and rural areas.
Assure that financial institutions serving the
homebuyer continue to enjoy the public's
confidence.
Reduce the cost of housing and otherwise encourage
families to become homeowners, through a number of
special tax breaks.
Help individual families obtain the credit they need
to buy homes through mortgage insurance programs.
Help families obtain housing on a nondiscriminatory
basis through the enforcement of fair housing laws.
Help homeowners protect their properties against
losses by increasing the availability of property
insurance.
Help families maintain their homes by facilitating
improvements and rehabilitation.
Protect mobile homebuyers through the development
and enforcement of construction and safety standards.
Promote improvements in housing quality through
research and development.
Help locally based housing agencies provide public
housing by underwriting the operating deficits they
incur.
During 1977, Federal and federally sponsored agencies
will support housing by providing:
$36.0 Billion n new mortgage loans
$4.9 Billion in loan guarantees and insurance
$5.2 Billion in direct subsidies
$9.4 Billion in special tax breaks
Simplification of Income Maintenance
The Federal Government operates or supports a host of
individual programs to provide the necessities to those
currently unable to provide for themselves such as:
-- Food Stamps;
-- Aid to Families with Dependent Children (AFDC);
-- Supplemental Security Income (SSI) for the elderly,
blind, and disabled; and
-- Housing programs.
The Administration is proposing a number of management and
structural reforms to answer pressing problems in the major
income assistance programs.
Food Stamps
In the Food Stamp program, reforms would eliminate inequities
and abuse, and simplify State administration in order to
reduce overpayments, underpayments, and plain wrong payments.
There are two key features which would concentrate benefits
on those most truly in need: (1) limiting eligibility to
households with net monthly income at or below the poverty
level, and (2) providing each household a standard deduction
of $100 per month in computing net income, with an additional
$25 allowed for the elderly, to replace the present complex
itemized deductions. Other changes would reduce certifica-
tion error by basing benefits on actual average monthly
income for the previous 90 days rather than the applicant's
estimate of future income.
Aid to Families with Dependent Children (AFDC)
It is estimated that, nationally, 7.5% of AFDC cases are
ineligible, and 17.5% receive overpayments and 7.3% receive
underpayments of benefits. HEW is working closely with the
States in the AFDC program and enforcing carefully designed
standards to eliminate errors and to ensure that eligible
persons receive accurate benefits. The Administration is
also requesting legislative changes such as the inclusion
of stepparents' income and revision of the income-disregards
for work-related expenses in the determination of AFDC
eligibility. These changes will focus income assistance
resources on the most needy by assuring that family income
is counted equitably and work incentives are promoted.
FORD
-2-
Work Incentive (WIN) Program
New WIN program legislation will be introduced to assure
that all employable applicants for, and recipients of,
AFDC search actively for jobs and accept suitable work
as a requirement for continuing eligibility for AFDC
benefits.
Authorized by 1967 amendments to the Social Security Act,
the Work Incentive (WIN) Program is designed to assist
recipients of Aid to Families with Dependent Children (AFDC)
to shift from welfare dependency to self-support through
stable employment. Under current law, all nonemployable
persons (those under 16 years of age, in school, disabled,
or with a dependent under six years old) receiving assistance
under AFDC are exempted from registration with the WIN
program. Employable AFDC recipients are required to register
with WIN and participate in WIN work and training activities
or, where possible, accept placement in jobs without prior
training. Child care and other necessary support services
are provided to WIN registrants to facilitate their partic-
ipation. The program is run jointly by the Department of
Labor and the Department of Health, Education, and Welfare.
The new legislation would require that all individuals
applying for AFDC be exposed to job opportunities at the
time of application. If they are found to be employable
under the guidelines noted above, they must then register
with WIN as in the past. All AFDC applicants registering
for WIN would review job openings again at the time of
registration and be required to follow up suitable job
opportunities. In addition, they would be required to
accept suitable job offers or lose their eligibility for
AFDC payments. WIN would apply job search requirements
to an estimated 1.3 million AFDC recipients - a figure
more than double the FY 1975 level.
Work and training activities will no longer be funded by
WIN, although individuals registered with WIN may fill
available slots in programs funded under the Comprehensive
Employment and Training Act. By emphasizing direct place-
ment and labor market exposure, the WIN program will be
concentrating on its most successful and cost-effective
program area. Over the past two years, approximately
two-thirds of the WIN job placements (about 233,000
-3- -
individuals) have been direct placements--those requiring
no prior work experience or training. Child care and
support services will continue to be available to those
WIN registrants most in need of assistance during job
search and for thirty days after accepting employment.
Supplemental Security Income (SSI)
Similarily in SSI, HEW is implementing management improve-
ments to reduce the number of overpayments, underpayments,
and payments to ineligibles. Errors in payments occur
due to mistakes made in taking the initial claim, incorrect
initial reporting by beneficiaries of their income and
living arrangements, and late or incomplete reporting by
beneficiaries of changes in income or living arrangements.
HEW is also examining ways to simplify the federally-
administered complex State supplements to the basic SSI
benefit.
Housing Assistance
In the area of housing, the Administration will propose
legislation to standardize rental payments charged to
lower income families under two subsidy programs: low-
rent public housing and lower income housing assistance
(commonly known as section 8). A uniform definition of
income will be proposed and tenants will be expected to
allocate 25% of their adjusted income to rent to obtain
subsidies. Under the present system, tenants are fre-
quently charged lower rents for reasons unrelated to
rent-paying ability. Consequently, the proposed changes
will simplify administration and result in greater equity
among tenants and lower costs to the taxpayers.
Overall Improvements
These specific program proposals and management improvement
actions have been advanced with a view toward longer range
objectives, including: (1) simplification of income assist-
ance administration and program requirements, (2) improve-
ments in the delivery of benefits to eligible recipients,
and (3) targeting existing income assistance programs on
the needy to the greatest extent possible.
We must, however, move beyond these immediate problems to
treat more fundamental income assistance problems, many of
which involve the weakening of incentives for people who
get income assistance to seek work.
-4-
The various income assistance programs were enacted at
different times over The course of the years to meet
specific concerns and needs. Many programs were created
in isolation from the others, with requirements and bene-
fits only superficially related (and sometimes unrelated)
to those of other programs. At the same time, these
programs serve a largely overlapping population, often
the duplicative benefits yet not coordinated because of
the multiplicity of programs and the ends they are supposed
to serve. This independent development of programs has
resulted in the following shortcomings of our national
income assistance effort:
-- Inequity - Individuals and families with similar
circumstances may not receive the same benefits.
Some persons may not qualify for any benefits
simply because they have a few more dollars of
income than others whose income falls below a
qualifying cutoff line.
-- Complexity - The large number of programs with
varying requirements are costly to administer and
bewildering to the applicant trying to obtain the
benefits he needs. The applicant, by not being
able to apply at one location for several possible
benefits, surely fails to obtain all the benefits
which he may need.
-- Inconsistency -- Since these programs have come
into existence at different times and seek to
achieve different objectives, individuals who
qualify under one program may, though their need
is as great, not qualify under another.
-- Targeting on the needy - Due to possible combinations
of benefits, a recipient may actually receive more
than a similarily situated working person who cannot
qualify for income assistance, though the latter's
need may be as great or even greater.
-- Work disincentives - The reductions in benefits from
several programs that can occur whenever a beneficiary
earns income or receives other benefits from other
programs may act together, so that for every additional
dollar a beneficiary receives, more than a dollar will
be taken away in benefits.
-5-
Efforts to correct these problems and to curb abuses
have either been: (1) piecemeal, unrelated efforts to
solve narrow problems within a program with no concern
for the impact on other programs or for the possible
impairment to overall Federal income assistance policy,
or (2) grand and comprehensive legislative reform proposals
that bog down in the Congress because of the sheer magnitude
and complexity of the task, jurisdictional disputes or con-
flicts in policy objectives, and the plethora of special
and often competing interests that have to be confronted.
The omnibus and single program approaches have not been
successful in bringing about fundamental reform. The
Administration is proposing a new approach to reform exist-
ing income assistance programs without massively restructur-
ing programs all at once. This approach will permit new
solutions to problems in this area that will move the sepa-
rate and conflicting income assistance programs towards a
consistent system. The Administration is requesting
authority to make modifications in pursuit of clear objectives
within specific limits and subject to disapproval by the
Congress. Below are the outlines of this proposal:
(1) The legislation would provide for altering
eligibility requirements, the bais for computing
income and assets, structure of benefits, and
associated organizational frameworks.
(2) The authority would be limited to programs that
provide benefits to individuals or families in
cash or in kind that are based on a standard of
need related to the beneficiary's income. It
would not include social security, unemployment
insurance, or other benefits earned by the recipient
and not subject to means tests.
(3) The total amount of resources devoted to income
assistance programs could not decline. Thus,
if a change would reduce benefits, an offsetting
change would be required so that total funds
remained the same as before.
(4) Congress would be able to disapprove any modifi-
cation before it would take effect.
(5) The modification authority would be available
for a period of five years. During this period
the authority would be carefully assessed and
possible changes in it studied.
&
FORD
GERALD
LIBRARY
-6-
The legislation would allow rational changes in our
income maintenance system since the changes could be
developed from a single, broad perspective and would
accommodate the practical requirements programs indi-
vidually and in light of their relationship to other
programs. This modification authority could be used
only to promote the following fundamental objectives:
-- Assist individuals to become self-sufficient.
-- Simplify administration, reduce excessive
reporting and procedural requirements, thereby
reducing administrative costs.
-- Assure that incentives to work are fostered for
those who are employable.
-- Achieve a system that is comprehensible to the
public.
-- Count income and assets under consistent rules;
eliminate haphazard exceptions and inappropriate
disregards of income for various expenses.
The Administration's proposal does not require additional
expenditures for income assistance programs and would
result in administrative savings by virtue of simplifying
and rationalizing the operation of these programs. It
provides the opportunity to advance to the Congress and
the public specific reasoned measures which address con-
crete issues within a framework of clearly stated long-
term goals. Each proposal would be considered within the
context of income assistance policy and yet analyzed and
treated with on its merits. Responsible exercise of this
modification authority will promote a sounder, more rational
and effective structure of income assistance for needy
Americans.
Child Nutrition Reform
The Administration is proposing a single, block grant
to provide Federal funds to enable States to feed needy
children. There are now 15 federal programs which provide
subsidies for 40 different types of meals.
Due to recent congressional changes, the Federal Govern-
ment shortly will be spending more money on non-needy
children than it does on needy children unless these
programs are reformed. Children from all families, regard-
less of income, are now eligible to receive Federal subsi-
dies for school lunches.
At the same time these programs (mostly run through the
schools) are spending more money on more non-needy children,
we estimate there are at least 700, 000 children from poor
families receiving no benefits whatsoever.
The existing set of complex and overlapping programs
has developed in a largely piecemeal and uncoordinated
fashion from the obsolete price-support and surplus-removal
programs authorized by Congress to relieve the national
economic emergency of the early 1930's. These programs were
initially expanded in 1946 in order to ensure the disposal
of irregularly occurring commodity surpluses in the period
of postwar conversion.
Since 1966, both the size and number of the programs
and school lunch programs has continued to grow. The Federal
Government now provides approximately 20% of the total cost
of school lunches served to all children regardless of their
nutritional need or income. A patchwork of laws lead to
complex Federal controls and regulations over State and local
programs initially intended to be left to the States.
Existing programs not only subsidize breakfasts and lunches
which include milk, but also subsidize the consumption of
milk by itself as a separate program. These programs are
summarized in the attachment.
FORD
43
-2-
Essentially, the child nutrition block grants would
replace the school lunch, school breakfast, special
milk, and several other categorical programs and would:
Help feed more low-income children.
Eliminate the existing Federal food subsidies to
non-needy children.
Eliminate the existing administratively complex
programs and give States more flexibility and
responsibility in meeting the needs of its poor
children.
Save the taxpayers $900 million in the process.
Programs to be Reformed under the Child Nutrition
Reform Act
1.
School Lunch Program/Basic: This program provides
a 12.5$ subsidy for lunches served to children
regardless of family income in schools (including
tuition charging schools) and residential child care
institutions. All qualifying school lunches must
include one-half pint of milk. This program will
subsidize nearly 4.2 billion lunches for 26.5 million
children in 1976 at a cost of $521 million.
2. Commodity Distribution: This program provides
commodities valued at 11¢ (or cash in lieu of
commodities) for each lunch in addition to subsidies
under the Basic subsidy of 12.5$ per lunch for every
lunch served in schools and child care institutions
without regard to family income of the children.
Together with the basic School Lunch subsidy of
12.5¢, over 4.2 billion lunches in 1976 will be
subsidized by 23.5$ for a total cost of nearly
$1 billion.
3. School Lunch Program/Special Assistance: This
program provides additional subsidies of 56.75$
and 46.754 for each lunch served to children with
family income up to 125% of the poverty level and
from 125% to 195% of the poverty level respectively.
This program also subsidizes meals served in residential
child care institutions as well as schools and will
subsidize 1.7 billion meals to approximately 11.5
million children in 1976 at a cost of $998 million.
4. Non-Food Assistance Program (Food Service Equipment):
Provides grants for equipment to schools and residential
child care institutions located in areas with poor
economic conditions.
5. School Breakfast/Basic: Provides a 10¢ subsidy for
each breakfast served to children in schools and
residential child care institutions regardless of
income. All qualifying breakfasts must include one-
half pint of milk. This program will subsidize
340 million breakfasts for 2.4 million children at
a cost of $116 (including Special Assistance) in 1976.
is
FORD
GERAL#
LIQUARY
6. School Breakfast/Special Assistance: Provides
subsidies in addition to the Basic School Breakfast
subsidy of 25.25¢ and 19¢ for breakfasts served to
children with family income up to 125% of the poverty
level and from 125% to 195% of the poverty level
respectively. This program will subsidizes 277 million
breakfasts served in residential child care institu-
tions as well as schools for approximately 2 million
children in 1976.
7. Special Milk/Basic: This program increases the
consumption of milk by providing a subsidy of 5.5¢
for each half pint of milk served to children with
family income above 125% of the poverty guideline.
This is in addition to the milk that is required
to be served under other programs to participating
children. In 1975, over 1.7 million half pints of
milk were consumed at a cost of approximately
99 million.
8. Special Milk/Special Assistance: This program is also
designed to increase the consumption of milk by provid-
ing a subsidy of the full cost of serving half pints
of milk to children up to 125% of the poverty level.
Most of this milk is in addition to milk subsidized
under the subsidized breakfast, lunch and snack
programs. In 1975, approximately 360 million free
half pints were consumed at a cost of $24 million.
9. Special Supplemental Food for Women, Infants and
Children: Provides cash grants to State health
agencies to supplement the diets of pregnant and
lactating women and infants and children up to
age 5 who are or may be at nutritional risk due
to inadequate family income nutrition. States make
cash grants to local sponsors who may provide either
cash, commodities or vouchers to program participants.
There were 464,000 participants in 1975 at a cost of
approximately $90 million. Program costs will exceed
to $190 million in 1976.
10. Supplemental Feeding for Women, Infants and Children:
Provides commodities to supplement the diets of
pregnant and lactating women and infants and young
children. There will be approximately 140,000
participants in 1976 at a cost of $21.5 million.
11. Summer Food Program: Provides free meals to all
children regardless of family income participating
in summer feeding programs. Summer feeding projects
under this program must serve areas where at least
one-third of the population have incomes below 195%
of the poverty level. This program includes children
attending summer camps, recreation centers, and schools.
12. Child Care Food Programs/Basic: Provides subsidies
for each meal, including snacks at 5.25$ per meal,
served to children in day care programs regardless
of family income, at the same subsidy levels as the
school lunch program at least 23.5¢ per lunch. Estimated
costs are $114 million in 1976 (including the special
assistance program below).
13. Child Care Food Program/Special Assistance: Provides
additional subsidies for meals served free or at
reduced prices to children in day care programs from
families below 195% of the poverty level. Subsidy
levels are the same as for schools and include 15.5¢
and 10.25$ for free and reduced price snacks respectively.
Lunch subsidies range from 23.5$ to 80,25¢.
FORD
GERALD
LIBRARY
14. State Administrative Expenses/Basic: Provides funds
for State administrative costs for most of School
Lunch and Child Nutrition programs. Some of the
programs above provide additional administrative financing.
15. State Administrative Expenses/Summer: Provides cash
grants to States for the summer feeding program. In
addition to the basic administrative expenses grants,
a set-aside equal to 2% of the funds distributed for
the summer feeding program are used for administrative
costs.
Allied Services Act
The Administration is proposing legislation to encourage
and assist States and localities to develop, demonstrate,
and evaluate the utilization and effectiveness of human
services through the integrated planning, management, and
delivery of those services. The objective is to better
achieve the personal independence and economic self-suffi-
ciency of individuals and families.
The proposal's basic provisions are:
--- Grants may be made to State and local governments for
a maximum of two years to develop, and for a maximum
of three years to implement, plans to demonstrate
the coordinated delivery of services.
--- State and local governments with allied services
plans approved by the Secretary of HEW would be
authorized to transfer up to 30% of their Federal
funds from one HEW program to another under limited
conditions and for selected purposes.
-- The Secretary of HEW would be authorized to waive
technical or administrative constraints in any pro-
gram administered by HEW if they impode the develop-
ment of integrated human services programs.
-- Proposed State and local plans for the integrated
delivery of services would be subject to public
comment for a period of 60 days.
-- Service delivery agencies would have to meet privacy
safeguards.
-- A total of $20 million per year for planning and
implementation grants would be authorized for this
program.
Even with the major block grants proposed for education,
health, and social services programs, there will remain many
cases where HEW human service programs operate under differing
requirements through different local agencies, but serve over-
lapping target groups with similar or related services. For
44
-2-
example, both the older Americans and social services pro-
grams may provide funding for the delivery of meals to the
homes of poor elderly persons. However, social services
funding is provided to States and, through them, to local
welfare agencies, while older Americans funding goes to
State and sub-State area agencies on aging.
States and localities are increasingly circumscribed in
their ability to use Federal funds flexibly to meet their
greatest priorities. Each program is designed to serve
narrow categorical target groups with a range of services.
And categorical programs tend to proliferate for it is easy
to identify special groups with particular needs. State and
local flexibility is further reduced since many Federal pro-
grams require State and local matching funds to be used for
those programs, further restricting the effective and
efficient use of funds.
The end result, however, is that individuals cannot readily
have all their service needs met; service programs are often
unwieldy, complicated, and inefficient; the cost of services
may be high; and gaps in needed services may exist. The
categorical requirements associated with the resources
available under each program may create imbalances in the
amounts spent on various problems and seriously skew State
and local service priorities.
The Allied Services Act would permit States and localities
to redress their imbalances and target resources on their
most pressing needs. They would be enabled to explore and
develop new and innovative systems to make available and
deliver a large number of diverse services to meet several
needs among their population. Substantial cost-savings
might result which could be used to expand services to the
needy.
VA Cemetery and Burial Benefits
The Veterans Administration provides a wide range of
burial benefits for veterans who have served their
country honorably. All are entitled to free burial
in national veterans cemeteries, a grave marker, and
a flag. Families who prefer to bury a veteran in a
private cemetery also may receive a plot allowance
and up to $250 to help pay funeral costs.
Other programs supported by Federal tax money provide
burial benefits which are similar to the $250 VA
burial payment, and most veterans' families are eli-
gible for these benefits. For example, survivors of
the 90% of all veterans who qualify for Social
Security are eligible to receive a lump-sum death
payment of up to $255. Some veterans also are eli-
gible to receive burial payments provided under the
Railroad Retirement Act as well as under other pro-
grams for Federal employees. Legislation proposed
in the 1977 Budget will eliminate VA burial payments
to the extent that the veteran's family is entitled
to similar federally-funded benefits. With this
legislation, every veteran's family will be treated
fairly and equally: each will be assured of receiving
a burial payment of at least $250 from the Federal
Government but none will be paid twice for the same
purpose.
Currently, the VA administers 103 national cemeteries
in which the country's 29 million veterans and more
than 20 million of their dependents, as well as mili-
tary personnel and their dependents, can be buried.
New cemeteries are planned for California, Massachusetts,
New York, Pennsylvania, and the Washington, D.C. area,
and a number of existing cemeteries are being expanded.
Studies undertaken by VA indicate that most veteran
families choose burial in a national cemetery only
if it is within 50 miles of their homes. The Federal
Government cannot afford to build cemeteries near
the homes of all the over 50 million people entitled
to burial in national cemeteries; therefore, the
President has proposed legislation which would pro-
vide grants to States so that they can establish and
maintain veterans cemeteries. This program will
greatly expand both the number and geographic dis-
tribution of veterans burial sites.
VA Medical Care
The VA medical care system with 172 hospitals, 229
outpatient clinics, 89 nursing homes and 18 domicil-
iaries serves millions of veterans. The 1977 Budget
of over $4 billion is an alltime high for the VA
medical system. It will provide for care of record
numbers of veteran inpatients and outpatients, as
well as continued high quality of care.
In 1974, at the request of the Administration, teams
of VA and other health professionals surveyed all VA
hospitals to evaluate how the system was operating and
how it could be improved. The survey-called the Quality
of Care Survey--resulted in two major recommendations:
-- Over 9,000 employees should be added to the VA
medical care staff.
-- Over $300 million should be provided to correct
fire and safety hazards and do other needed
construction work on VA hospitals.
In 1975, funds were provided to begin the recommended
Quality Care improvements. The 1977 budget provides
funds for all of the Quality Care medical staff not
already hired--an increase of over 1,700 full-time
staff. It also includes over $200 million for se-
lected high priority construction projects, including
approximately $50 million related to Quality Care proj-
ects which were not started in 1975 or 1976.
In addition to providing Quality Care staff and construc-
tion funds, the 1977 budget proposes legislation which
will improve the VA medical care program. VA medical
care is focused primarily on veterans with service-
connected disabilities. To the extent that VA staff
and facilities are not fully utilized by these veterans,
they are available to care for veterans with non-service-
connected disabilities. Many of these non-service-
connected veterans have health insurance or are covered
by workmen's compensation. The 1977 budget proposes
legislation which requires health insurers to reimburse
the VA for the care provided to covered non-service-
connected veterans. This legislation reflects the
Administration's belief that the Federal taxpayer should
not bear the cost of caring for non-service-connected
veterans when to do so will benefit only third parties,
including insurance companies, who are legally liable
for the disability or injury necessitating such care.
If enacted, this legislation would save over $130
million a year.
46
VA Educational Benefits
The primary purpose of all GI Bill education programs
- --World War II, Korean conflict and Vietnam-era--has
been to assist veterans make the transition from mili-
tary to civilian life by helping them get the education
they might have received if they had not served their
country in a time of national emergency.
The Vietnam-era GI Bill has served its purpose well.
By the end of 1976, over 7 million people will have
taken advantage of their education benefits at a cost
to the Government of almost $23 billion.
The Vietnam conflict officially ended in May 1975; the
draft, in June 1973. With the advent of a peacetime,
All-Volunteer Force, GI Bill educational benefits are
no longer appropriate for those men and women who enter
military service in the future. They will choose the
military in the same way men and women choose civilian
jobs.
The educational assistance programs for veterans of
both World War II and the Korean conflict were, from
their inception, for readjustment purposes for those
who served during wartime. It was never intended
that these programs be a continuing benefit, and
within a reasonable period after cessation of hostil-
ities these programs were terminated. The Vietnam-
era program should follow the same course. The
period between the end of hostilities and the termina-
tion of eligibility for wartime veterans educational
benefits has already been longer in the case of Vietnam
than for any prior war. The 1977 budget reflects a
proposal to end education benefits for people who join
the peacetime All-Volunteer Force in the future.
Terminating these benefits will result in savings of
$54 million in 1977. Even more will be saved in later
years--$111 million in 1978 and $236 million in 1979--
a total of over $1.5 billion in five years.
Although education benefits will be ended for future
Armed Forces members, the GI Bill program will continue
for those men and women now in service. Because the
active duty force is smaller now that the Vietnam
conflict has ended, there will be fewer veterans
training in future years--563,000 fewer in 1977
than in 1976 even with no changes to current law.
Although the program will be smaller in the future,
47
it is important that it be as well run as possible.
The 1977 budget reflects a number of proposals to
ensure that the program fulfills its intended purpose
efficiently.
-- Veterans now have up to 10 years after they leave
the service to use their education benefits. A
return to the original 8 year eligibility period
established for the Vietnam-era program--the same
eligibility period provided under the Korean con-
flict program--provides the veteran with sufficient
time to readjust from military to civilian life.
This action results in savings of $624 million
in 1977.
-- Currently, the Government spends over $210 million
a year on GI Bill flight and correspondence course
programs. These programs have high drop-out rates
and provide few job opportunities. Reform will
eliminate new enrollments in these programs at a
savings of $35 million in 1977.
-- To ensure that veterans have funds for training
when they need it, the Veterans Administration
pays the veteran his monthly benefit in advance
of the time he actually trains. A few veterans
have abused these pre-payments by never intending
to use them for educational purposes. Others
change their plans for legitimate reasons. In
both cases, the Veterans Administration requests
return of the money provided to the veteran for
time he did not train. In 1977 improved adminis-
trative practices will accelerate the collection
of $100 million of these overpayments.
The costs savings from the legislative proposals to
reform the GI Bill program total $713 million in 1977,
and almost $5 billion dollars over 5 years.
Federal prisons
The Federal Prison System consists of 58 correctional facilities
which house a total population of approximately 24,500. A
broad range of services are provided for inmates, e.g., mental
health, medical, religious, recreational, legal, educational,
drug treatment, etc.
To reduce present overcrowding in Federal prisions and provide
modern, humane facilities for incarceration, the 1977 budget
provides $40 million for construction of two new institutions--
youth facility in Alabama and an adult facility in New York.
Five million dollars is included for planning and site
acquisition for two new correctional centers in Detroit and
Phoenix. The budget provides $13 million to continue with
the rehabilitation of existing Federal institutions, and $5
million and additional staff to activate three new institutions
to be completed during fiscal 1977--the Bastrop, Texas youth
center, the Memphis, Tennessee youth center, and the Butner,
North Carolina correctional institution.
The National Institute of Corrections is budgeted for $5 million,
which will be used to make grants to universities, correctional
agencies, and non-profit corporations. The National Institute
provides training, technical assistance, and research and
evaluation programs, and contributes to the improvement of
standards and policy development for correctional institutions.
Finally, the budget includes $500,000 and 40 new positions to
expand functional unit management--a decentralized style of
management which has had some success on an experimental basis
in reducing tension among inmates.
FORD
48
U.S. attorneys and marshals
A U.S. Attorney supported by legal and clerical staff represents
the Government in each of 94 judicial districts in the 50 States,
Puerto Rico, and the territories. As the Government's trial
lawyer and legal representative, the U.S. Attorney and his
assistants are responsible for the prosecution and administration
of the criminal statutes as well as most civil litigation in
which the United States is involved.
In 1976, the Department of Justice is authorized to employ 1,618
attorneys and 1,676 support personnel in the Offices of the U.S.
Attorneys. A staff increase of 9 percent (291 people) is
proposed for 1977 to enable the U.S. Attorneys to cope with a
growing caseload and increasingly complex cases.
The U.S. Marshals Service is responsible for court security and
support, witness security, and other activities related to the
operation of the Federal court system. In 1976, 1,701 Marshals
are authorized for the 94 judicial districts and for Washington
headquarters. An additional 87 Marshals are proposed for 1977,
an increase of five percent.
49
Antitrust Enforcement
The President has emphasized his intention to maintain an open
and competitive free market system unfettered by illegal
restraints of trade. The two agencies with responsibility
for enforcing the antitrust laws are the Antitrust Division
of the Department of Justice and the independent Federal Trade
Commission. The Antitrust Division has grown from 665 full-time
permanent positions and outlays of $17.8 million in 1975 to
818 positions and $21 million in 1976. Twenty new positions
will be added in 1977, and outlays of $22.6 million are planned.
The Federal Trade Commission's antitrust activities have
increased from 503 full-time positions and outlays of $12
million in 1975 to 593 positions and $17 million in 1976.
Thirty new positions are requested for 1977, with most of the
increase attributed to expanded antitrust enforcement. Some
of the increased funds are requested for extraordinary expenses
associated with major litigation of both agencies.
50
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"ocrText": "The original documents are located in Box 10, folder \"FY 1977 - Fifty Issues (2)\" of the\nWhite House Special Files Unit Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library\nFY 1977 BUDGET\nEnvironmental Protection Agency\nBudget Summary\nOutlays ($ Millions)\nFY 76\nFY 77\nPercent\nPercent\nPercent\n$\nof Total\n$\nof Total\nChange\nSewage Treatment\nConstruction\n2,350\n74\n3,770\n84\n+60%\nGrants to State\nand local planning\nagencies\n92\n3\n70\n2\n-24%\nRegulation development\nenforcement and\ntechnical assistance\n386\n12\n314\n7\n-19%\nResearch and Development\n297\n9\n280\n6\n- 6%\nGeneral Agency Management\nand Regional Adminis-\ntration\n68\n2\n66\n1\n- 3%\n3,193\n100%\n4,500\n100%\n+41%\nBudget Policy Highlights\n- Continue to make progress in cleaning our lakes and\nstreams by emphasizing expenditures for sewage treat-\nment plants.\n- Propose amendments to the Federal Water Pollution\nControl Act which place a greater priority on catching\nup on the backlog of sewage treatment plants needed\nto solve the more immediate and widespread water\nquality problems and reduce Federal commitments for\nprojects of marginal effectiveness.\n- Provide additional resources to the States for the\nimplementation of the Safe Drinking Water Act in order\nto assist them in assuming primary enforcement\nresponsibility.\n10RD LIBRA CTY\n23\n2\n- Include new funds for water quality planning on the\nfew remaining high priority areas which have not\nreceived financial assistance.\n- Continue to assist State and local pollution abate-\nment agencies to meet their environmental goals by\nfunding these programs at the obligational level\nrecommended in the FY 1976 Budget.\nSpecific Budget Decisions\n1. Construction Grants\n(a) FY 1977 outlays. Expenditures will increase\n60%, from $2.35 billion in FY 1976 to $3.8\nbillion in FY 1977. The FY 1977 outlay level\nrepresents a 94% increase relative to FY 1975.\n(b) FY 1977 obligations. The total value of new\ngrants will increase from $4.5 billion in\nFY 1976 to $6.1 billion in FY 1977 -- over a\n35% increase. The Federal Water Pollution\nControl Act Amendments of 1972 provided $18\nbillion for the construction of municipal\nwaste treatment grants. Beginning in FY 1977,\nover $6 billion will still be available for\nobligation. These unobligated funds will be\nsufficient to fund the majority of projects in\nmost States and consequently it will not be\nnecessary to request additional budget\nauthority in FY 1977. Recommendations for\nfunding beyond the funds presently available\nwill be made subsequent to Congressional con-\nsideration of the Administration's legislative\nreform proposals for this program.\nBudget Constraints\n(a) Reimbursable Projects. Previously, $1.9 billion\nhas been appropriated to reimburse municipalities\nfor projects constructed prior to the passage\nof the Federal Water Pollution Control Act\nAmendments of 1972 (P.L. 92-500). The FY 1977\nbudget contains no additional funds for this\npurpose.\n(b) Reform Legislation. Amendments to the Federal\nWater Pollution Control Act Amendments of 1972\nare being proposed which would reduce Federal\nliability from $333 billion to a program level\nin the neighborhood of $30 to $60 billion and\ntherefore would bring the potential Federal\nfunding requirements in line with the projected\navailability of funds. These amendments would:\n3\n- Give priority to the backlog of construction\nneeded to provide existing communities with\nsewage treatment facilities. This would be\naccomplished by requiring that the construction\nof sewage treatment facilities for future\ncommunity growth be the financial responsibility\nof local and State governments.\n- Leave to local governments the responsibility\nfor raising funds for those projects, such as\ncollector sewers, whose cost can be, and\ntraditionally has been, borne directly by the\nuser.\n- Limit Federal funding to the provision of\nsecondary treatment except where the grant\napplicant demonstrates that the water quality\nbenefits to be achieved from higher treatment\nlevels are commensurate with their cost.\n- Encourage the adoption of inexpensive non-\nstructural measures to treat episodic pollution\nproblems associated with storm water.\n2. Program and Planning Grants to State and Local\nAgencies\nFunds are provided to State and local pollution\nabatement agencies to implement the Safe Drinking\nWater Act, The Clean Air Act and the Federal Water\nPollution Control Act.\nFederal support of State water supply programs is\nproposed at a level of $20 million - a doubling of\nthe FY 1976 level. This funding will assist States\nin assuming the primary enforcement responsibilities\nfor public water systems under the Safe Drinking\nWater Act.\nBudget Constraints. Air control agency grants will\ndecrease from the FY 1976 obligational level of $55.5\nmillion to an obligational level of $51.5 million\nin FY 1977. The initial schedules for complying\nwith the requirements of the Clean Air Act have,\nfor the most part, been completed. The amount\nrequested in FY 1977, which is identical to the\nFY 1976 request will provide for the necessary\nmodifications to the schedules and for other high\npriority State activities.\n4\nWater control agency grants will decrease from an\nobligational level of $50 million in FY 1976 to an\nobligational level of $40 million in FY 1977.\nAlthough the program is reduced $10 million below\nthe 1976 appropriation, the 77 level is the same\nas the 1976 Presidential request, which will support\nthe continuance of high priority State program\nactivities. The remainder of the cost of meeting\nthe State responsibilities in this area is provided\nby State governments.\nSection 208 water quality planning grants will\ndecrease from $53 million to $15 million in FY 1977.\nPrevious to FY 1977, more than $200 million has\nbeen provided to local and State planning agencies\nto conduct areawide waste management planning. The\namounts provided in the FY 1977 budget include\nsufficient funds for the few remaining high priority\nstudy areas.\n3. Regulatory Program. FY 1977 outlays will decrease\n19% relative to FY 1976. This reduction reflects\nan expected decrease in expenditures for contract\nsupport initiated in previous years for the develop-\nment of the vast majority of regulations which are\nnow being implemented. Outlays of $314 million are\nadequate to make the appropriate revisions in\nregulations and to provide resources to the State\nand local government for their implementation. It\nshould be noted that outlays do not provide a\ncomplete representation of the level of activity\nin this area since the FY 1977 budget provides $369\nmillion in budget authority, approximately the\nsame program level as provided in FY 1976.\nAGRICULTURE HIGHLIGHTS\nFarm Income Stabilization Programs\nFarm income stabilization programs for farmers\nprovide: credit on reasonable terms, income\nprotection against low market prices for grains\nand other commodities and against natural\ndisasters adversely affecting crop production.\nThis is accomplished by providing price supports,\ndirect payments, and crop insurance to farmers.\n- Outlays for farm income stabilization (price\nsupports, direct payments) will decline by\n$630 million in 1977, largely due to:\nThe sale for unrestricted use of stocks\nof peanut oil accumulated under the\npeanut price support program, and the\noffering of surplus peanuts for sale to\ncrushers. This is necessary because of\nthe substantial inventories that have\nbeen accumulated by the Government. Oil\nsales should total about 375 million\npounds, and will be carried out in a\nway that will not disrupt the vegetable\noil market. In the absence of reform\nlegislation, it is likely that peanut\nproduction will exceed consumption.\nA 15 percent reduction in marketing\nquotas for the 1976 crop of flue-cured\ntobacco. This action is necessary to\nbring supplies in line with demand and\nthus avoid costly surpluses which must\nbe paid for by the Federal Government.\nPrice support loans will be reduced by\n$255 million.\nAn anticipated reduction in the need\nfor credit (loans) extended to foreign\nnations to encourage purchase of our\nagricultural commodities, from $900\nmillion in 1976 to $450 million in 1977.\nThis reduction is based on the strong\nforeign demand for grains.\nGERALA FORD\n21\n2\nHeirs\nThe death of an owner of a small business or\nfarm can create major financial problems for the\nheirs, particularly if they wish the business to\nremain in the family. Unless sufficient liquid\nassets are available (or become available upon\nthe death of the owner) to pay the estate tax\nliability, heirs may be compelled to sell the\nbusiness.\nThe Administration will seek legislation permitting\nheirs of owners of small farms to defer the first\npayment of estate taxes for five years and amortize\nthe balance over 20 years at 4 percent simple\ninterest. This will ease significantly the current\nproblem faced by heirs of being forced to sell\nfarms that have been in a family for years in\norder to pay estate taxes.\nResearch\nProduction Efficiency Research\nA $21 million increase is proposed for new\nfundamental research efforts in the agri-\ncultural sciences, 5.5 percent above research\noutlays in FY 1976. This work is aimed at\nimproving the efficiency of our agricultural\nproduction by reducing the amount of\npetroleum-based fertilizer or other inputs,\nor increasing output by breeding for greater\nresistance. Much of the research beginning\nin FY 1977 will be of the most basic nature,\nin an attempt to further an understanding of\nbiological processes. Subjects receiving\nspecial attention will be: (1) increasing\nunderstanding of the process by which plants\nconvert light to energy; (2) increasing under-\nstanding of the process by which plants convert\nand use nitrogen as nutrients; (3) broadening\nthe genetic base of plants to maintain high\nyields with greater resistance to pests,\ndiseases, and weather.\nTrial Boll Weevil Eradication and Pest\nManagement Program\n$4.3 million of Federal funds will be used\nin FY 1977 to begin a 3-year trial program:\n(1) to eradicate the boll weevil from\n3\nVirginia, North Carolina, and South\nCarolina; and (2) to operate a concurrent\nprogram in another part of the South, as\nyet undetermined, to reduce the boll weevil\nto economically manageable proportions.\nThe strategies of eradication and pest\nmanagement form the two major alternatives\nfor insect control. During and at the con-\nclusion of the 3-year program, evaluations\nwill be made to determine comparative\ncost/benefit relationships, the efficacy\nof regulatory measures, the willingness of\naffected growers to cooperate, and other\nfactors. The President and the Secretary\nof Agriculture will then determine the best\nstrategy for dealing with the boll weevil\nthroughout the entire South.\nThe boll weevil is our nation's worst\nagricultural insect, causing approximately\n$300 million worth of damage each year in\nlost cotton, as well as requiring over\none-third of the pesticide applied to our\ncrops nationwide each year ($75 million\nworth). A sustained effort needs to be\nmade to reduce both economic damage and\nenvironmental costs.\nGrain Inspection\nBecause of recent abuses in the Federally\nsupervised national grain inspection system,\nthe credibility of the current public/private\nsystem in the United States is being seriously\nquestioned here and abroad. A basic defect in\nthe current public/private system is the inherent\nconflict of interest in the private inspection\nagencies and the lack of authority for the\nDepartment of Agriculture to supervise ade-\nquately the private activities.\nTo strengthen the system and restore confidence\nin the grain quality, the Administration has\n4\nproposed amendments to the U.S. Grain Standards\nAct that include: (1) authority to require\nofficial inspection agencies to meet criteria\nto qualify for designation; (2) authority to\nsuspend and to revoke designations of official\ninspection agencies for specified causes and\nfor the Department to perform original inspec-\ntions on a temporary basis if the service is not\notherwise available; (3) elimination of conflicts\nof interest by official inspection agencies;\n(4) increasing penalties for certain violations\nof the Act from misdemeanors to felonies; and\n(5) authority for the Secretary to require\ninstallation of monitoring equipment in grain\nelevators as a condition of eligibility for\nofficial inspection. No major expenditures or\nincreases in Federal employment should result\nfrom this proposal.\nReform of Agricultural Conservation Program (ACP)\nLegislation will be proposed to the Congress to\nreform the agricultural conservation programs by\neliminating payments to farmers for carrying out\nfarming practices which are a normal part of their\noperations, and by emphasizing long-term conserva-\ntion practices which are of national concern and\nachieve desirable land-use adjustments. This will\nreduce the cost of the program from $175 million\nannually to $90 million.\nForestry\nProgram levels for recreation use, wildlife habit\nmanagement, rangeland improvement, and several\nother national forest activities will increase\nby $26 million and about 8 percent. Research\nwill be increased by $4 million and 5 percent,\nprimarily for improvement of information and\nanalytical procedures for the next cycle under\nthe Forest and Rangeland Renewable Resources\nPlanning Act of 1974. Total outlays will decline\nbecause payments to States, based on 25 percent\n5\nof national forest receipts in the transition\nquarter, will decline by $54 million and because\n1977 fire-fighting costs are included in the\nallowance for contingencies, rather than in the\nestimate for Forest Service. These additional\ncosts, largely unpredictable, have averaged\nabout $100 million in recent years.\nRural Housing and Community Development\nHousing assistance is provided in rural areas\nby direct Federal loans and grants. The loans\nare for the purchase of single and multiple-\nfamily housing units, as well as for repair and\nrehabilitation of existing units. The budget\nproposes about $2.7 billion in loan funds in\n1976 and 1977, compared with $2.2 billion in 1975.\nSome small housing programs have been proposed\nfor termination during FY 1976 because they are\nineffective - high relative cost, small number\nof families taking advantage of the programs -\nand because other assistance programs are\navailable; e.g., the home ownership subsidized\nloan program, the rental assistance program, and\nHUD's Section 8 program. The programs proposed\nfor termination are:\n- Farm labor housing loans and grants\n(loans - $10 M; grants - $8 M).\n- Mutual and self-help housing grants ($9 M).\n- Self-help housing land development fund\nloans ($1 M).\nSmall businesses\nIn recognition of the difficulties which many small businesses\nface in obtaining needed financing in commercial markets, the\nSmall Business Administration's major loan guarantee program\nwhich will help about 22,000 businesses in 1976 will be\nincreased by 33% to $2 billion in 1977, thereby providing\nassistance to an additional 6,000 firms. By careful management,\nSBA will be able to operate this program at no cost to the\ntaxpayers.\nDuring 1976 and 1977, particular emphasis will be given to\nincreasing the success rate of firms receiving loan assistance\nfrom the Small Business Administration, thereby enhancing the\nbenefits to small firms and reducing costs to taxpayers.\nActions by SBA will include improved criteria for selecting\napplications for loan assistance, additional funds for technical\nassistance to firms receiving loans, and additional staff to\nmore effectively manage its portfolio of existing loans.\nThe total amount of SBA direct loans will be reduced slightly\nfrom $350 million in 1976 to $315 million in 1977, primarily\nbecause it is expected that there will be a decrease in\ndemand to assist firms faced with energy shortages.\nThe Lease Guarantee program, which is operating at a $35 million\nlevel in FY 1976 and which is expected to serve only about 100\nbusinesses during the year, will be phased out with no new\ncommitments in 1977. A recent General Accounting Office report\nfound that the program is not being operated on an actuarially\nsound basis, even though Congress intended that it should be\nself-sustaining. The GAO estimated that net losses would be\nabout $17 million on policies issued through fiscal year 1974.\n25\n2\nto $45 million in 1977, pending an evaluation of the effective-\nness of these programs which were proposed by the Administration\nin 1974.\nThe President's budget also proposes a rescission of the $4\nmillion Congress added for 1976 and the transition quarter\nto fund additional economic development planning districts. It\nwould be inappropriate to expand the share of EDA funds going\nfor this planning and administrative infrastructure when the\navailable resources should be used to implement existing\nredevelopment plans and more effectively utilize the capabilities\nof established districts. The 1977 budget includes funds for\nthose districts now being financed by the Economic Development\nAdministration.\nMinority enterprise\nThe 1977 Budget reflects the Administration's continued strong\nsupport of efforts to expand minority participation in private\nenterprise. The Office of Minority Business Enterprise in\nthe Commerce Department provides financial assistance to\nStates and local organizations to support efforts to create\nand expand business ownership opportunities for minorities\nand to provide management and technical assistance for\nthese businesses. This assistance is being continued at\nthe 1976 level of $50 million, and OMBE will direct more of\nits efforts to stimulating private, State and local initiatives.\nThe Small Business Administration will expand its programs for\nassistance to minority businesses, with an additional $3 million\nfor technical and management assistance to minority firms\nparticipating in its loan programs and in its 8(a) procurement\nprogram. SBA expects to provide over $465 million in loans\nand loan guarantees to about 8,600 minority businesses in 1977.\nPostal Service\nThe President's Budget continues the policy of moving toward a\nnostal system in which the mail users will pay the cost of\nthe services, and the burden on the taxpayers will be reduced.\nIn 1977, the public must continue to carry a large share of\nthe postal costs, as the subsidies are gradually reduced to\nallow adequate time for the users to assume responsibility for\nthese costs.\nThe Postal Reorganization Act of 1970 established an indepen-\ndent Postal Service based on the principle that ultimately\nit would be virtually self-sustaining, with the costs of\nproviding postal service being borne by those who use the\nmails. The 1970 Act authorized certain interim subsidies\nto bring about this transition to independent status. The\nBudget requests $1.5 billion for this purpose in 1977, in\ncontrast to the Postal Service's request for $1.8 billion.\nFrom the beginning of the Postal Service, through 1977, over\n$9.5 billion will have been provided for this transition\nsubsidy.\nRecent legislative changes have authorized an extension of\nthe time period granted mailers of second, third, and fourth\nclass matter to adjust to higher full cost recovery postage\nrates. The President's Rudget does not recommend appropriation\nof the additional $307 million requested by the Postal Service\nto finance this extension. Such subsidy payments would place\nan unfair burden on the taxpayer and constitute a direct\nwindfall benefit, in the form of subsidized lower rates, to\ncertain classes of mail users. The President proposes to\nrestrain Federal outlays by $307 million by not requesting\nthe additional subsidies. This action will not appreciably\nimpact the Postal Service's financial position as these\nrevenues can be made up through higher postage rates on the\naffected classes of mail.\nThe Postal Service continues to face serious difficulties in\nachieving a balance between its costs and revenues. Like most\nbusinesses, it has experienced strong inflationary pressures,\nand postage rate increases have been necessary to cover rising\ncosts. The Postal Service is urgently exploring ways to\ncontrol costs through such steps as closing small post offices,\nreducing overtime, and transferring employees from overstaffed\noperations to fill vacancies elsewhere. A number of other\ncost saving proposals are under review. It also may be\nnecessary to find ways to accelerate the process of adjusting\npostage rates to reflect cost changes.\nTransportation\nHighways\nProposed highway outlays for 1977 and 1978 will be the highest in\nhistory. In 1976 outlays will be $6.6 billion, in 1977 $7.0 billion\nand in 1978 almost $7.4 billion. In the 1976 budget, the Administration\nproposed a $4.6 billion Federal-Aid Highway program level for 1975 and\n$5.2 billion for 1976. In order to stimulate employment in the con-\nstruction industry and the economy, the President released $2 billion\nin additional funds in 1975. Congressional action added another $1.1\nbillion to the 1975 program. For 1976 and the Transition Quarter, the\n1976 Appropriations Act imposed an obligation ceiling at a $9.0 billion\nlevel for the 15-month period. The 1977 budget recommends the con-\ntinuation of a statutory obligation ceiling in the Appropriations Act\nand proposes a $6.7 billion program level for 1977, which is consistent\nwith earlier Administration legislative proposals, but lower than the\nunusually high 1975 and 1976 levels.\nThe Administration continues to urge the Congress to enact substantial\nhighway funding reform proposals. Authorizations should be at responsible\nlevels and the fiscal operations of the highway program should be brought\ninto conformance with the procedures of the Congressional Budget Act\nof 1974. The maze of 35-plus non-Interstate categorial grants should\nbe consolidated into three broad programs to permit maximum state and\nlocal flexibility in use of funds. Federal expenditures for completion\nof the Interstate Highway System should be directed toward completing\nkey links necessary to connect the national system. Because the Congress\nhas chosen not to address the financial restructuring recommended by\nthe Administration, the proposal to permit state preemption of 1c\nof the gas tax which would have yielded $1 billion to the states is\nnot reflected in this budget. Therefore, the funding level of the\nHighway Assistance Programs reflected in this budget is $1 billion\nabove levels contained in the Administration's proposed legislation\nfor 1977.\n26\nTransportation\nMass Transit\nFederal assistance for transit is projected to grow from $69 million\nin 1965 to a planned level of $2.5 billion in 1977. About $575 million\nof the 1977 amount will come from transfer of funds from unwanted\nInterstate highway projects. Transit aid includes major assistance\nfor rapid transit system construction, purchase of buses and subway\ncars, lately, operating subsidies and research and development.\nThe Urban Mass Transportation Administration will provide $650\nmillion in contract authority to an estimated 278 metropolitan\nareas through its formula grant program. This amount compares\nwith $500 million in 1976. However, in fiscal 1977, the budget\nproposes a limit on the use of Federal funds to pay operating\nsubsidies to 50% of the formula-allocated funds. This limitation\nwill help foster fundamental, long-term improvements at the local\nlevel in the financial management and operations of transit systems.\nThe Administration is concerned that Federal subsidies for operating\ncosts perpetuate high-cost transit operations and archaic fare\nstructures. Without needed capital improvements and operational\ninnovations, public assistance to transit simply becomes costlier,\nand eventually requires cutbacks in service and increased fares.\nThis budget proposal will insure that necessary capital equipment\nis replaced and use of the Federal funds almost entirely for\noperating subsidies is avoided.\nWhile both the 1976 and 1977 budgets include funding allowances to\nenable the Federal Government to participate in the initiation of\na selected number of new rapid transit systems, Department of\nTransportation policy and practice will continue to insist that\napplications for such new projects reflect a careful and rigorous\nanalysis of transit alternatives to assure that lower-cost, but\nequally effective, options are considered.\nTransportation\nWashington, D.C., METRO\nBetween 1969 and 1975 the Federal Government committed $1.0 billion\nof direct Federal aid and guaranteed $1.0 billion of local bonds\ntoward construction of the Washington, D.C., metropolitan area subway\nsystem. Local governments committed $600 million in the same period.\nThis mass transit system, which was estimated in 1969 to cost $2.5\nbillion, is now estimated to cost over $4.6 billion.\nThe 1977 budget includes $90 million of Federal funding for METRO\nconstruction under this project's separate 1969 legislation, and\nan estimate of $400 million for the amount of Interstate highway\nfunds which local jurisdictions are expected to apply toward METRO\nconstruction in 1977. Including local matching funds, approximately\n$700 million could be invested in METRO in fiscal 1976 and about\n$645 million in 1977. These amounts in fiscal 1976 and 1977 will\nadd an additional 25-30 miles to the almost 50 miles of system\nunder construction as of January 1976. Initial rail rapid transit\nservice is now scheduled to begin on a 4.6 mile downtown stretch in\nmid-1976.\nWhile current funding continues investment in the relatively more\nproductive parts of the METRO system, concerns about rising capital\ncosts and unanticipated operating deficits have prompted the Federal\nGovernment to urge a careful review of future fiscal and construction\nplanning for METRO. It is essential that local governments join with\nthe Department of Transportation in subjecting this project to further\nanalysis in order to get control over escalating construction and\noperáting costs. Meanwhile, the 1976 and 1977 funds will be targeted\nto construct operational segments of METRO at the earliest possible\ndates.\nTransportation\nRail Freight System in the Northeast (ConRail)\nSince 1970, nine railroads in the Northeast and Midwest have declared\nbankruptcy. In order to prevent serious economic problems in the\nregion, legislation has been proposed for Federal assistance to\npermit the reorganization of seven of these railroads into a new\ncorporation, ConRail. The nation's largest railroad, Penn Central,\nwill be included in this new system.\nThe Federal Government, acting through the U.S. Railway Association\n(a new agency, not part of the Department of Transportation), will\nprovide a total of $2.1 billion to ConRail over five years. This\nmoney will be used to fix the worn-out track and other facilities,\nas well as pay for initial operating losses. To protect the tax-\npayers' interest, all of these funds are to be repaid when ConRail\nbecomes profitable.\nAbout 5000 miles of rail lines owned by the bankrupts will not become\npart of ConRail. Federal programs are available to help state and\nlocal interests subsidize, buy, and improve these facilities, wherever\ncontinued rail service is found to be necessary.\nTransportation\nNortheast Corridor\nThe corridor between Boston and Washington, D.C., is the most densely\npopulated and heavily travelled one in the country. Rail passenger\nservice plays an important transportation role in this corridor,\nwith over 9 million trips being taken on AMTRAK trains there each\nyear. The Administration has proposed a six-year, $1.2 billion\nprogram to bring the railroad passenger service in this corridor\nto the highest level it has ever experienced. The request for 1977\nis $125 million. The program would extend electrification beyond\nNew Haven to Boston, replace and improve much of the track, ties\nand associated right-of-way and make various station improvements.\nThis investment would improve service between Boston, New York\nCity and Washington, D.C., to provide a reliable, comfortable ride\nwith improved energy efficiency which should result in higher rider-\nship levels. The Administration is currently discussing this proposal\nwith the Congress in negotiations being conducted on the omnibus rail\nlegislation.\nTransportation\nPassenger Service\nAMTRAK was created in 1970 as a for-profit, private corporation to\nrevitalize rail passenger service. Since then it has been given\nover $1 billion in Federal assistance for capital improvements and\nan additional $1 billion in operating grants. Its performance has\nbeen mixed -- while ridership has increased substantially from\n11 million in 1972 to 17 million in 1975, losses have risen at\nan even greater rate from $153 million in 1972 to $299 million in\n1975. The Congress refused to allow reduction of lightly patronized,\ninefficient service during this time while adding other routes with\nlittle transportation value. On trains outside the Northeast Corridor,\nAMTRAK passengers have an average of over a $30 per trip subsidy,\ncompared to an average fare of less than $24. The Administration in\n1977 proposes to allow AMTRAK operating grants of $378 million, an\nincrease of $49 million over 1976. Since this is about $51 million\nshort of what would be needed to retain all present routes, some service\ncuts will be required. AMTRAK will determine specific routes to be\neliminated as allowed in legislation passed recently which permits\nservice cuts to be made according to newly developed criteria.\nTransportation\nAviation\nThe aviation program in the Department of Transportation will increase\nby $100 million to $2.4 billion in 1977. Federal grants to airports\nrose from $50 million in 1970 to nearly $350 million in 1975 and will\nbe maintained at $350 million in 1976 and 1977. When serious airport\ncongestion arose in 1969-70, Federal aid for improving and upgrading\nairports was greatly increased, and new taxes (primarily passenger\nticket tax of 8%) on aviation users were levied. Meanwhile, airport\ncongestion problems lessened, and are now considerably less than the\n1969-70 levels.\nThe Administration has proposed legislation which would spread the\naviation tax burden more equitably and require those who benefit\nfrom the system to pay for it. Specifically, taxes on air carrier\npassengers would be reduced while general aviation taxes would be\nraised to reflect the public assistance they receive. This legislation\nproposes to use revenues from aviation users to pay certain costs\n($476 million in 1977) directly associated with maintaining the air\ntraffic control and navigational aid systems. At present the general\ntaxpayer rather than the user pays for all operating costs of $1.6\nbillion annually associated with the National Airspace System.\nAs in previous years the budget provides for an increase of 519 to\n29,083 in the number of air traffic controllers so that safety is\nassured in connection with the forecasted growth in aviation activity.\nA modest increase in system maintenance personnel is also planned.\nThese FAA employment level increases will be offset in part by re-\nallocation of positions from other activities.\nTransportation\nWaterway User Charges\nDuring calender year 1976, the Administration plans to submit a\nlegislative proposal that would impose charges for the use of\nwaterway facilities. It will aim at recovering $80 million in\n1977 which is a portion of the Federal costs of providing those\nfacilities. Details of the proposal are being worked out by DOT\nand other interested Federal agencies. Waterway carriers, mainly\nbarge operators, have never been charged for the use of waterways\nfacilities, all of which have been financed by the Federal Govern-\nment. This Federal subsidy has given waterway carriers a competitive\nadvantage over railroads particularly, and is not fair to the general\ntaxpayer. This user charge proposal will be a start toward remedying\nthis situation.\nMerchant ship construction and operations\nTo remove the cost disparity between U.S. and foreign shipbuilders,\nthe Maritime Administration of the Commerce Department pays\nconstruction differential subsidies for U.S.-built ships intended\nfor use in the U.S. foreign trades. Oversupply of certain ship\ntypes, especially oil tankers, has led to a slowdown in demand\nfor merchant ship construction. Whereas the program has been\nmaintained at approximately a $250 million level since 1970,\ndecreased demand for subsidies in 1975 led to a $101 million\nprogram level in that year. Recovery of ship construction\ndemand is projected for 1976 and 1977, with respective budget\nlevels of $200 million and $247 million. Contracts in 1976-1977\nwill add approximately 770,000 deadweight tons to U.S. shipyard\nproduction totals. No new budget authority is required to\nsupport a $247 million program level in 1977 because of unused\nfunds carried into 1977 from prior years.\nThe Maritime Administration also pays U.S. ship operators an\noperating differential subsidy to offset the higher cost of\noperating a ship under the U.S. flag rather than under a\nforeign flag. An appropriation increase from $316 million\nin 1976 to $404 million in 1977 is proposed for this purpose.\nCommunity Development Grants\nOn August 22, 1974, President Ford signed into law a\nbill establishing a new program of community develop-\nment block grants to States and local governments.\nThe Budget provides for a significant increase in\nblock grant commitments under the program, with\nfunding in 1977 proposed at $3.2 billion.\nThe block grant program has brought about major changes\nin the way Federal community development assistance is\nprovided:\n-- We now have a single program which can provide\nfunding for community development activities,\ninstead of the separate programs that existed\nuntil 1974 for such things as sewer lines,\nneighborhood centers, municipal parks, and\nurban renewal.\nFunding for individual community development\nprojects now depends on local needs and\npriorities, rather than on the whim of Federal\nofficials or the luck of the draw, as it did\nunder the old system.\nThere is now a formula for allocating Federal\naid on the basis of relative need, instead of the\nold approval system that put a premium on having\nexpensive consultants and influential spokesmen.\n(This means that while some communities may get\nless in the future than they got in the past, no\ncommunity gets less than its fair share of total\nfunding.)\nChief executives of large cities and counties now\nhave a pretty good idea of how much Federal com-\nmunity development assistance they can expect to\nreceive, and can plan accordingly; the old system\nusually kept them in the dark as to what they\ncould expect in Federal aid until the awards were\nmade.\nIn recognition of these improvements, the President's\nBudget provides $3.2 billion for block grants in 1977--\nabout $450 million more than in 1976. In percentage\nterms, the increase is nearly three times as large as\n27\nCommunity and Regional Development\nPublic works programs to combat unemployment\nThe 1977 Budget includes $291 million for the programs of the\nEconomic Development Administration and the Regional Action\nPlanning Commissions in the Department of Commerce. These\nprograms are to be focused on developing permanent employment\nopportunities for residents of economically depressed areas\nof the country. In 1977 these agencies will once again turn\ntheir full attention to assisting the chronically depressed\nareas, after devoting considerable attention in 1975 and 1976\nto creating temporary jobs for the unemployed. The $42\nmillion requested for the Regional Commissions will provide\nfor the same level of program activity recommended in the 1976\nBudget and is an increase over the 1975 level.\nThe $249 million requested for EDA's public works and business\ndevelopment projects and related programs is considered to be\nthe amount that can be used in an effective manner to stimulate\nlong-term economic development in economically depressed areas\nin 1977. While the appropriation request for EDA and the\nCommissions is being reduced, outlays from the economic\ndevelopment programs will increase from $505 million in 1976\nto $530 million in 1977.\nThe 1977 Budget does not request further funding for the Job\nOpportunities program or to continue the 1976 expansion of the\nregular job programs of EDA and the Commissions. In the 1976\nappropriations, Congress added $92 million to these agencies\nfor their ongoing programs, plus $375 million for the Job\nOpportunities program. The Job Opportunities program is very\ndifficult to administer effectively, and is an undesirable\nmeans of allocating funds among agencies. Under this program,\nCommerce allocates the funds among the Federal agencies based\non a minimum amount of information on the proposed use of the\nfunds. This system avoids the normal budgetary and appro-\npriation process for allocating funds to agencies and does not\npermit either the Congress or the President to assure that the\nfunds are allocated effectively.\nIn addition to ending funding for temporary jobs, the 1977\nbudget proposes other restraints in the EDA programs. In\nparticular, the new program of formula grants to states which\nprovided $20 million in 1976 is being suspended, and the new\nblock grant program is being reduced from $77 million in 1976\n27\nHUD Comprehensive Planning Assistance (701) Program\nThe Federal Government helps public and private agencies\nplan for the future through more than 45 different pro-\ngrams. The best known of these--HUD's 701 program\n(named after the section of the law that created it) --\nhas been distributing grants for 22 years, and has\nprovided funding to numerous public planning agencies\nthroughout the country.\nWith the community development block grant program now\nin full swing, there is less of a need to tie Federal\ngrants directly to planning activities. Accordingly,\nthe Budget provides for phasing down the 701 program\nfrom $75 million in 1976 to $25 million in 1977.\nThe community development grant program provides State\nand local governments with Federal money that may be\nused for a wide array of activities, including planning.\nUnder the program, recipients are free to decide how\nmuch Federal aid should be used for planning and how\nmuch should be used to implement the plans. There is\nanother advantage to funding planning and implementation\nfrom a single pot: The closer these activities are\nlinked, the more effective Federal community development\nassistance will be.\nFederal planning assistance will continue to be available\nunder other Federal programs, many of which are linked to\nfunctions of national interest. And, HUD will continue\nto provide planning assistance under the 701 program for\nactivities which might not otherwise qualify for assistance.\n28\nHigher Education\nThe President's budget provides $2 billion for higher\neducation in FY 1977. This will provide assistance to\napproximately 2.4 million students enrolled in colleges,\nuniversities and other postsecondary institutions across\nthe country. There are two principles that have guided\nthe Administration in the formulation of this budget.\nFirst, no student should be denied access to a postsecond-\nary education because of financial barriers. Those in\nneed should receive grants; others with higher family\nincomes should be helped to borrow to meet the costs.\nSecond, in most cases, aid should be provided to individ-\nuals rather than to institutions. In this way, the student ---\nwho is the ultimate consumer in the education process ---\ncan exercise choice, not on the basis of the aid that a\nschool receives, but on the basis of the kind of education\nthe student wants. Aid to institutions should be limited\nto carefully defined objectives or supplementary to direct\nstudent aid.\nIn accordance with these principles, the Administration\nis proposing the following actions:\n-- A request of $1.1 billion for the Basic Opportunity\nGrant program.\n- A funding level of $44 million for the State\nStudent Incentive Grant program.\n$400 million in subsidies for loans made under\nthe Guaranteed Student Loan program.\n--- $250 million for the College Work-Study program.\n--- $110 million for the Developing Institutions\nprogram.\n--- $60 million for Special Programs for the Disad-\nvantaged.\n-- Elimination of the Supplemental Education\nOpportunity Grant program.\nGERALA AUTHORIT 4. FORD\n20\n2\nNo new capital contributions for the National\nDirect Student Loan program.\n-- Elimination of the Veterans Cost of Instruction\nprogram.\n-- Elimination of the University Community Services\nprogram.\n-- Elimination of the Postsecondary Education\nCommission program.\n-- Elimination of the Personnel Development program.\nBasic Opportunity Grants\nThe Basic Opportunity Grant program provides aid to\nneedy students and can be used at any college or university\nselected by the student. The amount of the grant is based\nupon the student's ability to pay, and is adjusted to the\ncost of the institution to be attended.\nThe Administration is requesting rull funding for this\nprogram in 1977. Every needy student may receive up to\n$1,400 per year but no more than one-half of need. The\nstudent's need is determined after taking into account\nthe contribution the family is expected to make. This\nexpected family contribution varies with income and family\nsize. Under the formulas used, no grants are now made to\nstudents with family income above $12,000. 1.3 million\nstudents will receive an average award of $854 under this\nprogram. The amounts provided by the Administration will\nprovide $400 million more to serve 214 thousand more\nstudents than Congress provided for 1976 and $100 million\nmore than was appropriated for all student grant programs\nin 1976.\nSupplemental Education Opportunity Grants\nBecause the Administration is requesting full funding\nfor the Basic Grant program, it is proposing to eliminate\nthe Supplemental Grant program. This program is administered\nby the colleges and they determine who receives a grant\nwithout any Federal restriction on standards of need, as\nwell as, the size of the grant (up to $1,500 a year). The\n3\nappropriation made by Congress for 1976 (which the\nAdministration has asked be rescinded) would provide\nan average of $530 each to 445,000 students.\nWork-Study Programs\nIn recognition of the fact that many college students,\nincluding those who get a basic opportunity grant, need\na job to provide enough income to stay in school, the\nFederal Government provides grant funds to colleges and\nuniversities to create jobs for students. Federally funded\nwork-study programs pay 80% of the wages to a working\nstudent employed by a school or by an off-campus nonprofit\ninstitution.\nThe Administration proposes to provide $250 million in\n1977. This will provide 652,000 jobs in school year 1977-78.\nThe Administration is proposing that the Federal share of\nwages be reduced to 70% next year and down to 50% by school\nyear 1979-1980. This will allow more students to share the\nFederal funds.\nGuaranteed Student Loan Program\nThe Federal Government guarantees the repayment of\nstudent aid loans made by others -- most typically banks\nor the schools themselves. In addition to this direct\nguarantee, the Federal Government will re-insure States\nwhich offer their own loan guarantees by agreeing to pick\nup 80¢ out of every dollar of a defaulted loan. One\nmillion students will obtain $1,276 million in loans in\nthese loans in FY 1977.\nThe maximum interest rate is now 10%, of which the\nGovernment pays any in excess of 7% for the life of the\nloan. In addition, the Government pays all of the interest\nwhile the student is in school. The maximum loan amount\nis up to $2,500 per year, up to $7,500 total while an under-\ngraduate, and up to $10,000 total if a graduate student.\nThe loans are available to almost any student, regardless\nof family income, and can be used to attend the school the\nstudent chooses. In order to assure an adequate supply\nof private capital for student loans, legislation is pro-\nposed to increase the maximum interest rate charged by banks\nfrom 10% to 11%, with the Government paying the increase for\noutstanding loans, and students paying the increase on new\nloans.\n4\nNational Direct Student Loans\nThe National Direct Student Loan program has, since\n1958, provided $3 billion to colleges and universities.\nColleges and universities have used these funds to provide\n3% interest rate loans to students. Funds are provided\nto colleges and universities, who in turn determine which\nstudents meet their own definition of need and then can\nreceive these loans. Unlike other Federal loans, however,\nthis money is not returned to the Government, but is\nrepaid to colleges. This program was enacted well before\nthe current programs of direct grants to students meeting\na national definition of need, and of guaranteed loans.\nIn view of these new programs, no further capital contribu-\ntion to college loan funds are proposed. However, colleges\nwill have over $225 million available for relending in\nschool year 1977-1978.\nInstitutional Assistance\nThe 1977 budget proposes the elimination of most\nprograms which provide aid directly to colleges or uni-\nversities. The largest institutional aid program that\nwill be funded in 1977 is the developing institutions\nprogram. Under this program, $110 million is being\nprovided to schools with high percentages of black and\nother minority students to enable them to enter the main-\nstream of American higher education. In addition, the\nbudget provides $60.3 million for institutions to assist\nstudents who are disadvantaged.\nFinancial Assistance for Elementary\nand Secondary Education\nIn the area of Federal support for elementary and\nsecondary education, the Administration is proposing to\ngroup 27 separate programs into one, unified program\nwith a FY 1977 funding level that would total $3.3\nbillion.\nThe bulk of Federal support for elementary and second-\nary education funding is distributed through States to\nlocal educational agencies through mechanisms that take\ninto account such factors as school-age populations, income\nlevels of the students' families, etc. These different\ntypes of support have various objectives which may not\ncorrespond to the State or local educational agencies'\nmost pressing need.\nIn order to eliminate administrative difficulties\nand to provide greater freedom to educational agencies\nin using Federal monies, the Administration is proposing\nto combine these programs into one broad funding authority.\nThe programs included in the proposal are listed in the\nattachment.\n31\nPrograms Included in the Financial Assistance\nfor Elementary and Secondary Education Act\nPresent Elementary and Secondary Education Act\n-- Education of the Disadvantaged: This program\nprovides support for compensatory educational\nactivities aimed at insuring equality of educa-\ntional opportunity for disadvantaged students.\nSupport is provided to States and then to local\neducational agencies based on a formula. In\naddition, support is provided to States for the\nchildren of migrant workers and for handicapped,\nneglected and delinquent students who are residents\nin State maintained institutions.\n-- Educational Support and Innovation: This program\nassists educational agencies in improving the\ntechniques and methods employed in education.\nFunds are distributed to States on a formula\nbasis and selected projects are then funded within\neach State.\nEducation for the Handicapped\nState Grant Program\nFormula grants are made to States to assist in the\nprovision of educational services to handicapped children\nat the preschool, elementary and secondary levels. Funds\nare allocated to the States based upon the number of all\nchildren aged three to twenty-one inclusive in the States.\nSeverely Handicapped Projects\nProject grants are made for the development of demonstra-\ntion models that are easily replicable in schools. This\nprogram is designed to make severely handicapped children\nas independent as possible through specialized services.\nSpecific Learning Disabilities\nGrants and contracts are made with institutions of\nhigher education, State, local and private agencies to\n2\nprovide comprehensive services for all children with\nspecific learning disabilities. These activities are\nachieved through the funding of model demonstration and\nrelated programs.\nEarly Childhood Education\nGrants and contracts are made on a matching basis\n(90% Federal/10% local) to stimulate the development of\ncomprehensive educational services for handicapped children\nfrom birth up to 8 years.\nRegional Education Programs\nGrants and contracts are made with institutions of\nhigher education, including junior and community colleges\nand other appropriate educational agencies for the develop-\nment and operation, on a regional basis, of specifically\ndesigned programs of vocational, technical, postsecondary\nor adult education for handicapped persons.\nInnovation and Development\nGrants and contracts are made with inst: tutions of\nhigher education, educational and other public and private\nnon-profit agencies. This activity attempts to improve\nthe effectiveness of educational systems for the handicapped\nthrough the verification and packaging of educational models.\nMedia Services and Captioned Films\nThis program provides the handicapped learner with\nspecific materials to increase educational achievement.\nThis is achieved through a National Center for Educational\nMedia and Materials for the Handicapped.\nRegional Resource Centers\nProject grants and contracts are made with institutions\nof higher education, State educational agencies, or non--\nprofit private organizations to establish and operate\nregional centers, whose purpose is to increase the develop-\nment and application of programs for handicapped children.\n3\nRecruitment and Information\nThis program provides for grants or contracts with\ninstitutions of higher education, State and local\neducational agencies to maintain information and referral\nservices for parents and their handicapped children.\nAdditionally, the program supports projects to interest\npeople in the career of special education.\nPersonnel Development\nThis program provides grants to institutions of\nhigher education, State and local educational agencies\nand other non-profit agencies to prepare teachers,\nsupervisors and other educators, researchers, speech\ncorrectionists and other special service personnel to\nmore effectively educate handicapped children.\nVocational and Adult Education\nBasic Grants to States\nFormula grants are made to States to assist them in\nconducting vocational education and training programs.\nStates are required to set aside 15% for vocational\neducation for the disadvantaged; 15% for postsecondary\nprograms; and 10% for the handicapped. Funds may be used\nfor construction of area vocational education facilities.\nStates are required to match one dollar for every Federal\ndollar.\nPrograms for Students with Special Needs\nGrants are made to States by formula, with no matching\nrequired to provide support for programs and services for\npersons who are unable to succeed in regular vocational\nprograms. Programs are concentrated in communities where\nthere is a high incidence of youth unemployment and high\nschool dropouts. Specially trained staff and instructional\nmaterials and equipment best suited to the students' needs\nand abilities are provided.\n4\nConsumer and Homemaking Education\nThis program provides formula grants to States for\nprograms in Consumer and Homemaking Education. For\nmost of the programs, States must match the Federal\ngrant dollar for dollar. States must use one-third of the\nFederal funds allocated for programs in economically\ndepressed areas or areas with high rates of unemployment\nwhere matching is 90% Federal and 10% State and local.\nWork-Study\nFormula grants are allocated to the States for work-\nstudy programs to assist economically disadvantaged, full-\ntime vocational students, ages 15-20, to remain in school.\nThe program provides part-time employment with public\nemployers. Priority is given to areas having high dropout\nrates and high youth unemployment. Funds are allocated\non a matching basis -- 80% Federal and 20% State and\nlocal.\nCooperative Education\nFormula grants are made to the States to support\nprograms which involve an arrangement between schools\nand employers which enable students to receive vocational\ninstruction in the school and related on-the-job training\nthrough part-time employment. Priority is given to areas\nwhere there is high incidence of student dropouts and\nyouth unemployment. Students must be at least 14 years old\nand are paid by the employer either a minimum wage or a\nstudent-learner rate established by the Department of Labor.\nState Advisory Councils\nAny State receiving a grant for vocational education\nactivities must establish a State advisory council, which\nis appointed by the Governor. Of the State's allotment,\n1% is earmarked for support of the council. The councils\nassist in the development of the State plans and provide\n'technical assistance to program administrators.\nInnovation\nFormula grants are awarded to the States for stimulating\nnew ways of creating bridges between school and employment\n5\nfor young people, who: (a) are still in school, (b) have\nleft school either by graduation or by dropping out, or\n(c) are in postsecondary programs of vocational preparation.\nFifty percent of the appropriation is reserved for alloca-\ntion by U.S. Commissioner of Education for discretionary\ngrants or contracts to the States. The remaining 50% is\nallocated to the State Boards of vocational education for\nsimilar activities.\nCurriculum Development\nThe Commissioner makes grants or contracts with\ncolleges and universities, State Boards of vocational\neducation, and other public or nonprofit private agencies\nand institutions for curriculum development in vocational\nand technical education. No matching funds are required.\nThis program provides for the development, testing, and\ndissemination of vocational education curriculum materials\nfor use in teaching occupational subjects, including those\ncovering new and changing occupational fields.\nResearch\nThis program provides support to State Boards of\nvocational education to foster research efforts designed\nto improve the effectiveness of vocational education.\nFifty percent of these funds are, with the approval of\nthe State Board, expended by the U.S. Commissioner of\nEducation. The remaining 50% are provided directly to\nthe State Boards.\nAdult Education\nThis program is operated through formula grants made\nto States for the education of adults. The program is\ndirected toward adults who are 16 years of age or older\nand who have not achieved the 12th grade level of education.\nThe purpose is to enable them to become more employable,\nproductive, and responsible citizens. Local school\ndistricts submit plans and proposals to the State education\nagency which makes the funding decisions. Ten percent of\nthe total cost of any program must be paid by the State\nand/or local education agency, with up to 90% paid by\nFederal funds allocated to the State.\n6\nLibraries and Instructional Resources\nPublic Library Services\nThis program provides support to States through\nmatching formula grants to assist them in providing\nlibrary services to areas without such services or with\ninadequate services and to assist in improving the overall\nquality of information services throughout the nation.\nCollege Library Resources\nThis program authorizes grants to institutions of\nhigher education to assist them in the acquisition of\nlibrary resources. Since the program's inception in 1966,\napproximately 2,200 institutions have participated annually\nresulting in the acquisition of over 10 million library\nvolumes.\nLibrary Training and Demonstrations\nLibrary training grants are provided to institutions\nof higher education and other nonprofit library organizations\nto support librarian and information scientist training.\nDemonstration grants and contracts are also awarded to fund\ndemonstrations of library delivery systems. Emphasis is\nplaced on improving both access to library services and\nthe operating efficiency of the library and resource sharing.\nSchool Library Resources\nSchools are provided library resources, textbooks and\nother instructional materials for the use of children and\nteachers in public and private elementary and secondary\nschools. To receive funds, a plan must be approved assuring\nneed for assistance, equitable treatment of the private\nschool sector and local effort to provide services.\nUndergraduate Instructional Equipment\nThis program provides grants to institutions of higher\neducation on a matching basis for the acquisition of\ninstructional equipment, materials and other minor remodel-\ning. States receive funds via formula based on enrollment\nin higher education institutions and per capita income.\nImpact Aid\nIn the 1977 President's Budget, the Administration\nis proposing to reform the Impact Aid program by making\npayments only to school districts that are adversely\naffected by Federal activities in the area. If this is\ndone, the program costs would be $395 million in 1977.\nThe Impact Aid program should make sure that the Federal\nGovernment pays its share of local school costs when\nfamilies living and working on Federally owned property\nsend children to the local schools. These families do\nnot pay property taxes. The program, however, is not\nexpanded beyond this legitimate aim.\nThere are three categories of children for whom\nthe Federal Government makes impact aid payments to\nlocal schools. If program levels provided in the FY\n1976 appropriations bill were to be continued, payments\nfor the entire program would total $680 million in 1977.\n-- \"a\" category: those children whose parents\nboth live and work on Federal property\n(and they do not pay property taxes). The\noverwhelming majority of these children\nare the dependents of military personnel.\n1977 payments for these students would be\n$247 million, 42% of the total.\n-- \"b\" category: those children whose parents\neither live or work on Federal property.\nSupport for these students is provided without\nrespect to whether the student's parent works\nor lives in the same school district as that in\nwhich the child is attending school. In\n1977, unless the program is changed, $285\nmillion would be spent for this category,\n48% of the total.\nGERALS ADVUNIT\n32\n2\n-- \"c\" category students: those whose parents either\nlive or work in low cost public housing. This\nsupport is provided without regard to any Federal\nimpact. In 1977, unless the program is changed,\n$58 million would be spent for this category,\n10% of the total.\nUnder the President's proposals, the 1977 budget would\nprovide support only for the \"a\" category children, those\nwhose parents both live and work on Federal property. The\nAdministration believes that the Federal Government has a\nresponsibility to pay the cost of educating these children.\nIn the case of the \"b\" category students, more than\n99% of these children reside on private, taxable land that\nis a source of revenue for the school district. Where there\nis a Federal installation or building within the same school\ndistrict, there is, obviously an accompanying loss of\nrevenue. The presence of the Federal Government as an\nemployer adds to the economic, and therefore the tax base,\nof the community. Payrolls, sales taxes, retail and\ncommercial activities all are increased. While these\nactivities do not provide direct support to school districts.\nthey are factors that enrich the community and place it in\na better position to support its educational system. If\ncommunities did not believe this, they would not compete\nfor new Federal activities or protest when facilities are\nclosed\nFor example, Fairfax County, Virginia and Montgomery\nCounty, Maryland, where the average per capita income in\n1973 was 29% and 56% higher than the national average,\nare school districts that could receive substantial amounts\nof this aid.\nIn the case of the \"c\" category children, the Federal\nresponsibility is also very tenuous. Here, due to the\npresence of low cost public housing within a school dis-\ntrict, the Federal Government is required to provide\neducational support for children who reside in this housing.\nThis property is not owned by the Federal Government, but\nby local authorities. Although the Federal Government\nsubsidizes this housing, it was built at the free choice\nof the community to help its people. Public housing\nprojects make payments in lieu of taxes up to 10% of\nrental receipts.\n3\nThe Administration is proposing to continue the\nfollowing activities as well:\n--\nSupport for local educational agencies that\nexperience sudden, unpredictable changes in\nFederal activities.\n-- Provision of support for direct educational\nservices to some Federal dependents.\n-- Support for the construction of school facilities\nin districts heavily impacted by Federal activity\nor on Federal bases.\nIn proposing these changes, the Administration antici-\npates a saving of some $285 million in FY 1977, from the\n$680 million otherwise would be spent\n;\nFORD\nPrograms for the Unemployed\nThe Budget reduces the size of the major programs for\nthe unemployed in 1977 to correspond to improvements\nin the economy. Unemployment benefits are reduced by\n$2.5 billion; temporary employment assistance (public\nservice jobs) is reduced by $1.2 billion.\nNew initiatives were undertaken in both areas at the\nstart of the recession, and additional efforts are now\nproposed to bring the programs into line with the pro-\njected economic conditions.\nOther important programs for the unemployed also dis-\ncussed below are the regular employment and training\nprograms authorized by the Comprehensive Employment\nand Training Act (CETA), and the summer youth employment\nprogram.\nUnemployment Compensation\nThe most important program for the unemployed is the\nregular Unemployment Insurance (UI) system. Unemploy-\nment insurance serves as a first line of defense in the\nnational economy during periods of high unemployment.\nThe program restores part of wages lost, helps maintain\npurchasing power, and thus helps to maintain the economic\nwell-being of both the unemployed worker and the community\nas a whole. The program operates through a Federal-State\npartnership in which the expenses of administration of\nState unemployment compensation laws are borne by the\nFederal Government and benefit payments are made largely\nfrom tax receipts collected from employers at rates\nestablished by the State. Except for limited standards\nin the Federal laws, the States develop their own programs\nand have wide latitude in their administration.\nThe Federal Government currently collects a tax of 0.5%\non the first $4,200 of wages paid each covered employee.\nIn addition to Federal and State administrative costs,\nthe Federal tax pays one half the cost of extended benefits\n(State unemployment taxes pay the other half), which\nprovide up to an additional 13 weeks of benefits during\nperiods of high unemployment. The combination of regular\nand extended benefits provides up to 39 weeks of compensation.\n33\n2\nTypes of employment covered by the program have been\ngradually expanded over the past forty years as\nexperience has indicated the need; average weekly\nbenefits have also risen. About 85% of the work force\nis covered by regular UI.\nIn the fall of 1974, the Administration and the Congress\nbegan work to make temporary adjustments in recognition\nof the worsening employment situation. The initial set\nof measures were enacted in December 1974. They provided:\nA temporary extension of unemployment insurance\nbenefits beyond the 39 weeks of maximum duration\nup to 52 weeks, financed by the Federal unemploy-\nment tax.\nCreation of a special unemployment assistance\nprogram, financed from general revenues, for\nworkers not covered under the regular program\n(about 12 million), or those without adequate\nwork history in the base period used by many\nStates to determine eligibility for the regular\nUI programs, to provide for them a total of up\nto 26 weeks of benefits.\nLater in 1975, amendments extended the maximum number of\nweeks of benefits available for those covered by the regular\nprogram to 65 and the maximum number of weeks for the others\nto 39.\nThese actions were stop gap. A two-stage effort has been\nproposed by the President to make more permanent improve-\nments in unemployment compensation. On July 14, 1975, the\nSecretary of Labor transmitted to the Congress a bill which\nwould:\n-- Expand coverage under the regular UI program to 92%\nof the work force by including:\nAgricultural workers (about 710,000 who work\nfor larger employers - about two-thirds of\nall agricultural workers)\nDomestic workers (about 400,000 who work\nfor employers who pay $500 or more in quarterly\nwages)\nState and local hospital employees and\nelementary and secondary school employees\n(about 4.8 million workers)\n3\n-- Increase benefit levels by requiring each State to\nprovide each eligible claimant with a weekly benefit\namount equal to at least 50% of his pre-tax average\nweekly wage. States could place a limit on the amount\nof benefits payable to any individual equal to at\nleast two-thirds of the State-wide average weekly\nwage for covered workers.\n-- Strengthen the financing of the UI system by per-\nmanently increasing the wages subject to tax from\n$4,200 to $6,000 a year and by temporarily increasing\nthe net Federal tax rate from 0.5% to 0.65% until\nthe general funds used to finance extended benefits\nduring the recession have been repaid.\n-- Increase the system's responsiveness to changes in\nthe economy which determine when extended benefits\nwill be paid under the regular UI program.\n-- Establish a National Commission on Unemployment\nCompensation which will undertake a thorough and\ncomprehensive examination of the present unemploy-\nment compensation system and proposed changes, and\nmake recommendations for further improvements. The\nCommission will study the appropriate objectives for\nUI, including railroad UI, and the appropriate role\nof U.L in income maintenance and its relationship to\nother social insurance and income maintenance programs.\nThe Commission will examine the relationship between\nUI and training and employment programs, and will\nstudy the relationship of UI to the economy, with a\nfocus on the long range UI funding needs. In addi-\ntion, the Commission will explore eligibility require-\nments, disqualification provisions, and factors to\nconsider in determining appropriate benefit amounts\nand duration.\nBecause of these proposals and anticipated improved economic\nconditions, no proposal is made to extend legislative authority\nfor the two emergency temporary unemployment assistance\nprograms which will expire in 1977. These programs were\nconceived to provide additional support during the worst\nperiod of the recession. The extension of benefits to 65\nweeks under the regular program is now being phased down\nunder the temporary law on a State-by-State basis as\nunemployment rates decline. Many workers now benefiting\nfrom the temporary special unemployment assistance program\nwill be taken into the regular program under expanded\ncoverage proposed to take effect January 1, 1977.\n4\nIn FY. 1977, it is estimated that some $14.8 billion of\nunemployment insurance will be paid to approximately\n8.9 million beneficiaries under the regular UI program,\nthe temporary extension to 65 weeks and the proposed\nlegislation. In addition, some 700 thousand people\nwill be paid an estimated $.9 billion under Federal\nprograms which provide unemployment benefits to former\nFederal personnel, to workers qualifying under the\ntemporary special unemployment assistance program, and\nworkers qualifying for trade adjustment assistance.\nEmployment and Training Services\nThe principal Federal programs providing employment\nand training services to the unemployed are authorized\nby the Comprehensive Employment and Training Act of\n1973 (CETA). CETA makes available a broad range of\nemployment and training activity primarily through\ngrants to States and localities. Under the major\nprogram, Title I, about $1.6 billion is proposed for\n1977. These funds will permit more than 430 prime\nsponsors (states, counties, cities with populations of\n100,000 or more, or voluntary combinations of local\ngovernments) to serve an estimated 1.3 million economically\ndisadvantaged, unemployed, and underemployed persons in\nvarious training and employment programs with the\nexpected improvements in the economy by 1977, more\nemphasis is expected to be placed on training programs\naimed primarily at serving the economically disadvantaged,\nand less emphasis on work experience.\nOther parts of CETA offer nationally directed programs\nfor Indians, Migrants and Seasonal Farmworkers, severely\ndisadvantaged youth, and other groups.\nThe President's Budget also includes a special program of\nsummer jobs in 1976 and 1977 for disadvantaged youth.\nThe precise funding level for this program will be\ndetermined after a careful review of unemployment rates\nand other economic indicators each year. Supplemental\nbudget requests will be submitted as soon as projections\nfor the summer months are available (generally in March).\nFinally, CETA authorizes public service employment both\nas a transitional employment device for the disadvantaged\nwho may need work experience or a period of stable employ-\nment before moving into regular jobs, and as a temporary\nemployment device for some of the workers who lost jobs\nin the economic downturn.\n5\nTotal 1977 outlays for CETA programs, excluding temporary\nemployment assistance, are estimated at $2.8 billion.\nOne of the programs enacted in December 1974, with the\nunemploy ment compensation revisions, was Temporary\nEmployment Assistance (TEA).\nTEA authorized public service employment (PSE) similar\nto the existing CETA programs. Here, however, the\nemphasis was on rapid hiring for one-year jobs, rather\nthan on individual development and transition to regular\njobs.\nA total of $2.5 billion was appropriated for TEA to enable\nsome 260,000 jobs to be created through the end of 1976.\nAnother 50,000 jobs are being financed under the regular\nCETA programs.\nBecause of the uncertainty of the economic situation last\nspring, no decisions could be made on TEA beyond 1976.\nBy the fall of 1975, however, it was clear that the worst\nof the recession was over and that the economy generally\nwas improving. It is also known that the job creating\nimpact for PSE programs dissipates rapidly after the\nfirst year. Increasingly, States and localities sub-\nstitute these Federal funds for expenditures they would\nhave made from their own resources.\nIt was, therefore, necessary to consider how to phase out\nthe TEA program. The pattern of economic recovery is\nlikely to be uneven across the country. It is also likely\nthat improvement in employment will lag somewhat behind\nimprovement in other economic indicators.\nThe President is therefore proposing:\nMaintenance of the regular CETA PSE program\nfor 1977 at a level of $400 million for about\n50,000 jobs;\nFunding of regular State and local CETA programs\nat $1.6 billion to provide 466,000 training and\nemployment opportunities which will serve approxi-\nmately 1.3 million new enrollees;\nMaintenance of CETA national programs for 1977\nat a level of $414 million;\n6\nFunding of the CETA summer youth employment program\nat about $400 million to provide 672,000 jobs (subject\nto change based on 1977 data) ;\nContinued funding into 1977 for the 243,000 TEA jobs\nthat are in areas of substantial unemployment, at\nwhich time a 9-month phase out will begin, so that\nby the end of FY 1977, the TEA program can be completed.\nProviding some discretionary funds to areas with\nlower unemployment rates (which now have about\n17,000 TEA jobs) SO they can phase out their pro-\ngrans earlier since their economices provide\ngreater unsubsidized job opportunities.\nTo simplify planning for States and localities, both the\ncontinuation and subsequent phase out funding for the\nTemporary Employment Assistance Program are requested\nin FY 1976 as one supplemental for $1.7 billion.\nThe new funding will only be available to pay a Federal\ncontribution to salaries of up to $7,000 per year. This\nprovision intended to discourage further substitution of\nFederal funds for local resources and to encourage transi-\ntion of enrollees into unsubsidized employment. The\naverage wage tor most PSE enrollees is now slightly below\n$7,000.\nSummer Youth Employment Program\nA program to provide jobs for economically disadvantaged\nyouth aged 14 to 21 during the summer months is included\nin the President's budget request for 1976 and 1977.\nEligible youth are generally those from families whose\nincome is below the Federal poverty line ($5,050 for a\nfamily of four). A preliminary estimate of $440.3\nmillion for the 1976 program will support approximately\n740,000 9-week part-time summer jobs at the minimum wage\nThis proposed level is equivalent to the level of effort\nprovided in the summer of 1975, allowing for an improve-\nment in the unemployment rate for youth. The preliminary\nestimate for the 1977 summer program is $400 million,\nwhich would provide 672,000 jobs.\nThis program provides part-time summer jobs in various\norganizations, including schools, hospitals, libraries,\ncommunity service organizations and private nonprofit\nagencies. Traditionally, these summer jobs are in such\nfields as clerical, summer camp aides, school maintenance\naides, library aides, day care aides, and ecology pollsters.\nSupplemental budget requests for funds for this program\nwill be formally transmitted to the Congress this year\nand in 1977 as soon as data on the projected level of\nyouth unemployment and other relevant economic ractors\nfor the summers of 1976 and 1977 become available (approi-\nmately early March, each year). These funds will be\ndistributed through the more than 430 State, county and\nother local prime sponsors of the Comprehensive Employment\nand Training Act.\nLIBERTY STRAIS ? FORD\nFinancial Assistance for Community Services\nThe present social services program, as authorixed under\nTitle XX of the Social Security Act, provides grants to\nthe States on a population basis for the delivery of a\nwide range of social services to individuals and families.\nFederal funds are provided in a three-to-one ratio to re-\nquired State matching funds.\nThe Administration is proposing new legislation for Financial\nAssistance for Community Services to enhance and amplify the\nState's discretion in the provision of services, and eliminate\nundue Federal regulation and restrictions on providers. The\nmain features of Financial Assistance for Community Services\nare:\n(1) Eliminate the requirement of State matching funds.\n(2) Distribute $2.5 billion as a block grant to the\nStates based on population. About 30 States will\nreceive higher funding in 1977 than 1975.\n(3) Eliminate most Federal requirements and prohibitions\non the use of Federal funds.\n(4) Emphasize services to low-income Americans; focus\nFederal funds on those whose incomes fall below the\npoverty income guidelines.\n(5) Require public review and comment on State planning,\nevaluation, and reporting processes.\nThe Federal Government would retain the role of evaluating the\noverall operation of this program and of providing a clearing-\nhouse for the dissemination and exchange of information among\nthe States on effective services.\nThe Administration-proposed program of Financial Assistance\nfor Community Services will provide States the latitude to\nuse this source of funding more productively to meet their\ngreatest service needs unencumbered by excessive Federal\nadministrative and reporting demands.\nDepartment of Labor\nThe overall budget for the Department of Labor declines\n$4.3 billion in outlays to a total of $22.1 billion,\ncompared to $26.4 billion in 1976. The reduction\nprimarily reflects improvements in the economy which\nlead to lower amounts for unemployment compensation\nand permit the phase out of the temporary public\njobs program.\n(in millions)\n1975\n1976\n1977\nUnemployment rate\n.....\n7.3%\n8.1%\n7.1%\nUnemployment benefits\n(Outlays)\n$12,792\n$18,402\n$15,893\nTemporary Employment\nAssistance\n$ 319\n$ 2,331\n$ 1,065\nAverage employment\n: -\n44,200\n274,200\n125,300\n36\nJAN 17 1976\nMEDICARE IMPROVEMENTS OF 1976\nHIGHLIGHTS. The President's Medicare proposals will:\nProvide catastrophic protection for 25 million\naged and disabled persons by limiting an\nindividual's payments to $500 per year for\nhospital and nursing home care and $250 annually\nfor doctor's fees. The proposal will reduce\ncost-sharing under proposed law for 3 million\npersons.\nSlow health cost inflation by limiting increases\nin Medicare payment rates in 1977 and 1978 to 7%\nper day for hospitals and 4% for physician\nservices.\nRequire that patients pay 10% of hospital and\nnursing home charges after the first day, until\nthey reach the $500 maximum, and increase the\nexisting deductible from $60 to $77 annually for\nphysicians' services, relating it to increases\nin social security cash benefits\nThe President is requesting Medicare outlays of $19.6\nbillion in 1977, a $2.2 billion increase over 1976.\nThe budgetary impact of the reform proposals--\n\"Medicare Improvements of 1976 are shown in Attachment\nA.\nBACKGROUND. There are two components to the Medicare\nprogram:\n1. Hospital Insurance (HI) pays for inpatient\nhospital care and subsequent skilled nursing\nhome and home health benefits. HI is financed\nthrough a 1.8% payroll tax (half paid by each\nthe employee and employer) collected along\nwith the regular social security retirement\nand disability tax.\n2. Supplementary Medical Insurance (SMI) pays for\nphysicians and other outpatient services. SMI\nis financed by premiums collected from the\nelderly and disabled wishing coverage, and by\ngeneral tax revenues. Currently about 60% of\nthe funds come from the Federal contribution.\n37\n2\nFor both hospital and physicians services, the elderly\nare expected to pay some initial costs-- a \"deductible\"-\nand to share ,a certain portion of the other costs.\nMedicare, in turn, pays the remaining medical costs for\ncovered services. Medicare will reimburse hospitals for\nall reasonable costs and pays physicians and other\nsuppliers of medical services according to schedules of\ncustomary and prevailing charges for particular services\nin each geographic area.\nThe inflation of health costs has been particularly rapid\nsince the enactment of Medicare in 1965. In that period,\nhospital costs have risen by 220%, from $40 per day in\n1965 to $128 per day in 1975. Physicians have raised\ntheir fees by 85% over the decade.\nThe need to protect the aged and disabled faced with extra-\nordinary medical bills in the light of these increases\nand the added costs of modern medical care--is of major\nconcern. Present benefit limits need to be removed and\n\"caps\" placed on required cost-sharing. At the same\ntime, cost-sharing provisions are needed to encourage\neconomical use of services for short hospital stays and\nroutine physician care. The President's proposals\naddress both these problems.\nThe medical care field is unique from most other sectors\nof the economy in that 2/3 of all costs are paid not by\nthe user, or patient, but by a third-party--normally\nprivate insurance or the government. As a result, there\nhas been too little incentive for the providers of medical\ncare to keep costs as low as possible and to run efficient,\neconomical operations.\nAlthough recognizing that many of the cost increases which\nhave resulted in higher charges for medical care were\nunavoidable, the Administration believes that its Medicare\npolicy of reimbursing hospitals and physicians for nearly\nall increases merely serves to reinforce inflationary\npressures in this area. Consequently, the President is\nalso proposing that Medicare reimbursement rates be limited\nto discourage--rather than reward--excessive inflation.\nFORD\nAttachment A\nMedicare Improvements of 1976\n(in $ millions)\nOutlays\n1976\n1977\n1978\nCatastrophic insurance\nHospital insurance ($500 limit)\n+15\n+330\n+420\nSupplementary medical insurance\n($250 limit)\n--\n+208\n+634\nSubtotal\n+15\n+538\n+1,054\nCost-sharing reforms\nHospital insurance (10% coinsurance)\n-330\n-1,730\n-2,020\nSupplementary medical insurance\n-- dynamic deductible\n($77 on 1/1/77)\n--\n-111\n-255\n-- 10% coinsurance hospital-based\nservices\n--\n-19\n-38\nSubtotal\n-330\n-1,860\n-2,313\nReimbursement limits\nHospital insurance (7% per diem)\n--\n-730\n-1,905\nSupplementary medical insurance\n(4% charges)\n--\n-179\n-301\nSubtotal\n--\n-909\n-2,206\nTotal\n-315\n-2,231\n-3,465\nJAN 17 1976\nFINANCIAL ASSISTANCE FOR HEALTH CARE\nIn 1977, the Administration is proposing the Financial\nAssistance for Health Care program. The proposal con-\nsolidates 16 separate health programs, including Medicaid,\ninto a single block grant of $10 billion in 1977 and\n$10.5 billion in 1978. The proposal would give States\ngreater discretion, make States responsible for health\nservices for their low-income populations, and distribute\nFederal funds more equitably.\nIn 1975, HEW spent $24 billion on health services pro-\ngrams. These Federal funds were distributed through\n12 types of non-Federal intermediaries to 25 kinds of\nproviders, and paid for delivery of services to 60\ndifferent beneficiary groups. Of this $24 billion,\nMedicare accounted for $15 billion and Medicaid\naccounted for $7 billion.\nThe Financial Assistance for Health Care program will\nreduce the inequities of current Federal programs and\nfunding and eliminate extensive Federal decision-\nmaking as to which communities and categories of groups\nget special Federal subsidies for health services.\nEquity. The present programs are an inequitable way of\nproviding Federal funds to ensure needed health services\nto the poor.\n-- States do not receive Federal funds on an\nequitable basis. Federal funds are distri-\nbuted largely to States with higher per\ncapita incomes which can afford to meet\nFederal matching requirements or to communi-\nties that are effective at \"grantsmanship.\nThe amount of Federal funds States receive\nper low-income person varies by State from\nmore than $800 to less than $200. States\n38\n2\nwith higher per capita incomes receive\nmore Federal funds because they offer\nmore generous benefits and eligibility\nstandards than States that have greater\nneed.\n-- Individuals and families in different\nStates do not receive comparable benefits\nfrom Federal funds. A low-income family\nin one State may receive far greater\nFederal assistance through Medicaid than\nwould the same family in another State,\ndue to differences in benefit standards\nand payment schedules. Communities in\nsimilar circumstances are treated\ndifferently through the project grant\naward process, e.g., community mental\nhealth centers which have been funded\nin over 600, but not in all communities.\n-- Federal health funds do not benefit all\nof the poor before they are spent on the\nnonpoor. Recent HEW data indicates that\nonly half of the expenditures from the\n15 existing narrow categorical health\nprograms--excluding Medicaid--actually\nsupport services to the poor.\nIn short, Federal funds--under Medicaid as well as\nunder special, narrow categorical legislation--are\noften distributed on the basis of where a person\nhappens to live, the group of which he is a member,\nwhere he gets his health care, and many other factors\nthat are unrelated to need.\nEfficiency. The narrow categorical nature of these\nprograms makes program efficiency difficult and\ncoordination nearly impossible. For example:\n-- under the current array of Federal laws,\nspecific groups of individuals, e.g.,\n3\nmigrants, merchant seamen, mothers or\nchildren are eligible for comprehensive\nservices under special programs. Other\nprograms are organized around specific\nservices, e.g., family planning, immuni-\nzations, or particular types of providers,\ne.g., neighborhood health centers or\ncommunity mental health centers. Some\nof the existing programs are targeted\non specific diseases, e.g., venereal\ndiseases, or health problems, e.g., lead\npaint poisoning. As a result, it is very\ndifficult for State and local officials\nto develop comprehensive public health\nprograms; and\n-- some federally-funded health centers have\nbeen shown to have unusually high costs-\nmore than $80 per visit--and to be less\nproductive than other health care providers.\nThe fact that the Federal Government spends\nits money in this way undermines State and\nlocal capability to develop efficient health\ncare systems.\nThe proposed Financial Assistance for Health Care Act\nwill not, in and of itself, solve all the health care\nservices problems of this country. But it will help to\nassure that the money spent for health services by the\nFederal Government gets distributed more equitably and\nthat States and localities have greater flexibility to\napply funds to their health priorities.\nThe principal advantages of the new program over Medicaid\nand the 15 current individual categorical programs being\nconsolidated are that it would:\n-- allow States discretion to establish compre-\nhensive health services and eligibility\nstandards. In 1975, States and localities\n4\nspent. $16 billion of their own funds for\nhealth purposes, much of which supported\nhealth services to the low-income popu-\nlation;\n-- give States greater flexibility in meeting\nthe health needs of low-income citizens.\nThe needs and problems of these people will\nvary at the local level, and so should the\nsolutions;\nprovide for a much fairer allocation of\nmoney for the States. Federal funds of\n$10 billion in 1977, $10.5 billion in\n1978, and $11 billion in 1979 would be\ndistributed among the States by a formula\nbased primarily on the number of low-income\npersons in each State. No State matching\nwould be required and no State would\nreceive less in 1977 than it did in 1976.\nA phase-in period will gradually ease the\ntransition to the more equitable distri-\nbution in future years;\n-- require the development by the States of\nhealth planning and cost control systems.\nStates will be required to develop plans\nfor use of these funds. The fixed Federal\npayment will increase the incentive of\nStates to control costs; and\n-- enable the Federal Government to reduce\nFederal employment for health grant\nprograms being consolidated by over\n2,300 positions in 1977.\nJAN 17 1975\nPUBLIC HEALTH SERVICE (PHS) HOSPITALS\nThe 1977 budget proposes legislation to transfer to\ncommunity use or close the 8 Public Health Service (PHS)\nhospitals. Care to primary Federal beneficiaries will\ncontinue to be provided, but through contracts with\nlocal health providers. The 26 free-standing PHS\noutpatient clinics and the leprosarium at Carville,\nLouisiana, will continue to operate. This proposal is\nconsistent with a January 1973 proposal and with other\nproposals in the 1977 budget designed to reform Federal\nfinancing and direct delivery of health care.\nThe Federal Government provides direct comprehensive\nhealth care at no cost to approximately 223,000 primary\nbeneficiaries, most of whom are merchant seamen employed\non board American registered private vessels. The Federal\nGovernment maintains 8 Public Health Service hospitals and\n34 outpatient clinics--as well as contracts with other\nFederal and non-Federal providers to deliver this health\ncare. In 1921, there were 94 hospitals; all but 8 hospitals\nhave already been turned over to other agencies, converted\nto community facilities, or closed. The remaining hospitals\nare located in Boston, Staten Island, Baltimore, Norfolk,\nNew Orleans, Galveston, Seattle, and San Francisco. Over\n5,200 Federal employees are required to deliver this care.\nIn January 1973, the Administration proposed a phase out\nof the 8 hospitals and to finance the care of primary\nbeneficiaries through contractual arrangements. This\nproposal reflected an overall effort on the part of the\nAdministration to reduce the Federal Government's role in\ndirect delivery of health care.\nP.L. 93-155, the \"Department of Defense Appropriation\nAuthorization Act, 1973,\" however, specifically requires\nthe Secretary of HEW to continue operation of these\nhospitals at the level of operation on January 1, 1973.\nThese hospitals have, therefore, continued to operate.\nP.L. 93-155 provided that the HEW Secretary could submit\nlegislation to close or transfer to community use any of\nthese hospitals.\n2\nThe continued maintenance of the PHS hospital system\nprimarily to provide health services for one occupational\ngroup,\ni.e\nmerchant seamen, is of questionable equity\nand program merit.\n-- The average occupancy rate of these hospitals\nby merchant seamen was 32.5% in 1973 and 31%\nin 1974.\n--- The hospitals are located in major metropolitan\nareas where adequate community facilities are\navailable to care for current PHS hospital\npatients if the facilities are closed. The\nincreased demands on other community health\ncare facilities would not adversely affect\naccess to care for other citizens.\n-- At least 5 of the hospitals (Galveston, Seattle,\nBaltimore, Boston, and San Francisco) are in\nareas which have an excess of hospital beds for\ncommunity needs. Continued operation of these\nPHS hospitals tends to push up hospital costs\nin the areas in which they are located.\n--- Only 69% of the hospitals' capacity will be\nused in FY 1976 (even if the hospitals were\nscheduled to remain open in 1977).\n-- For the hospitals to remain operational, substantial\ncapital investment could be required in future\nyears in order to enable them to meet hospital\naccreditation standards.\nThe Federal Government first began providing a separate\nhospital system to serve merchant seamen in 1798, but the\nneed for a separate system can no longer be justified,\nparticularly in light of the excessive number of hospital\nbeds in the nation. Moreover, the primary program purpose\nfor this assistance to prevent the spread of communicable\ndiseases-- no longer exists. Access to health care by\nmerchant seamen is no longer a problem, and most seamen\nunion funds that originally covered only dependents have\nbeen extended to cover seamen as well. Other beneficiaries\nof the PHS hospital system have available health care\nfinancing that makes the continued operation of the PHS\nhospitals for them unnecessary.\n3\nUnder P.L. 93-155, the closure of the hospitals requires\nthe \"written, unqualified approval\" of the State health\nplanning and regional health systems agencies as well as\napproval by Congress. Approval will be sought from the\nagencies involved and legislation will be submitted to\nCongress by this spring to transfer to community use or\nclose the 8 hospitals. It is anticipated that transfer\nor closure can be achieved by the end of January 1977.\nOccupational Safety and Health Administration\nThe 1977 budget for the Department of Labor's Occupational\nSafety and Health Administration provides an increase to\nenable it to:\nDevote more emphasis to job health problems.\nProvide more help to those, particularly small\nbusinesses, who are trying to comply with the\nletter and spirit of the law.\nMaintain, but improve, job safety activities.\nBudget Totals (000's)\n1975\n1976\n1977\nBudget Authority\n102,006\n117,585\n127,970\nOutlays\n91,086\n119,330\n124,940\nThe Occupational Safety and Health Act of 1970 requires\nthe Occupational Safety and Health Administration (OSHA)\nto regulate job safety and health in most private sector\nworkplaces. The law specifies that this he accomplished\nthrough mandatory standards enforced by OSHA through in-\nspections and fines for non-compliance. It also provides\nfor programs of education and training for employers and\nworkers to help them meet the law's requirements. Although\nthis law preempts State authority in occupational safety\nand health regulation, States that have programs approved\nby the Labor Department can get 50 percent Federal financing.\nThe Budget includes financing for programs in 23 States\nand jurisdictions.\nThe question of OSHA's ability to reduce job accidents\nand job-related illnesses has not yet been answered\nconclusively. The program was started in 1971 and it\nis not possible to obtain the statistics necessary to\nevaluate this program in only five years. There is thus\ninsufficient measured experience at this time to permit\nfirm conclusions. Federal Government inspections of\nlarge numbers of private sector workplaces, including\nsmall businesses less accustomed to Federal regulation,\nhas generated substantial controversy and criticism from\nadvocates and from opponents of Federal activity in the\narea. The extremely complex nature of the cause and\neffect relationships in job-related diseases has delayed\nissuance of health standards.\n40\n2\nThe 1977 budget request of $127.9 million acknowledges these\nproblems and provides resources to allow DOL to continue a\nbalanced expansion of the program and attack some of the\nmore difficult problems.\nThe request is for resources to continue existing program\nlevels and to increase the following activities:\nOccupational Health. The Budget requests an increase\nof 95 positions and $2 million to develop and enforce\nmore job health standards without lessening OSHA's\ncapability to develop and enforce safety standards.\nVoluntary Compliance and Consultation. Budget requests\n$19.7 million for a variety of education and consultation\nprograms to help voluntary compliance with the law. Most\nexisting education programs in OSHA have been about\ngeneral rights and duties under the law; in FY 1977\nOSHA will expand its efforts to work more closely with\nbusiness associations, unions, and large and small firms\nto solve specific problems. The proposal contains an\nincrease of $4.7 million to expand OSHA consultation\nprograms to the 21 States not now providing this service\nwith Federal matching assistance from DOL.\nInspector Training. Because of criticism of inspector\nquality and conduct, the Budget seeks an increase of\n$2.1 million for expanded training programs to upgrade\nthe professionalism of OSHA inspectors and enable more\ninspections under occupational health standards which\nare increasingly complex and require higher skills.\nEconomic and Environmental Impact. To insure that new\nOSHA standards not only protect workers but take account\nof economic costs and technological feasibility, the\nBudget calls for an increase of $4 million to provide\n$6.3 million for conducting detailed studies of the\ninflationary and environmental impact of standards\nbefore they are promulgated.\nNational Emphasis Programs. Finally, the proposals\nwill enable OSHA to expand and continue the National\nEmphasis Programs begun in FY 1976. These programs\nseek to reduce injuries and illnesses in selected\nhigh-hazard industries, including small businesses,\nby focusing OSHA activities on the recognized hazards\nfor which OSHA standards exist and by obtaining the\nvoluntary cooperation of trade associations, management\ngroups, organized labor and the scientific community\nin making the programs work.\nHousing\nTop priorities in the housing area, as reflected in the\n1977 Budget, are to: (1) further the current recovery\nin housing construction, (2) modernize our financial\nsystem so that housing can hold its own in competing\nfor capital, and (3) enable more families to obtain\nadequate housing.\nHousing recovery. Clearly, a recovery in housing con-\nstruction got underway during 1975. By November, the\nannual rate of new housing starts had risen more than\n56 percent above the rate achieved in December 1974.\nThe Administration's economic policy would further\nthis recovery.\nIn addition, the President's budget program will facili-\ntate the housing recovery by making it easier to finance\nnew housing. The Budget provides $3 billion for the\npurchase of mortgages in 1976--an amount sufficient to\nfinance 120,000 new apartment units. Since the mortgages\nwill carry lower interest rates than those generally\navailable, rent levels can be lower than otherwise.\nThe financial system. The President is again urging\nCongress to pass the Financial Institutions Act. This\nlegislation would improve the ability of financial\ninstitutions to compete for funds. It would also\nencourage lenders to make mortgage loans by providing\na tax credit on income from such loans.\nAdequate housing for the Nation's families. The Budget\nprovides for continued increases in the number of persons\nreceiving Federal housing subsidies. Subsidies will be\napproved for up to 400,000 tenant families under a new\nrental housing program in both 1976 and 1977. This\nprogram (commonly referred to as the \"Section 8\" program)\npays the difference between a percentage of family income\nand the rent charged by the landlord. The long-term\nFederal obligation to provide these subsidies will come\nclose to $41 billion.\nDuring the 1976-1977 period, additional subsidies will\nbe approved for 175,000 families with moderate incomes\nto help them buy their own homes, under the Section 235\nhomeownership assistance program.\n41\nDuring the same period, the Farmers Home Administration\nin the Department of Agriculture will provide housing\nsubsidies for 191,000 families through programs geared\nto meet the needs of rural areas. In addition, Farmers\nHome will help finance nearly 300,000 units of housing\nthrough direct and guaranteed loans in rural areas where\nthere is a serious lack of mortgage credit.\nAll told, occupants of approximately 585,000 units of\nhousing will be approved for new subsidies in 1977.\nSummary. The Federal Government also supports housing\nthrough a variety of other policies and programs which:\nIncrease the supply of credit available to finance\nhome purchases in urban and rural areas.\nAssure that financial institutions serving the\nhomebuyer continue to enjoy the public's\nconfidence.\nReduce the cost of housing and otherwise encourage\nfamilies to become homeowners, through a number of\nspecial tax breaks.\nHelp individual families obtain the credit they need\nto buy homes through mortgage insurance programs.\nHelp families obtain housing on a nondiscriminatory\nbasis through the enforcement of fair housing laws.\nHelp homeowners protect their properties against\nlosses by increasing the availability of property\ninsurance.\nHelp families maintain their homes by facilitating\nimprovements and rehabilitation.\nProtect mobile homebuyers through the development\nand enforcement of construction and safety standards.\nPromote improvements in housing quality through\nresearch and development.\nHelp locally based housing agencies provide public\nhousing by underwriting the operating deficits they\nincur.\nDuring 1977, Federal and federally sponsored agencies\nwill support housing by providing:\n$36.0 Billion n new mortgage loans\n$4.9 Billion in loan guarantees and insurance\n$5.2 Billion in direct subsidies\n$9.4 Billion in special tax breaks\nSimplification of Income Maintenance\nThe Federal Government operates or supports a host of\nindividual programs to provide the necessities to those\ncurrently unable to provide for themselves such as:\n-- Food Stamps;\n-- Aid to Families with Dependent Children (AFDC);\n-- Supplemental Security Income (SSI) for the elderly,\nblind, and disabled; and\n-- Housing programs.\nThe Administration is proposing a number of management and\nstructural reforms to answer pressing problems in the major\nincome assistance programs.\nFood Stamps\nIn the Food Stamp program, reforms would eliminate inequities\nand abuse, and simplify State administration in order to\nreduce overpayments, underpayments, and plain wrong payments.\nThere are two key features which would concentrate benefits\non those most truly in need: (1) limiting eligibility to\nhouseholds with net monthly income at or below the poverty\nlevel, and (2) providing each household a standard deduction\nof $100 per month in computing net income, with an additional\n$25 allowed for the elderly, to replace the present complex\nitemized deductions. Other changes would reduce certifica-\ntion error by basing benefits on actual average monthly\nincome for the previous 90 days rather than the applicant's\nestimate of future income.\nAid to Families with Dependent Children (AFDC)\nIt is estimated that, nationally, 7.5% of AFDC cases are\nineligible, and 17.5% receive overpayments and 7.3% receive\nunderpayments of benefits. HEW is working closely with the\nStates in the AFDC program and enforcing carefully designed\nstandards to eliminate errors and to ensure that eligible\npersons receive accurate benefits. The Administration is\nalso requesting legislative changes such as the inclusion\nof stepparents' income and revision of the income-disregards\nfor work-related expenses in the determination of AFDC\neligibility. These changes will focus income assistance\nresources on the most needy by assuring that family income\nis counted equitably and work incentives are promoted.\nFORD\n-2-\nWork Incentive (WIN) Program\nNew WIN program legislation will be introduced to assure\nthat all employable applicants for, and recipients of,\nAFDC search actively for jobs and accept suitable work\nas a requirement for continuing eligibility for AFDC\nbenefits.\nAuthorized by 1967 amendments to the Social Security Act,\nthe Work Incentive (WIN) Program is designed to assist\nrecipients of Aid to Families with Dependent Children (AFDC)\nto shift from welfare dependency to self-support through\nstable employment. Under current law, all nonemployable\npersons (those under 16 years of age, in school, disabled,\nor with a dependent under six years old) receiving assistance\nunder AFDC are exempted from registration with the WIN\nprogram. Employable AFDC recipients are required to register\nwith WIN and participate in WIN work and training activities\nor, where possible, accept placement in jobs without prior\ntraining. Child care and other necessary support services\nare provided to WIN registrants to facilitate their partic-\nipation. The program is run jointly by the Department of\nLabor and the Department of Health, Education, and Welfare.\nThe new legislation would require that all individuals\napplying for AFDC be exposed to job opportunities at the\ntime of application. If they are found to be employable\nunder the guidelines noted above, they must then register\nwith WIN as in the past. All AFDC applicants registering\nfor WIN would review job openings again at the time of\nregistration and be required to follow up suitable job\nopportunities. In addition, they would be required to\naccept suitable job offers or lose their eligibility for\nAFDC payments. WIN would apply job search requirements\nto an estimated 1.3 million AFDC recipients - a figure\nmore than double the FY 1975 level.\nWork and training activities will no longer be funded by\nWIN, although individuals registered with WIN may fill\navailable slots in programs funded under the Comprehensive\nEmployment and Training Act. By emphasizing direct place-\nment and labor market exposure, the WIN program will be\nconcentrating on its most successful and cost-effective\nprogram area. Over the past two years, approximately\ntwo-thirds of the WIN job placements (about 233,000\n-3- -\nindividuals) have been direct placements--those requiring\nno prior work experience or training. Child care and\nsupport services will continue to be available to those\nWIN registrants most in need of assistance during job\nsearch and for thirty days after accepting employment.\nSupplemental Security Income (SSI)\nSimilarily in SSI, HEW is implementing management improve-\nments to reduce the number of overpayments, underpayments,\nand payments to ineligibles. Errors in payments occur\ndue to mistakes made in taking the initial claim, incorrect\ninitial reporting by beneficiaries of their income and\nliving arrangements, and late or incomplete reporting by\nbeneficiaries of changes in income or living arrangements.\nHEW is also examining ways to simplify the federally-\nadministered complex State supplements to the basic SSI\nbenefit.\nHousing Assistance\nIn the area of housing, the Administration will propose\nlegislation to standardize rental payments charged to\nlower income families under two subsidy programs: low-\nrent public housing and lower income housing assistance\n(commonly known as section 8). A uniform definition of\nincome will be proposed and tenants will be expected to\nallocate 25% of their adjusted income to rent to obtain\nsubsidies. Under the present system, tenants are fre-\nquently charged lower rents for reasons unrelated to\nrent-paying ability. Consequently, the proposed changes\nwill simplify administration and result in greater equity\namong tenants and lower costs to the taxpayers.\nOverall Improvements\nThese specific program proposals and management improvement\nactions have been advanced with a view toward longer range\nobjectives, including: (1) simplification of income assist-\nance administration and program requirements, (2) improve-\nments in the delivery of benefits to eligible recipients,\nand (3) targeting existing income assistance programs on\nthe needy to the greatest extent possible.\nWe must, however, move beyond these immediate problems to\ntreat more fundamental income assistance problems, many of\nwhich involve the weakening of incentives for people who\nget income assistance to seek work.\n-4-\nThe various income assistance programs were enacted at\ndifferent times over The course of the years to meet\nspecific concerns and needs. Many programs were created\nin isolation from the others, with requirements and bene-\nfits only superficially related (and sometimes unrelated)\nto those of other programs. At the same time, these\nprograms serve a largely overlapping population, often\nthe duplicative benefits yet not coordinated because of\nthe multiplicity of programs and the ends they are supposed\nto serve. This independent development of programs has\nresulted in the following shortcomings of our national\nincome assistance effort:\n-- Inequity - Individuals and families with similar\ncircumstances may not receive the same benefits.\nSome persons may not qualify for any benefits\nsimply because they have a few more dollars of\nincome than others whose income falls below a\nqualifying cutoff line.\n-- Complexity - The large number of programs with\nvarying requirements are costly to administer and\nbewildering to the applicant trying to obtain the\nbenefits he needs. The applicant, by not being\nable to apply at one location for several possible\nbenefits, surely fails to obtain all the benefits\nwhich he may need.\n-- Inconsistency -- Since these programs have come\ninto existence at different times and seek to\nachieve different objectives, individuals who\nqualify under one program may, though their need\nis as great, not qualify under another.\n-- Targeting on the needy - Due to possible combinations\nof benefits, a recipient may actually receive more\nthan a similarily situated working person who cannot\nqualify for income assistance, though the latter's\nneed may be as great or even greater.\n-- Work disincentives - The reductions in benefits from\nseveral programs that can occur whenever a beneficiary\nearns income or receives other benefits from other\nprograms may act together, so that for every additional\ndollar a beneficiary receives, more than a dollar will\nbe taken away in benefits.\n-5-\nEfforts to correct these problems and to curb abuses\nhave either been: (1) piecemeal, unrelated efforts to\nsolve narrow problems within a program with no concern\nfor the impact on other programs or for the possible\nimpairment to overall Federal income assistance policy,\nor (2) grand and comprehensive legislative reform proposals\nthat bog down in the Congress because of the sheer magnitude\nand complexity of the task, jurisdictional disputes or con-\nflicts in policy objectives, and the plethora of special\nand often competing interests that have to be confronted.\nThe omnibus and single program approaches have not been\nsuccessful in bringing about fundamental reform. The\nAdministration is proposing a new approach to reform exist-\ning income assistance programs without massively restructur-\ning programs all at once. This approach will permit new\nsolutions to problems in this area that will move the sepa-\nrate and conflicting income assistance programs towards a\nconsistent system. The Administration is requesting\nauthority to make modifications in pursuit of clear objectives\nwithin specific limits and subject to disapproval by the\nCongress. Below are the outlines of this proposal:\n(1) The legislation would provide for altering\neligibility requirements, the bais for computing\nincome and assets, structure of benefits, and\nassociated organizational frameworks.\n(2) The authority would be limited to programs that\nprovide benefits to individuals or families in\ncash or in kind that are based on a standard of\nneed related to the beneficiary's income. It\nwould not include social security, unemployment\ninsurance, or other benefits earned by the recipient\nand not subject to means tests.\n(3) The total amount of resources devoted to income\nassistance programs could not decline. Thus,\nif a change would reduce benefits, an offsetting\nchange would be required so that total funds\nremained the same as before.\n(4) Congress would be able to disapprove any modifi-\ncation before it would take effect.\n(5) The modification authority would be available\nfor a period of five years. During this period\nthe authority would be carefully assessed and\npossible changes in it studied.\n&\nFORD\nGERALD\nLIBRARY\n-6-\nThe legislation would allow rational changes in our\nincome maintenance system since the changes could be\ndeveloped from a single, broad perspective and would\naccommodate the practical requirements programs indi-\nvidually and in light of their relationship to other\nprograms. This modification authority could be used\nonly to promote the following fundamental objectives:\n-- Assist individuals to become self-sufficient.\n-- Simplify administration, reduce excessive\nreporting and procedural requirements, thereby\nreducing administrative costs.\n-- Assure that incentives to work are fostered for\nthose who are employable.\n-- Achieve a system that is comprehensible to the\npublic.\n-- Count income and assets under consistent rules;\neliminate haphazard exceptions and inappropriate\ndisregards of income for various expenses.\nThe Administration's proposal does not require additional\nexpenditures for income assistance programs and would\nresult in administrative savings by virtue of simplifying\nand rationalizing the operation of these programs. It\nprovides the opportunity to advance to the Congress and\nthe public specific reasoned measures which address con-\ncrete issues within a framework of clearly stated long-\nterm goals. Each proposal would be considered within the\ncontext of income assistance policy and yet analyzed and\ntreated with on its merits. Responsible exercise of this\nmodification authority will promote a sounder, more rational\nand effective structure of income assistance for needy\nAmericans.\nChild Nutrition Reform\nThe Administration is proposing a single, block grant\nto provide Federal funds to enable States to feed needy\nchildren. There are now 15 federal programs which provide\nsubsidies for 40 different types of meals.\nDue to recent congressional changes, the Federal Govern-\nment shortly will be spending more money on non-needy\nchildren than it does on needy children unless these\nprograms are reformed. Children from all families, regard-\nless of income, are now eligible to receive Federal subsi-\ndies for school lunches.\nAt the same time these programs (mostly run through the\nschools) are spending more money on more non-needy children,\nwe estimate there are at least 700, 000 children from poor\nfamilies receiving no benefits whatsoever.\nThe existing set of complex and overlapping programs\nhas developed in a largely piecemeal and uncoordinated\nfashion from the obsolete price-support and surplus-removal\nprograms authorized by Congress to relieve the national\neconomic emergency of the early 1930's. These programs were\ninitially expanded in 1946 in order to ensure the disposal\nof irregularly occurring commodity surpluses in the period\nof postwar conversion.\nSince 1966, both the size and number of the programs\nand school lunch programs has continued to grow. The Federal\nGovernment now provides approximately 20% of the total cost\nof school lunches served to all children regardless of their\nnutritional need or income. A patchwork of laws lead to\ncomplex Federal controls and regulations over State and local\nprograms initially intended to be left to the States.\nExisting programs not only subsidize breakfasts and lunches\nwhich include milk, but also subsidize the consumption of\nmilk by itself as a separate program. These programs are\nsummarized in the attachment.\nFORD\n43\n-2-\nEssentially, the child nutrition block grants would\nreplace the school lunch, school breakfast, special\nmilk, and several other categorical programs and would:\nHelp feed more low-income children.\nEliminate the existing Federal food subsidies to\nnon-needy children.\nEliminate the existing administratively complex\nprograms and give States more flexibility and\nresponsibility in meeting the needs of its poor\nchildren.\nSave the taxpayers $900 million in the process.\nPrograms to be Reformed under the Child Nutrition\nReform Act\n1.\nSchool Lunch Program/Basic: This program provides\na 12.5$ subsidy for lunches served to children\nregardless of family income in schools (including\ntuition charging schools) and residential child care\ninstitutions. All qualifying school lunches must\ninclude one-half pint of milk. This program will\nsubsidize nearly 4.2 billion lunches for 26.5 million\nchildren in 1976 at a cost of $521 million.\n2. Commodity Distribution: This program provides\ncommodities valued at 11¢ (or cash in lieu of\ncommodities) for each lunch in addition to subsidies\nunder the Basic subsidy of 12.5$ per lunch for every\nlunch served in schools and child care institutions\nwithout regard to family income of the children.\nTogether with the basic School Lunch subsidy of\n12.5¢, over 4.2 billion lunches in 1976 will be\nsubsidized by 23.5$ for a total cost of nearly\n$1 billion.\n3. School Lunch Program/Special Assistance: This\nprogram provides additional subsidies of 56.75$\nand 46.754 for each lunch served to children with\nfamily income up to 125% of the poverty level and\nfrom 125% to 195% of the poverty level respectively.\nThis program also subsidizes meals served in residential\nchild care institutions as well as schools and will\nsubsidize 1.7 billion meals to approximately 11.5\nmillion children in 1976 at a cost of $998 million.\n4. Non-Food Assistance Program (Food Service Equipment):\nProvides grants for equipment to schools and residential\nchild care institutions located in areas with poor\neconomic conditions.\n5. School Breakfast/Basic: Provides a 10¢ subsidy for\neach breakfast served to children in schools and\nresidential child care institutions regardless of\nincome. All qualifying breakfasts must include one-\nhalf pint of milk. This program will subsidize\n340 million breakfasts for 2.4 million children at\na cost of $116 (including Special Assistance) in 1976.\nis\nFORD\nGERAL#\nLIQUARY\n6. School Breakfast/Special Assistance: Provides\nsubsidies in addition to the Basic School Breakfast\nsubsidy of 25.25¢ and 19¢ for breakfasts served to\nchildren with family income up to 125% of the poverty\nlevel and from 125% to 195% of the poverty level\nrespectively. This program will subsidizes 277 million\nbreakfasts served in residential child care institu-\ntions as well as schools for approximately 2 million\nchildren in 1976.\n7. Special Milk/Basic: This program increases the\nconsumption of milk by providing a subsidy of 5.5¢\nfor each half pint of milk served to children with\nfamily income above 125% of the poverty guideline.\nThis is in addition to the milk that is required\nto be served under other programs to participating\nchildren. In 1975, over 1.7 million half pints of\nmilk were consumed at a cost of approximately\n99 million.\n8. Special Milk/Special Assistance: This program is also\ndesigned to increase the consumption of milk by provid-\ning a subsidy of the full cost of serving half pints\nof milk to children up to 125% of the poverty level.\nMost of this milk is in addition to milk subsidized\nunder the subsidized breakfast, lunch and snack\nprograms. In 1975, approximately 360 million free\nhalf pints were consumed at a cost of $24 million.\n9. Special Supplemental Food for Women, Infants and\nChildren: Provides cash grants to State health\nagencies to supplement the diets of pregnant and\nlactating women and infants and children up to\nage 5 who are or may be at nutritional risk due\nto inadequate family income nutrition. States make\ncash grants to local sponsors who may provide either\ncash, commodities or vouchers to program participants.\nThere were 464,000 participants in 1975 at a cost of\napproximately $90 million. Program costs will exceed\nto $190 million in 1976.\n10. Supplemental Feeding for Women, Infants and Children:\nProvides commodities to supplement the diets of\npregnant and lactating women and infants and young\nchildren. There will be approximately 140,000\nparticipants in 1976 at a cost of $21.5 million.\n11. Summer Food Program: Provides free meals to all\nchildren regardless of family income participating\nin summer feeding programs. Summer feeding projects\nunder this program must serve areas where at least\none-third of the population have incomes below 195%\nof the poverty level. This program includes children\nattending summer camps, recreation centers, and schools.\n12. Child Care Food Programs/Basic: Provides subsidies\nfor each meal, including snacks at 5.25$ per meal,\nserved to children in day care programs regardless\nof family income, at the same subsidy levels as the\nschool lunch program at least 23.5¢ per lunch. Estimated\ncosts are $114 million in 1976 (including the special\nassistance program below).\n13. Child Care Food Program/Special Assistance: Provides\nadditional subsidies for meals served free or at\nreduced prices to children in day care programs from\nfamilies below 195% of the poverty level. Subsidy\nlevels are the same as for schools and include 15.5¢\nand 10.25$ for free and reduced price snacks respectively.\nLunch subsidies range from 23.5$ to 80,25¢.\nFORD\nGERALD\nLIBRARY\n14. State Administrative Expenses/Basic: Provides funds\nfor State administrative costs for most of School\nLunch and Child Nutrition programs. Some of the\nprograms above provide additional administrative financing.\n15. State Administrative Expenses/Summer: Provides cash\ngrants to States for the summer feeding program. In\naddition to the basic administrative expenses grants,\na set-aside equal to 2% of the funds distributed for\nthe summer feeding program are used for administrative\ncosts.\nAllied Services Act\nThe Administration is proposing legislation to encourage\nand assist States and localities to develop, demonstrate,\nand evaluate the utilization and effectiveness of human\nservices through the integrated planning, management, and\ndelivery of those services. The objective is to better\nachieve the personal independence and economic self-suffi-\nciency of individuals and families.\nThe proposal's basic provisions are:\n--- Grants may be made to State and local governments for\na maximum of two years to develop, and for a maximum\nof three years to implement, plans to demonstrate\nthe coordinated delivery of services.\n--- State and local governments with allied services\nplans approved by the Secretary of HEW would be\nauthorized to transfer up to 30% of their Federal\nfunds from one HEW program to another under limited\nconditions and for selected purposes.\n-- The Secretary of HEW would be authorized to waive\ntechnical or administrative constraints in any pro-\ngram administered by HEW if they impode the develop-\nment of integrated human services programs.\n-- Proposed State and local plans for the integrated\ndelivery of services would be subject to public\ncomment for a period of 60 days.\n-- Service delivery agencies would have to meet privacy\nsafeguards.\n-- A total of $20 million per year for planning and\nimplementation grants would be authorized for this\nprogram.\nEven with the major block grants proposed for education,\nhealth, and social services programs, there will remain many\ncases where HEW human service programs operate under differing\nrequirements through different local agencies, but serve over-\nlapping target groups with similar or related services. For\n44\n-2-\nexample, both the older Americans and social services pro-\ngrams may provide funding for the delivery of meals to the\nhomes of poor elderly persons. However, social services\nfunding is provided to States and, through them, to local\nwelfare agencies, while older Americans funding goes to\nState and sub-State area agencies on aging.\nStates and localities are increasingly circumscribed in\ntheir ability to use Federal funds flexibly to meet their\ngreatest priorities. Each program is designed to serve\nnarrow categorical target groups with a range of services.\nAnd categorical programs tend to proliferate for it is easy\nto identify special groups with particular needs. State and\nlocal flexibility is further reduced since many Federal pro-\ngrams require State and local matching funds to be used for\nthose programs, further restricting the effective and\nefficient use of funds.\nThe end result, however, is that individuals cannot readily\nhave all their service needs met; service programs are often\nunwieldy, complicated, and inefficient; the cost of services\nmay be high; and gaps in needed services may exist. The\ncategorical requirements associated with the resources\navailable under each program may create imbalances in the\namounts spent on various problems and seriously skew State\nand local service priorities.\nThe Allied Services Act would permit States and localities\nto redress their imbalances and target resources on their\nmost pressing needs. They would be enabled to explore and\ndevelop new and innovative systems to make available and\ndeliver a large number of diverse services to meet several\nneeds among their population. Substantial cost-savings\nmight result which could be used to expand services to the\nneedy.\nVA Cemetery and Burial Benefits\nThe Veterans Administration provides a wide range of\nburial benefits for veterans who have served their\ncountry honorably. All are entitled to free burial\nin national veterans cemeteries, a grave marker, and\na flag. Families who prefer to bury a veteran in a\nprivate cemetery also may receive a plot allowance\nand up to $250 to help pay funeral costs.\nOther programs supported by Federal tax money provide\nburial benefits which are similar to the $250 VA\nburial payment, and most veterans' families are eli-\ngible for these benefits. For example, survivors of\nthe 90% of all veterans who qualify for Social\nSecurity are eligible to receive a lump-sum death\npayment of up to $255. Some veterans also are eli-\ngible to receive burial payments provided under the\nRailroad Retirement Act as well as under other pro-\ngrams for Federal employees. Legislation proposed\nin the 1977 Budget will eliminate VA burial payments\nto the extent that the veteran's family is entitled\nto similar federally-funded benefits. With this\nlegislation, every veteran's family will be treated\nfairly and equally: each will be assured of receiving\na burial payment of at least $250 from the Federal\nGovernment but none will be paid twice for the same\npurpose.\nCurrently, the VA administers 103 national cemeteries\nin which the country's 29 million veterans and more\nthan 20 million of their dependents, as well as mili-\ntary personnel and their dependents, can be buried.\nNew cemeteries are planned for California, Massachusetts,\nNew York, Pennsylvania, and the Washington, D.C. area,\nand a number of existing cemeteries are being expanded.\nStudies undertaken by VA indicate that most veteran\nfamilies choose burial in a national cemetery only\nif it is within 50 miles of their homes. The Federal\nGovernment cannot afford to build cemeteries near\nthe homes of all the over 50 million people entitled\nto burial in national cemeteries; therefore, the\nPresident has proposed legislation which would pro-\nvide grants to States so that they can establish and\nmaintain veterans cemeteries. This program will\ngreatly expand both the number and geographic dis-\ntribution of veterans burial sites.\nVA Medical Care\nThe VA medical care system with 172 hospitals, 229\noutpatient clinics, 89 nursing homes and 18 domicil-\niaries serves millions of veterans. The 1977 Budget\nof over $4 billion is an alltime high for the VA\nmedical system. It will provide for care of record\nnumbers of veteran inpatients and outpatients, as\nwell as continued high quality of care.\nIn 1974, at the request of the Administration, teams\nof VA and other health professionals surveyed all VA\nhospitals to evaluate how the system was operating and\nhow it could be improved. The survey-called the Quality\nof Care Survey--resulted in two major recommendations:\n-- Over 9,000 employees should be added to the VA\nmedical care staff.\n-- Over $300 million should be provided to correct\nfire and safety hazards and do other needed\nconstruction work on VA hospitals.\nIn 1975, funds were provided to begin the recommended\nQuality Care improvements. The 1977 budget provides\nfunds for all of the Quality Care medical staff not\nalready hired--an increase of over 1,700 full-time\nstaff. It also includes over $200 million for se-\nlected high priority construction projects, including\napproximately $50 million related to Quality Care proj-\nects which were not started in 1975 or 1976.\nIn addition to providing Quality Care staff and construc-\ntion funds, the 1977 budget proposes legislation which\nwill improve the VA medical care program. VA medical\ncare is focused primarily on veterans with service-\nconnected disabilities. To the extent that VA staff\nand facilities are not fully utilized by these veterans,\nthey are available to care for veterans with non-service-\nconnected disabilities. Many of these non-service-\nconnected veterans have health insurance or are covered\nby workmen's compensation. The 1977 budget proposes\nlegislation which requires health insurers to reimburse\nthe VA for the care provided to covered non-service-\nconnected veterans. This legislation reflects the\nAdministration's belief that the Federal taxpayer should\nnot bear the cost of caring for non-service-connected\nveterans when to do so will benefit only third parties,\nincluding insurance companies, who are legally liable\nfor the disability or injury necessitating such care.\nIf enacted, this legislation would save over $130\nmillion a year.\n46\nVA Educational Benefits\nThe primary purpose of all GI Bill education programs\n- --World War II, Korean conflict and Vietnam-era--has\nbeen to assist veterans make the transition from mili-\ntary to civilian life by helping them get the education\nthey might have received if they had not served their\ncountry in a time of national emergency.\nThe Vietnam-era GI Bill has served its purpose well.\nBy the end of 1976, over 7 million people will have\ntaken advantage of their education benefits at a cost\nto the Government of almost $23 billion.\nThe Vietnam conflict officially ended in May 1975; the\ndraft, in June 1973. With the advent of a peacetime,\nAll-Volunteer Force, GI Bill educational benefits are\nno longer appropriate for those men and women who enter\nmilitary service in the future. They will choose the\nmilitary in the same way men and women choose civilian\njobs.\nThe educational assistance programs for veterans of\nboth World War II and the Korean conflict were, from\ntheir inception, for readjustment purposes for those\nwho served during wartime. It was never intended\nthat these programs be a continuing benefit, and\nwithin a reasonable period after cessation of hostil-\nities these programs were terminated. The Vietnam-\nera program should follow the same course. The\nperiod between the end of hostilities and the termina-\ntion of eligibility for wartime veterans educational\nbenefits has already been longer in the case of Vietnam\nthan for any prior war. The 1977 budget reflects a\nproposal to end education benefits for people who join\nthe peacetime All-Volunteer Force in the future.\nTerminating these benefits will result in savings of\n$54 million in 1977. Even more will be saved in later\nyears--$111 million in 1978 and $236 million in 1979--\na total of over $1.5 billion in five years.\nAlthough education benefits will be ended for future\nArmed Forces members, the GI Bill program will continue\nfor those men and women now in service. Because the\nactive duty force is smaller now that the Vietnam\nconflict has ended, there will be fewer veterans\ntraining in future years--563,000 fewer in 1977\nthan in 1976 even with no changes to current law.\nAlthough the program will be smaller in the future,\n47\nit is important that it be as well run as possible.\nThe 1977 budget reflects a number of proposals to\nensure that the program fulfills its intended purpose\nefficiently.\n-- Veterans now have up to 10 years after they leave\nthe service to use their education benefits. A\nreturn to the original 8 year eligibility period\nestablished for the Vietnam-era program--the same\neligibility period provided under the Korean con-\nflict program--provides the veteran with sufficient\ntime to readjust from military to civilian life.\nThis action results in savings of $624 million\nin 1977.\n-- Currently, the Government spends over $210 million\na year on GI Bill flight and correspondence course\nprograms. These programs have high drop-out rates\nand provide few job opportunities. Reform will\neliminate new enrollments in these programs at a\nsavings of $35 million in 1977.\n-- To ensure that veterans have funds for training\nwhen they need it, the Veterans Administration\npays the veteran his monthly benefit in advance\nof the time he actually trains. A few veterans\nhave abused these pre-payments by never intending\nto use them for educational purposes. Others\nchange their plans for legitimate reasons. In\nboth cases, the Veterans Administration requests\nreturn of the money provided to the veteran for\ntime he did not train. In 1977 improved adminis-\ntrative practices will accelerate the collection\nof $100 million of these overpayments.\nThe costs savings from the legislative proposals to\nreform the GI Bill program total $713 million in 1977,\nand almost $5 billion dollars over 5 years.\nFederal prisons\nThe Federal Prison System consists of 58 correctional facilities\nwhich house a total population of approximately 24,500. A\nbroad range of services are provided for inmates, e.g., mental\nhealth, medical, religious, recreational, legal, educational,\ndrug treatment, etc.\nTo reduce present overcrowding in Federal prisions and provide\nmodern, humane facilities for incarceration, the 1977 budget\nprovides $40 million for construction of two new institutions--\nyouth facility in Alabama and an adult facility in New York.\nFive million dollars is included for planning and site\nacquisition for two new correctional centers in Detroit and\nPhoenix. The budget provides $13 million to continue with\nthe rehabilitation of existing Federal institutions, and $5\nmillion and additional staff to activate three new institutions\nto be completed during fiscal 1977--the Bastrop, Texas youth\ncenter, the Memphis, Tennessee youth center, and the Butner,\nNorth Carolina correctional institution.\nThe National Institute of Corrections is budgeted for $5 million,\nwhich will be used to make grants to universities, correctional\nagencies, and non-profit corporations. The National Institute\nprovides training, technical assistance, and research and\nevaluation programs, and contributes to the improvement of\nstandards and policy development for correctional institutions.\nFinally, the budget includes $500,000 and 40 new positions to\nexpand functional unit management--a decentralized style of\nmanagement which has had some success on an experimental basis\nin reducing tension among inmates.\nFORD\n48\nU.S. attorneys and marshals\nA U.S. Attorney supported by legal and clerical staff represents\nthe Government in each of 94 judicial districts in the 50 States,\nPuerto Rico, and the territories. As the Government's trial\nlawyer and legal representative, the U.S. Attorney and his\nassistants are responsible for the prosecution and administration\nof the criminal statutes as well as most civil litigation in\nwhich the United States is involved.\nIn 1976, the Department of Justice is authorized to employ 1,618\nattorneys and 1,676 support personnel in the Offices of the U.S.\nAttorneys. A staff increase of 9 percent (291 people) is\nproposed for 1977 to enable the U.S. Attorneys to cope with a\ngrowing caseload and increasingly complex cases.\nThe U.S. Marshals Service is responsible for court security and\nsupport, witness security, and other activities related to the\noperation of the Federal court system. In 1976, 1,701 Marshals\nare authorized for the 94 judicial districts and for Washington\nheadquarters. An additional 87 Marshals are proposed for 1977,\nan increase of five percent.\n49\nAntitrust Enforcement\nThe President has emphasized his intention to maintain an open\nand competitive free market system unfettered by illegal\nrestraints of trade. The two agencies with responsibility\nfor enforcing the antitrust laws are the Antitrust Division\nof the Department of Justice and the independent Federal Trade\nCommission. The Antitrust Division has grown from 665 full-time\npermanent positions and outlays of $17.8 million in 1975 to\n818 positions and $21 million in 1976. Twenty new positions\nwill be added in 1977, and outlays of $22.6 million are planned.\nThe Federal Trade Commission's antitrust activities have\nincreased from 503 full-time positions and outlays of $12\nmillion in 1975 to 593 positions and $17 million in 1976.\nThirty new positions are requested for 1977, with most of the\nincrease attributed to expanded antitrust enforcement. Some\nof the increased funds are requested for extraordinary expenses\nassociated with major litigation of both agencies.\n50"
}